The visit of US House Speaker Nancy Pelosi to Taipei Taiwan might start another war amid fears of tightening supply chain disruption.
The tension between Taiwan and China escalated to a threatening level after Nancy visited Taiwan. The Chinese forging minister stated that the US House Speaker’s visit to Taipei was a valuation of China’s borders and rights. He also stated that the United States would pay the price sooner rather than later.
The China threat was clear and the consequences have already started. The stock market is down for the past two days. Yesterday, China announced a live military exercise near Taiwan, and fears of military escalation remain an option.
The Chinese-Taiwan geopolitical crisis is very similar to last February’s. The Russian-Ukrainian crisis started after Ukraine announced that it would join NATO. Today, the visit to Taiwan by US House Speaker Nancy Pelosi might start another military crisis in Asia. In terms of military forces, Taiwan is in the minor leagues against China, outgunned by military numbers, materials, population, and defense budget.
Last week, the U.S. and Japan held a meeting to find a solution that supports the chip-making industry. The meeting was to discuss an economic strategy to follow if China decided to escalate the tension from geopolitical tension to invasion.
Taiwan is a world leader in the semiconductor industry. To put some numbers into perspective, by the end of the fiscal year 2021, Taiwan accounted for 26% of the world’s semiconductor revenues. plus a 46% share of foundry revenues. Twain is fourth in the global semiconductor revenues, which makes this tension more like an economic tension.
China wants to boost its chip-making revenues and dominate the tech industry, but to do that, Taiwan must bend a knee to China. The rising tension had caused a panic state on Wall Street and in the stock market. For two consecutive days, Wall Street’s main indexes took serious losses.
The S&P 500 and Nasdaq fell for the third consecutive day in early trading on Wednesday. Thanks to tech giants, Wall Street can turn the wheel to its advantage. The S&P 500 had gained 1.71% by the end of the evening trading session. Tech stocks led today’s wins by showing an increase on the general Nasdaq index of 2.63%.
The Dow Jones Industrial Average gained 1.36%, while the WTI crude oil price fell 3.3% to $90 per barrel. Despite concerns about a lack of supply chain distribution today, the price index data shows a 7.2 drop from 80.1 to 72.3.
Consumer stocks were among the top winners today, which indicates strong and refreshing consumer spending. The Federal Reserve boosted its interest rate by 75bp last week, which makes the current crisis a new burden in its attempt to shrink the all-time inflation rate since 1982.
Taiwan holds a strategic economic spot for disruption, plus its ability to support tech giants with its high-efficiency chips. In the case of a military invasion, it’s more likely to see a sharp decline in chip supplies followed by strong market demand. This military invasion might send the stock market into a recession since inflation is still peaking in the eurozone and in the U.S. as well.