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Crisis between China and Taiwan and its economic impacts

explaining the crisis

          Recentemente a Presidente da Câmara of Representatives of the United States, Nancy Pelosi, went to Taiwan. The Chinese government reacted negatively to the visit and considered it an affront to its sovereignty. To make its discomfort clear, China carried out several military exercises near the region.

Taiwan considers itself independent since 1949, having political autonomy, but the Asian giant considers the island as part of its territory and has made it clear its intentions to unite it again with the country, using force if necessary. Taipei, on the other hand, started several military exercises around the island, in addition to proposing a defense budget of 13.7 billion dollars, increasing it by 13% over the last year, with the aim of bolstering its defensive capacity. .


Economic relationship between China and Taiwan

          A China representa o maior Taiwan's economic partner, with more than 42% of Taiwanese exports destined for the Asian giant, from where the island obtains 22% of its imports. Taiwan is the world's largest producer of semiconductors, used in the production of chips, a sector that is already in crisis and affects the whole world. In addition, the shipping route between China and Taiwan is one of the busiest in the world.

Strict sanctions have been imposed by China, which has suspended imports of fruit and fish products, as well as halting exports of natural sand, which is used by the island's construction industry. However, the Chinese economy depends on imports of electronic commodities from Taipei, just as Taiwan has about 70% of its economy based on exports, necessitating the purchase of the Chinese giant.


US involvement in the crisis

          Taiwan se apresenta como nono largest trading partner of the United States, which recognizes it as an independent state. Both have cooperation and trade agreements, such as the Taiwan Relations-Act, which determines the export of modern weapons systems to Taipei, in addition to enacting the US commitment to defend the island against possible invasions. Thus, if China declares war on Taiwan, it would mean a war between the two largest world economies, as the United States would have to get directly involved in the conflict, so as not to generate a loss of confidence among its allies.


What would be the impacts of this conflict for Brazil?

          O Brasil seria fortemente abalado for this crisis, given its dependence on the semiconductors that Taiwan produces. In the first half of 2022 alone, the country imported nearly 5 billion dollars in products from Taiwan. The materials imported in greater quantity are chips, semiconductors and processors, representing 30% of the imports of these products, which arrive in Brazil. In this way, the goods coming from Taipei are vital for the Brazilian industry, which without these materials would have to look for new suppliers, which would strongly affect the supply of these articles, generating an increase in the prices of durable goods. Faced with this crisis, it is advisable to wait and be cautious in relation to investments, since it is difficult to foresee a war between the aforementioned countries.

By: Gabriela Costa Eitler on 09/16/2022


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