Taiwan’s economy could take serious damage if tensions with China lead to broad and lasting disruptions in cross-strait trade, with large global repercussions possible, warned economists at Goldman Sachs Group Inc.

The near-term growth impact of recent trade restrictions should be less than 0.1% of Taiwan’s gross domestic product, economists including Goohoon Kwon wrote in a Wednesday note.

But that’s if the disruptions remain limited to selective non-tech products without extensive supply chain linkages, they said. The economists added that a wider disruption -- such as interruptions to transportation of goods -- could be “highly damaging” to Taiwan’s economy, or “highly disruptive” to global tech supply chains.

“The concentration of tech exports in cross-strait trade, Taiwan’s dominance in the foundry business and its prevalence in processing trade, suggests that any broad disruptions in cross-strait trade would be highly disruptive to global tech supply chains,” the economists wrote.

Tech goods dominate cross-strait trade, accounting for about 70% of of China-bound Taiwan exports, the economists wrote. In contrast, food accounts for just 0.4%.

China last week suspended some fish and fruit imports from Taiwan as US House Speaker Nancy Pelosi visited the island, a move economists said at the time would likely have only a marginal impact on Taiwan’s economy.

A Taiwan finance ministry official downplayed the impact of China’s economic measures earlier this week, saying the two economies were too closely intertwined. The official said both of their electronics industries were “highly dependent on each other.”

Source:
courtesy of BLOOMBERG

by Cindy Wang

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