Financial Markets

The Taiwan Strait: A Vital Artery for Global Trade and Geopolitical Tensions

The Taiwan Strait: A Vital Artery for Global Trade and Geopolitical Tensions

As China continues its military drills near Taiwan and maintains the stance that force remains an option to achieve reunification, the global community is increasingly concerned about the implications for trade through the Taiwan Strait. This strategic waterway is a vital artery for international shipping, and its importance cannot be understated. Visual Capitalist's Kayla Zhu has illustrated this significance by highlighting the proportion of exports and imports passing through the strait, with a comparison of figures from the G7 and BRICS nations.

The Center for Strategic and International Studies (CSIS) provides data current as of October 2024. The graphic reveals that BRICS economies, particularly China, the United Arab Emirates, and Iran, are more vulnerable to potential disruptions. For the UAE and Iran, over 24% of exports transit through this passage. China and Japan stand out as being the most dependent on this route for trade, specifically for imports, with approximately one-third of their import goods transported through the Taiwan Strait. For Japan, a striking 95% of its crude oil—a critical component of its energy infrastructure—originates from a select group of Middle Eastern countries and is shipped via the Taiwan Strait, underscoring its energy dependence.

In China's case, although 15% of its exports utilize this route, a figure lower compared to other nations, the sheer monetary value of these goods exceeds a significant $551 billion. The route is also pivotal for China's domestic trade, facilitating over half of the shipping between its eastern ports, according to CSIS. In contrast, G7 countries, aside from Japan, exhibit considerably less dependency on the Taiwan Strait for their trade activities. The United States, the United Kingdom, Canada, Italy, Germany, and France all feature low single-digit percentages regarding goods passing through this channel for both imports and exports.

Historically, the Taiwan Strait has been a hotspot of multiple security crises between China and Taiwan since the 1950s, involving military actions such as artillery shelling, missile tests, and naval operations. For a broader economic comparison, there is also a visual representation available that examines G7 and BRICS countries by GDP, offering further insight into their international standings.