China Retaliates Against Taiwan After Pelosi Visit: What It Means For Semiconductors, Other Key Sectors

China imposed a new set of commercial sanctions on Taiwan on Wednesday as an apparent retaliation after the visit of U.S. House Speaker Nancy Pelosi.

Pelosi visited the island country on Tuesday as part of an official Indo-Pacific tour in the face of aggressive warnings from Chinese officials.

China’s newly imposed restrictions on Taiwan’s trade, though small, signal a new wave of actions that could be felt across the global supply chain.

Imports: Pastries, Fruits and Fish 

Imports of over 2,000 individual products originated in Taiwan have been suspended by China since Pelosi’s visit was confirmed on Monday, according to a review by Nikkei Asia.

The products range across at least 50 categories of food imports, which include vegetables, cookies, cakes, drinks and fresh seafood, out of a total of 3,228 items registered as food imports from Taiwan.

With China being Taiwan’s largest trading partner, the pressure the Chinese Communist Party can exercise in the island nation is extreme. In 2021, the countries’ bilateral trade was worth $273 billion, or 33% of Taiwan’s entire international trade.

Food, drinks and alcohol exports from Taiwan into China accounted for around $683 million last year.

Taiwan’s Council of Agriculture said it is monitoring the situation and advising the Taiwanese companies involved to prepare any documents that they need.

"We will also assist and study whether we need to roll out related support programs for industries that are impacted," the council said in a public statement.

Exports: Sand For Semiconductor Production

China suspended exports of natural sand into Taiwan, a key product in the manufacture of semiconductors.

The semiconductor industry is one of Taiwan’s most powerful sectors. The country accounts for 64% of the world production of semiconductors, which are a key element in a plethora of tech products, from consumer electronics to cars and military technology.

Related: Nancy Pelosi Meets With Taiwan Semiconductor: Will It Help Line The Speaker's Pockets?

On this last item, Taiwan officials were not concerned, stating that Chinese sand only accounts for "less than 1%" of its total demand, according to CNN Business.

For its part, the Chinese government did not issue any official communications relating the sanctions with the Pelosi visit, maintaining an indirect approach, in the same spirit of a series of  live-fire exercises which are expected to be conducted around Taiwan’s sea and airspace in the coming days.

Benzinga’s Take: Global Impact Of The Sanctions

This week’s trade sanctions did not exercise specific pressure on the markets, or at least not in a discernible way from the overall effects of the visit to Taiwan by Pelosi on Tuesday.

Yet the aftershocks of her visit could take longer to develop.

The sanctions can be seen as a first alarm in a conflict that, if escalated, could inflict further turmoil in an already disrupted global supply chain.

With inflation rising globally and global food supply disrupted by the war in Ukraine, further pressure added to the supply chain of technological equipment is far from desirable from an investment standpoint.

Commercial or military conflict in Taiwan could further exacerbate an ongoing global chip shortage whose consequences have already been felt across industries, particularly in the automotive sector.

Mark Liu, chairman of Taiwan Semiconductor Mfg. Co. Ltd. TSM, Taiwan’s largest semiconductor manufacturer, said in an interview this week that war between China and Taiwan would “render TSMC factory not operable."

His company produces over 50% of the world supply of semiconductors, and 90% of the world’s most advanced chips.

Photo by Timo Volz on Unsplash.