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Nancy Pelosi’s historic visit to Taiwan draws China’s wrath, sending shivers across global markets

Wednesday, August 3, 2022 by Robinhood Snacks |
USA in Taipei (Taiwanese Foreign Ministry/Anadolu Agency/Getty Images)

USA in Taipei (Taiwanese Foreign Ministry/Anadolu Agency/Getty Images)

The plot thickens... House Speaker Nancy Pelosi landed in Taiwan yesterday, becoming the highest-ranking US official to visit the self-ruling island in 25 years. The visit, part of a broader Asia tour, is causing global drama. China has long claimed Taiwan and its population of 23M to be part of its territory, saying that reunification is its "historical task." Chinese President Xi Jinping has vowed to eventually take Taiwan back by any means. Pelosi wants to show support for the small democracy, and is set to meet with the Taiwanese president today.

  • China's response: Beijing staunchly opposed the trip, threatening consequences for the US. American officials said that China has been staging military drills, sending missiles near Taiwan, and boosting its military presence closer to the island.
  • America's response: President Biden can't really dictate where a member of Congress can travel (#SeparationOfPowers). But he did say: "I think that the military thinks it’s not a good idea right now.”

Interesting timing… US-China relations are at a precarious low, exacerbated by economic and military competition. Meanwhile, Russia’s invasion of Ukraine is far from over. China hasn’t overtly intervened on Russia’s behalf, but the two superpowers have their interests allied against the US. At the same time, China is a key trade partner: the US imports more from China than from any other country, and China is critical for US exports. Taiwan’s TSMC makes half of the world’s computer chips (including Apple’s).

THE TAKEAWAY

Geopolitical tension is market kryptonite… Investors hate uncertainty, and the world is rife with it. China’s economy is tied to the world by a thread right now, and some fear Pelosi’s visit could be a pair of scissors. Escalating tensions with both Russia and China have investors on edge: global markets tumbled yesterday, from Hong Kong to New York.