by Manal Barakat, SeaNewsEditor
The latest developments on the China-Taiwan front raised concerns for a new Black Swan event with potential negative impact on the maritime industry.
In early July, the two countries carried out military exercises that brought attention to the region. Taiwan extended its annual “Han Kuang” defence exercise to ten days this year, which reflects growing concerns over a potential conflict.
The drills simulated a Chinese invasion and involved both military hardware and civilian participation.
Taiwan's exercises were carried out following a series of Chinese manoeuvres, which simulated attacks on Taiwan’s infrastructure and a blockade of the island.
However, on 18 July, comments from Taiwan's Vice President Hsiao Bi-khim seem to ease the latest tension.
In a conference, Hsiao reaffirmed the island’s commitment to peace amid rising tensions with China but warned that Beijing’s military stance could undermine regional stability and disrupt global trade.
She further emphasised that Taiwan does not seek confrontation.
"Defending the status quo (with China) is our choice, not because it is easy, but because it is responsible and consistent with the interests of our entire region," Hsiao said.
Implications on regional and international trade
Nevertheless, these political developments could have significant implications for international trade.
The Taiwan Strait is a narrow but vital maritime corridor that handles over a fifth of global seaborne trade. Any disruption could severely impact the flow of goods between North Asia and key markets in Europe, Southeast Asia, and the Americas.
Most notable is the potential impact on the semiconductor industry.
Taiwan produces around 60% of the world’s semiconductors and 90% of the most advanced chips. A conflict could halt production and delivery, with ripple effects across industries.
Furthermore, smaller Asian economies such as Malaysia, Vietnam, and Singapore, which rely on Taiwanese components for their export industries, would also face economic strain.
Taiwanese shipping giants Evergreen and Yang Ming, ranked among the world’s top ten container carriers, would likely see operations severely affected.
Alternative shipping routes exist but come with drawbacks. Rerouting through the East China Sea or around the Philippines introduces risks from territorial disputes, storms, and piracy.
The Strait of Malacca, already congested, would face additional pressure. According to the Mercatus Centre, diverting traffic could cost up to $2.8 billion per month, depending on the route.
Political negotiations are currently in place, with no signs of escalation from either side. However, maritime industry players are keeping a watch of the situation.
