Key Takeaways:
According to the Chinese Ministry of Foreign Affairs, Beijing has decided to “hold off discussions” on arms control and non-proliferation talks with the US, due to continued arms sales to Taiwan.
Given Taiwan’s strategic significance in semiconductors and maritime area control, the US’ continued, or withdrawn support for Taiwan will have major geopolitical and economic ramifications.
The US’s future commitment to supporting Taiwan’s military capabilities will likely be affected by the November election, potentially threatening the integrity of the Taiwanese semiconductor industry. A more withdrawn US could serve to de-escalate tensions with China, but also undermine the integrity of the US’ semiconductor supply by reducing the deterrence for aggression felt in Beijing.
On 17th July 2024, China announced its decision to “hold off” its nuclear arms control meetings with the US, regressing the bilateral effort on the non-proliferation of nuclear weapons and hindering their commitment to ease cross-strait tensions. The recent increase in US engagement with Taiwan, specifically in defence, has prompted China to “hold off discussion” on arms control with the US. The US has been supplying Taiwan with its defence requirements since the 1940s. In more recent years, the US has provided several billion dollars in military aid each year.
Frequent and large-scale military aid packages from the US were condemned by China, and were viewed as the US’ failure to uphold their responsibility to ease arms races around the region. In a recent disclosure, the Chinese Ministry of Foreign Affairs stated that arms sales to Taiwan have "seriously compromised the political atmosphere for continuing the arms-control consultations", leading to the regular bilateral conference on arms control’s cessation. Consistent support for Taiwan, according to the Chinese Ministry of Foreign Affairs, means that “responsibility fully lies with the US” for the pause.
Given Taiwan’s major strategic significance in offering area control in the Indo-Pacific, and for being the top global source of semiconductors, maintaining its security despite halted arms control talks between the US and China remains crucial for global supply. KSG assesses that the US future commitment to defending Taiwan could vary depending on the outcome of the 2024 US presidential election, as the US presidential candidate Donald Trump claimed that Taiwan “should pay the US for its defence as it does not give the country anything”.
Despite the claim, Taiwan retains its positive outlook regarding its relations with the US, and showcases its willingness to “take more responsibility” to defend and ensure the country’s security, addressed by Taiwan Premier Cho Jung-Tai. Moreover, it intends to continue strengthening its own defence, and its ties with the US.
Looking forward:
The Taiwanese semiconductor industry could be affected depending on the Presidential election’s outcome, and much effort will need to be made by Taiwan to solidify the US’s continued support.
Beyond consumer electronics, disruptions to the Taiwanese semiconductor industry’s security could influence US access to capital goods and advanced military equipment, increasing the potential need for American defence cooperation with Taiwan.
With US presidential candidate Donald Trump’s more isolationist attitude to foreign defence spending, it is uncertain whether or not continued arms sales to Taiwan will be seen. A more withdrawn US could serve to de-escalate tensions with China, but also undermine the integrity of the US’ semiconductor supply by reducing the deterrence for aggression felt in Beijing.
Semiconductor supply to the EU and Middle Eastern nations will also be affected by the future of US-China-Taiwan relations. Semiconductors are crucial to several key sectors, as the European Council recently pointed out. This cessation in talks between both sides will provide further impetus for countries across the globe to further consider their reliance on Taiwanese semiconductors, and seek diversification at a quicker rate.
By Benjamin Wu and Joaquin Magno, Indo-Pacific Analysts