China’s trade restrictions on Taiwan after Pelosi visit are a drop in the ocean

Beijing’s new trade blockades against Taiwan affect about 0.04% of their mutual trade, making them more political than economic.

Beijing took action against Taiwan after US House Speaker Nancy Pelosi visited the island earlier this month, despite warnings from Beijing. That included suspensions of imports of Taiwanese citrus, frozen fish, sweets and biscuits and exports of natural sands to Taiwan.

Taiwan is a self-governed democracy, but Beijing considers the island part of its territory and a breakaway province. China says Taiwan has no right to maintain foreign relations and warned about Pelosi’s visit for weeks.

Which trade numbers show?

US House Speaker Nancy Pelosi with Taiwanese President Tsai Ing-wen, after arriving at the president’s office on August 3, 2022 in Taipei, Taiwan. Pelosi’s visit infuriated China, which considers the self-ruled island its own, and responded with first-ever test launches of ballistic missiles over Taipei, as well as wiping out some lines of dialogue with Washington.

Handout | Getty Images News | Getty Images

When it comes to Taiwan’s imports from mainland China, more than half of the $82 billion traded in 2021 was electrical machinery, electronic and technological parts, as well as nuclear reactors and boilers.

As for Taiwan’s exports to China, 65% of them were similar goods in electrical machinery, electronic and technological parts.

Drop in the ocean

On the other hand, the trading volume in the areas targeted by Beijing is relatively small.

The export of natural sand to Taiwan – which Beijing focuses on – was a drop in the ocean against the above figures. That amounted to about 3.5 million dollars last year, according to data from the Taiwanese trade bureau.

They were also a small trade compared to natural sand exports from Australia and Vietnam, the largest suppliers of natural sand to Taiwan last year. Together, they supplied about $64 million of the raw material used in construction and other industries, accounting for 70% of Taiwan’s purchases, according to the trade bureau.

Similarly, the target citrus trade was valued at a relatively small $10 million last year, although mainland China was also Taiwan’s largest citrus buyer, Taiwan’s trade data shows.

The agricultural products now in the headlines are only a fraction of Taiwan’s export basket. And so the impact on Taiwan won’t really be noticeable.

Nick Marro

Economist Intelligence Unit

Other targets, such as Taiwan’s exports of bread, pastries, cakes and biscuits to mainland China, were worth more than $50 million in total last year.

Beijing’s specific suspension of two types of frozen fish, horse mackerel and big-headed scabbard tail, was valued at more than $3 million in 2021, according to the Taiwan trade bureau.

“China’s economic retaliation against Taiwan is a long-standing strategy in its diplomatic playbook. That said, its decision to target relatively low-value commodities reflects the limits of its economic pressure toolbox,” global trade chief analyst said. the Economist Intelligence Unit. , Nick Marro.

“There have been restrictions on Chinese visitors to Taiwan for a few years now, which are of more economic significance; the agricultural products that are now in the headlines are only a fraction of Taiwan’s export basket. And so the impact of the headlines on Taiwan will not really stand out.”

precedents

Beijing’s trade suspensions against Taiwan are not a new phenomenon.

In previous years, tensions between the two have led to a ban on travelers to mainland Taiwan.

Last year, China suspended imports of Taiwanese pineapples due to quarantine measures due to “harmful creatures” that had come with the fruit. Until then, China was Taiwan’s largest pineapple buyer.

Investment bank Natixis said China’s recent trade restrictions targeted “highly replaceable food products” but not the information and communications technology sector in which the two trading partners have the most trade.

The bank also said mainland China will continue to import from Taiwan for as long as it needs the goods, similar to what it has done in other trade disputes such as those with Australia and the United States.

In the China-Australia trade dispute that began in 2020, China restricted its purchases of some commodities such as barley and coal, but continued to source Australia’s iron ore, a key ingredient in China’s steel production and the foundation of the countries’ trade.

There could also be other consequences of the Pelosi visit that could hurt wider regional trade. For example, heightened military exercises in the Taiwan Strait could slow shipments, analysts say.

“Shutting down these transport routes — even temporarily — will affect not only Taiwan, but trade flows linked to Japan and South Korea,” Marro said.

“It’s a story not only for Taiwan and China, but also for their neighbors.”

Analysis by logistics platform Container xChange said diverting shipping lines to avoid military exercises could be problematic for the trading world as the peak shipping season enters.

However, Christian Roeloffs, CEO of Container xChange, said supply chains have become much more resilient over the course of the pandemic.

Customer feedback shows that diverting ships from the Taiwan Strait will add a few days to ship travel, although Roeloffs does not expect a huge impact on logistics costs.

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