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China Taiwan Global Shipping Threatens Trade

US politician Nancy Pelosi’s trip to Taiwan has escalated trade tensions between the US and China.

Pelosi, the Speaker of the US House of Representatives, is the highest-ranking American official to visit Taiwan, which China lays claim to and has fractious relations with, in 25 years.

Diplomatic moves

The Guardian reports that the Californian congresswoman pledged America’s “crucial” solidarity with Taiwan, in a meeting with Taiwan’s president Tsai Ing-wen.

China has reacted angrily, summoning the US ambassador to China on Tuesday to rebuke him over Pelosi’s “egregious” trip.

Alternative trade routes

Pelosi’s visit comes as China is commencing military drills in the seas around Taiwan.

Sky News reports that Taiwan has asked ships to find alternative routes around the island and to avoid the Chinese drill areas until midday on Sunday.

China also warned shippers against entering the six areas in which it is conducting drills, which includes zones close to the major Taiwanese ports of Kaohsiung and Keelung, according to Lloyd’s List.

Semiconductor warning

Fortune notes that Taiwan plays an outsized role in the global semiconductor chip supply chain, as its manufacturers are especially important suppliers of advanced chips  used in consumer products such as smartphones and computers.

China’s tariffs on Taiwan, issued in response to the visit, have so far not included semiconductors. However, stocks in semiconductor companies plunged in response to the news of Pelosi’s trip. 

Mark Liu, the chairman of TSMC, one of the largest semiconductor manufacturers, said that the company’s reliance on real-time global links with the rest of the world means any military action or move to take TSMC by force would render its factories inoperable and create “economic turmoil”.

Import suspension

China suspended the imports of thousands of Taiwanese food imports, from fruit and vegetables to cookies and baby food, reports Nikkei Asia.

Beijing has a history of punishing countries for behaviour it dislikes by cutting them off from its markets, but analysts and government officials said the move was a huge expansion of such economic warfare, reports the FT

Tariff decision

US president Biden faces his own balancing act as he has to decide what to do about $350 billion of tariffs imposed on China by his predecessor Donald Trump.

CNBC reports that Biden’s administration faces a legal deadline to defend the tariffs, even as the White House considers scaling them back to lower consumer prices and ease inflation. 

Scores of companies sued the Trump administration in September 2020, arguing the tariffs were overly broad and hastily implemented. If the Biden administration, having inherited the suit, cannot prove the legitimacy of the tariffs, it could end up refunding importers as much as $80bn.

Britain’s new relationship

According to the Atlantic, the UK has transformed its approach to China since Brexit.  

It is seeking to ensure its economic priorities with China are kept alive as much as possible.

As covered previously by the IOE&IT's Daily Update, both remaining candidates in the Conservative Party leadership race  former chancellor of the exchequer Rishi Sunak and foreign secretary Liz Truss  have positioned themselves as hawkish on China.