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China Reliance on Taiwan Would Make Trade Retaliation Costly

  • Banning Taiwan’s chips is unlikely given China’s dependence
  • China and Hong Kong account for around 40% of Taiwan’s exports
Updated on

China’s military drills after US House Speaker Nancy Pelosi visited Taiwan sparked alarm around the region, although its trade retaliation barely made a dent -- mostly because Beijing doesn’t want to hurt itself.

The value of trade targeted by China’s sanctions contributes a tiny amount of less than 1% to Taiwan’s gross domestic product, according to economists, taking the sting out of China’s announcements. Beijing could ramp up actions by targeting more food products, wood or minerals. But levies on any big-ticket items that would cause real damage to Taipei -- such as semiconductors -- are near-unthinkable, given China’s reliance on the island for cutting-edge technology.