China has blocked imports of citrus fruits and fish from Taiwan in retaliation for a visit by top US Democrat Nancy Pelosi to the self-ruled island.
The two sides, which split in 1949 after a civil war, have no official relations but multibillion-dollar business ties, especially in the flow of Taiwanese-made processor chips needed by Chinese factories that assemble the world’s smartphones and other electronics.
They built that business while Beijing threatened for decades to enforce the ruling Communist Party’s claim to the island by attacking.
Two-way trade soared 26 per cent last year to 328.3 billion dollars (£269bn).
Taiwan, which produces half the world’s processor chips and has technology the mainland cannot match, said sales to Chinese factories rose 24.4 per cent to 104.3 billion dollars (£85bn).
“The global economy cannot function without chips that are made in either Taiwan or China,” said Carl Weinberg of High-Frequency Economics in a report.
On Wednesday, Beijing blocked imports of citrus fruits and frozen mackerel from Taiwan after Ms Pelosi, speaker of the House of Representatives, arrived in Taiwan late on Tuesday.
But the ruling party avoided disrupting the flow of chips and other industrial components, a step that would send shockwaves through the shaky global economy.
Beijing also announced four days of military exercises with artillery fire in waters around Taiwan. That might delay or disrupt shipping to and from the island, one of the biggest global traders.
The potential disruption adds to concerns over weakening global economic growth, but Asian stock markets rose on Wednesday after there was no immediate sign of Chinese military action.
The Communist Party says Ms Pelosi’s visit might embolden Taiwan to make its decades-old de facto independence permanent. Beijing says that would lead to war.
The administration of US President Joe Biden has sought to tone down the volume on the visit, insisting there is no change in America’s long-standing “one-China policy” which recognises Beijing but allows informal relations and defence ties with Taipei.
Meeting leaders in Taiwan, Ms Pelosi said she and other members of Congress in a visiting delegation were showing they will not abandon their commitment to the self-governing island.
“America’s determination to preserve democracy, here in Taiwan and around the world, remains ironclad,” she said in a short speech during a meeting with Taiwan’s President Tsai Ing-wen.
“Facing deliberately heightened military threats, Taiwan will not back down,” Ms Tsai said.
The ban on imports of citrus fruits and frozen mackerel will hurt suppliers seen as Ms Tsaí’s supporters.
Taiwan plays an outsize role in the chip industry for an island of 15 million people, accounting for more than half the global supply.
Its producers including Taiwan Semiconductor Manufacturing make the most advanced processors for smartphones, tablet computers, medical devices and other products.
Beijing has invested billions of dollars in developing its own industry, which supplies low-end chips for cars and appliances but cannot support the latest smartphones, tablet computers, medical devices and other products.
Chips are China’s biggest import at more than 400 billion dollars a year, ahead of crude oil.