China halted some trade with Taiwan in retaliation to the high-profile visit of US House Speaker Nancy Pelosi to the island, with more disruptions likely as political tensions intensify.
China suspended some fish and fruit imports from Taiwan, citing excessive pesticide residue detected on products since last year and some frozen fish packages that tested positive for coronavirus in June. Exports of natural sand used in construction were also banned.
With Taiwan’s agricultural exports accounting for only 0.6% of total exports last year, according to DBS Group Holdings Ltd., and China’s sand exports to the island amounting to just over $1 million last year, the trade bans imposed so far are likely to have only a marginal impact on Taiwan’s economy.
However, the bigger risk is if Beijing widens the restrictions or if shipments are disrupted as the East Asian Country conducts military exercises around the island.
“What needs to be watched is whether Beijing will broaden the trade bans into the manufacturing sector, particularly semiconductors/electronics going forward,” said Ma Tieying, senior economist at DBS.
Beijing has often targeted Taiwan’s agricultural industry for punishment over political issues. Many of southern Taiwan’s fruit-producing regions are typically bastions of political support for President Tsai Ing-wen’s Democratic Progressive Party, which advocates for Taiwan’s formal independence.
China is Taiwan’s largest trading partner, with bilateral trade rising 26% on year to $328.3 billion last year. Taiwan held a sizable surplus against the country, with exports from the island exceeding imports by $172 billion, according to Chinese customs data. While Beijing could leverage that advantage by sanctioning exporters, China also relies on Taiwan for semiconductor supplies.
About a fifth of Taiwan’s total agricultural exports, or $1.12 billion, was shipped to China last year.