Treasury officials said the island did not expect further sanctions from Beijing because of “highly dependent” economic ties.
China’s Economic measures against Taiwan A Treasury official said it was unlikely to have a significant impact on trade between the two countries, given their close ties.
Beatrice Tsai, chief statistician at the Ministry of Industry and Information Technology, told reporters in Taipei on Monday that the electronics industries of the two economies are “highly dependent” and that Taiwan is China’s largest source of integrated circuit imports.
Tensions between Beijing and Taipei worsened last week, with China firing missiles at Taiwan and imposing trade restrictions on some agricultural and construction materials following a visit by U.S. House of Representatives Speaker Nancy Pelosi.
“Because of our high reliance on economic ties, we expect China to impose tougher economic sanctions on Taiwanese companies to be low,” Tsai said.
Taiwan released stronger-than-expected trade data on Monday, with exports rising 14.2% in July from a year earlier. That was faster than the most optimistic estimates in a Bloomberg survey of economists and pushed total shipments to $43.3 billion, the second-highest on record.
Exports to China have grown sluggishly this year as Beijing grapples with the coronavirus outbreak and lockdown. Shipments to mainland China and Hong Kong rose just 3% year-over-year in July after contracting in June, following double-digit growth earlier in 2022. By contrast, shipments to the U.S. surged 24.8% last month.
largest export market
Still, China and Hong Kong are by far Taiwan’s biggest export markets. Exports totaled more than $16 billion in July, while exports to the United States totaled nearly $7 billion.
Economists have said the risk to Taiwan will depend on whether Beijing expands restrictions to cover manufacturing and semiconductors. Taiwan’s agricultural exports to China accounted for just 0.6 percent of total exports last year, according to DBS Group Holdings Ltd.
Citigroup economist Adrienne Lui wrote in a research note that the import bans announced so far “are manageable for overall trade.” “But given the volatile geopolitical situation, risks remain for other key exports not subject to tariffs on China.”
Another major concern is whether a series of military exercises around Taiwan will have a significant impact on the shipping industry. By Monday, however, shipping in the Taiwan Strait showed signs of returning to normal.
Tsai Ing-wen said on Monday that the development situation on both sides of the Taiwan Strait is difficult to predict. She noted, however, that exports were largely unaffected the last time Beijing sharply stepped up pressure on Taiwan in 1995 and 1996, despite the blow to financial markets and consumer confidence.
Barring any major disruptions to shipping routes or new trade measures from mainland China, Taiwan’s total exports are likely to rise by 8% to 12% in August.
Taiwan also has to contend with a global economic slowdown, which could impact demand for its electronics. As work-from-home tech demand slows, the momentum in Taiwan’s tech sector demand is likely to slow in the second half of the year, said Grace Ng, an economist at JP Morgan Chase Bank NA.
“There are some worrying signs in the overall global demand situation,” Ng wrote in a research note. “Especially the recent loss of momentum in Taiwan’s tech exports seems rather worrying, as the level of tech exports in the first quarter appears to have peaked.”
Exports of electronic components rose 15.6% year-on-year, the slowest pace so far in 2022. Semiconductor exports fell 1.8% month-on-month.