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History of China-Taiwan Diplomatic Tension
For the past two decades, Beijing has demonstrated belligerent opposition against Taiwanese Independence since the Peoples Republic of China (PRC) has considered Taiwan a Chinese territory since 1949. After losing the Chinese Civil War, the Republic of China (ROC) relocated to Taiwan and established a brutal dictatorship until 1990, when it established a democracy (Kastner & Pearson, 2021). Taiwan and the US government established a defense treaty in 1950 that was abrogated by the Taiwan Relations Act of 1979. In Case of the inevitable conflict between Taiwan and China, the US would face multiple economic drawbacks.
Potential Economic Chaos from the China-Taiwan War
Assuming that the simmering tensions between Taiwan and Beijing escalate to war, the economic challenges would be catastrophic to the US. First, the US partners with China and Taiwan in trade and investment that the war would disrupt. Notably, Taiwan is a significant transit point for global supplies that would affect the supply chain, hence the price of commodities (Brands, 2022). Reflecting on the current confrontation between Russia and Ukraine, disruption in the global supply chain triggers global inflation. Therefore, the global supply chain is positively related to the rates of inflation in the US.
Impacts of China-Taiwan Relations on Trade
Further deterioration of the Taiwan-China relations would substantially affect US trade and economic growth. Today, the US imports from China more than any other country due to its production capacity, low commodity prices, and higher corporate profits. Despite sharing similar values, America has deep commercial and economic links with Taiwan, particularly in science and technology. In 2021, 2.1% of US exports valued at $1.4 trillion were shipped to Taiwan (Smith et al., 2022). Ultimately, the US reaps untold economic benefits and growth from trade with Taiwan and China that would potentially be affected by war.
Implications of Taiwan-China War on Americas Productivity
A war would affect multiple American corporations operating in Taiwan and China, contributing to the US GDP, such as General Motors in China. The low. Recently, the US has gravitated towards semiconductor investment utilizing chips supplied from Taiwan. For instance, in 2020, the US successfully lobbied TMC to build a chip plant in Arizona. An escalated confrontation between Taiwan and China would implicate the multi-billion semiconductor investments in the US (Lau, 2019).
Bibliography
Brands, H. (2022). Economic chaos of a Taiwan war would go well past semiconductors. Bloomberg.com. Web.
Kastner, Scott L., and Margaret M. Pearson. Exploring the parameters of Chinas economic influence. Studies in Comparative International Development 56, no. 1 (2021): 18-44. Web.
Lau, Lawrence J. The ChinaUS trade war and future economic relations. China and the World 2, no. 02 (2019): 1950012. Web.
Smith, Tori, Gabriella Beaumont-Smith, and Rachael Wolpert. (2022). USTaiwan Free Trade Agreement: The Economic Case. Web.
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