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Economic impact of latest Taiwan Strait crisis

Geopolitical tensions in the Taiwan Strait have risen after US House Speaker Nancy Pelosi visited Taiwan.

It is no surprise that Beijing announced economic retaliations and military drills. The Taiwan Strait, one of the world’s most important lanes for marine shipping and air cargoes, is now a riskier place because of the ongoing live military exercises. These are bound to create bottlenecks and supply-chain disruptions, feeding inflationary pressures.

The focus of Beijing’s economic sanctions is on food, but that only affects 0.2% of Taiwan’s exports. So the import ban is very narrowly targeted, without touching the semiconductors that mainland China clearly needs. But the live military drills surrounding Taiwan are more worrisome, especially if they become regular. That could force ships and planes to reroute, detour, or even cancel their trips.



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