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Political tensions between the US and China have escalated since the visit of the Speaker of the House of Representatives to Taiwan. Nancy Pelosic, co-founder of loop fund, Gene Munsterstates that the development could create a domino effect in the technology sector.
Munster said the US tech sector has benefited “significantly” over a decade and a half from its close relationship with China (low costs, high quality, fast time to market and diverse production).
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He said that China has also contributed to the demand for American tech companies.
According to Munster, Pelosi’s visit to Taiwan will further intensify the rift between the two countries.
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What is near the store?
Munster said the US and China are unlikely to engage in a direct conflict over Pelosi’s visit to Taiwan.
China’s response will be “slow, measured and powerful” and will have consequences for the global economy, he said, adding that it will not give up on its long-term goal of complete control over Taiwan.
Munster said China could add tariffs affecting Taiwan and US trade, systematically “slowing down its manufacturing engine”.
He said Chinese companies supplying finished goods and parts globally may be asked to cut production under the guise of conserving energy, reducing pollution or adhering to COVID-19 controls.
“My prediction is that the global supply chain will slow even further in the coming months,” Munster said.
Munster said China, which has so far sought economic prosperity to maintain political stability, could face problems if its own growth is affected by its efforts to slow the global economy. The US may choose to halt the current move because it would have already sent the message that “the escalation will have consequences”, he said.