U.S. Speaker of the House Nancy Pelosi landed in Taiwan Tuesday, a move that faced heavy opposition from the Chinese Communist Party (CCP), and observers worldwide have been assessing the significance of the highest-level U.S. visit in twenty five years.
“I think a lot of it is trying to burnish her legacy," David Sacks, Council on Foreign Relations research fellow, told Yahoo Finance Live (video above). "You know if the polling that we see is correct, she won't remain the speaker after the midterm elections."
In terms of midterms, polls do not look good for Democrats. According to the latest CBS News/YouGov polling data, House Republicans are expected to gain 16 seats, giving them the majority over House Democrats. The Senate race looks more unpredictable as 5 seats are anticipated to be a toss-up.
Outlook for upcoming elections aside, Pelosi's position on China "has been consistent," Sachs added, "and she's considered quite hawkish on China going back to when she unfurled a pro-democracy banner at Tiananmen Square decades ago. And so this is largely consistent with her criticism of China and support for Taiwan over the years."
Pelosi has made her mark as an outspoken critic of China. She has called out the Chinese government for their treatment of Uyghur Muslims and boycotted the 2008 Beijing Olympics over human rights violations in Tibet.
Sacks also mentioned that China is going to have a response to Pelosi’s visit before Chinese President Xi Jinping is up for his third term.
“A lack of a Chinese response right now is not really in the cards because Xi Jinping doesn't want to risk looking weak," Sacks explained. "And so I think China will err on the side of overreacting to Pelosi's visit, rather than underreacting just for domestic political considerations."
Sacks noted that China’s Zero-Covid policy – an approach endorsing mass isolation, frequent testing, and border enclosures – has received pushback from the public. Experts also attribute China’s lower economic output to strict measures to tamp down the spread of COVID-19. Chinese GDP fell by 2.6% last quarter compared to Q1 2022, missing expectations by 0.6%.
“There’s pushback to Xi Jinping’s signature zero-Covid policy, so he could also find it useful to kind of rally the Chinese people around the flag around a shared threat, or a shared challenge to China by the United States and Taiwan,” Sacks added.
Xi Jinping’s regime has responded to Pelosi’s visit.
“Taiwan is bearing the brunt of that response. The PRC announced overnight that it is barring over 100 Taiwanese exports to the Agricultural and Food space. They also announced significant military exercises opposite Taiwan, and are challenging the median line and a line in the middle of the Taiwan Strait where, generally speaking, China and Taiwan do not operate militarily over that line,” Sacks said.
Sacks also mentioned that these measures could impact the semiconductor industry, which is a huge Taiwanese export to the U.S.
“If the PRC does significant missile tests, for instance, in the Taiwan Strait, it essentially closes down the Taiwan Strait to international shipping because of military exercises, then, of course, that will ripple through global supply chains, given how reliant companies around the world are, or Taiwanese inputs above all semiconductors.”
Taiwan is the world’s largest semiconductor producer, and the United States receives more than $19 billion annually worth of electrical machinery from the island nation. While the CHIPS Act of 2022 cleared the House and Senate last week, time will tell if the legislation can fill in for Taiwanese supply of semiconductors.
Yaseen Shah is a writer at Yahoo Finance. Follow him on Twitter @yaseennshah22