The standoff between China and Taiwan (and the United States) has raised tensions to their highest level in decades, but – so far at least – economic watchers have not seen a worst-case scenario.
The island’s crucial semiconductor industry has dodged a direct hit and, although China currently has an effective blockade of Taiwan, that is set to end this weekend.
But White House officials and other observers say that doesn’t mean Taiwan’s economy and global markets are off the hook. There are three key economic repercussions – from global shipping to cyberattacks to trade wars – that could be felt in global markets in the weeks and months to come, even if tensions do not escalate.
“We will not seek, nor do we want, a crisis,” NSC Strategic Communications Coordinator John Kirby told reporters on Thursday, but it was clear that China’s actions are “eroding the status quo. cross-strait quo” on economic and military issues.
Here are some of the immediate economic effects likely to be felt even if China halts ahead of a full-scale economic (or real) war following House Speaker Nancy Pelosi’s trip to the island.
The effective blockade of the island by China
Pelosi was the highest-level US politician to visit Taiwan in 25 years and, according to the White House, China launched around 11 ballistic missiles towards Taiwan in response in a dramatic show of military force. The drills took place all around the coastline of the island and had the effect of establishing an effective economic blockade.
But even with military tensions at the highest level in decades, the economic implications could be limited if China’s fleet of ships finally return to their home ports as it is scheduled to do this weekend.
In the meantime, airlines are adjusting, with some flights to Taipei completely canceled while others appear set to move forward avoiding some disputed airspace in the waters around Taiwan.
Ships to and from Taiwan, however, are largely at a standstill but are expected to be back on the road soon. Even if they do, a longer-term economic consequence could be that shippers are less likely to wade through the waters around Taiwan, especially if China continues to make its displeasure known to passing vessels.
Herbert Lin, a senior fellow at Stanford’s Center for International Security and Cooperation, told Yahoo Finance on Friday, “You can easily imagine if the shipping lines in and out of Taiwan are under threat in any way. [then insurance rates could go up] and it is a BFD.
For her part, Speaker Pelosi made strengthening economic ties and trade between the United States and Taiwan a centerpiece of the trip, noting how she told Taiwanese “our CHIPS and Science Act will go a long way to strengthening our two economies. , as expressed our support for a 21st century trade framework.
Chinese cyberattacks
Another closely watched area is any changes to China’s ongoing cyber warfare campaign against Taiwan.
China and its allies have been suspected of being behind cyberattacks aimed at disrupting Taiwanese society and economy for years. In the past few days alone, he apparently hacked everything from 7-Eleven stores to the Taiwan presidential office to show his displeasure with the visit.
The question is whether China will increase the ferocity of the attacks in the coming days and whether the United States could be drawn into this conflict.
On Thursday, Kirby was asked about the cyberattacks and declined to weigh in on specific measures, but made it clear the United States was monitoring the situation closely. “For many good reasons, we don’t talk about the actions we take unilaterally or bilaterally in cyberspace,” but immediately added, “we are committed, as we have been for decades, to Taiwan’s self-defense. [and] I will leave it there.
Professor Lin notes that the increase in cyberattacks could continue for a long time.
“It is very costly to continue to carry out large-scale military operations as they are doing,” he said of China, noting that missile launches may be slowing down, but cyber warfare is “ a cheap and easy way to express your displeasure”.
Experts have also often recalled that, if the conflict were to drag on, the Americans are not immune to direct cyberattacks either. The vulnerabilities of American companies in the cyberspace of the Chinese and Russian governments – as well as unofficial actors – have been repeatedly demonstrated in recent years.
Economic coercion
Economic coercion efforts are another ongoing risk.
Kirby showcased those efforts from the White House podium on Thursday, and Beijing announced it would block certain imports such as citrus fruits, fish and other foods from Taiwan indefinitely, even after the effective blockade ends.
Yet China has notably said that it will continue to allow imports of semiconductors from Taiwan. The Taiwan Semiconductor Manufacturing Company (TSM) is the world’s largest semiconductor company, with its products powering countless electronic devices in China and around the world.
Experts noted Beijing’s divided response suggesting economic coercion efforts may not have as profound an effect as some might fear.
In the past, China has banned Taiwanese imports of products such as sugar and wax apples and pineapples, but actions are often limited to more symbolic products – as opposed to exports that would seriously disrupt one or more of them. other economy.
This week’s action is another example of this trend.
On semiconductors, for example, Beijing is not seen as likely to institute a ban anytime soon. Sarah Kreps, a professor and director of the Cornell Tech Policy Lab, recently told Yahoo Finance that “chips have become almost a third rail,” something China doesn’t want to touch.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
Read the latest financial and business news from Yahoo Finance
Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedIn, Youtubeand reddit.