Taiwan 2021: Heightened geo-economic relevance amid rising cross-strait tensions*

ABSTRACT

Taiwan remained one of the crossroads of international politics in the second year of the COVID-19 pandemic. Cross-Strait relations with China continued their downward trend, with increasing military tensions in the airspace and waters surrounding the island, leading to speculations of a military takeover. The PLA activism in the Strait was inherently tied, in an action-reaction dynamic, to the further strengthening of relations between Washington and Taipei, with the new Biden administration in the White House operating in broad continuity with the previous Trump administration, albeit with expected differences in style. The Biden administration was instrumental in fostering support among allies to call for «peace and stability» in the Taiwan Strait. In this contest, Taiwan further strengthened relations with Japan, and made inroads in Europe. Partners abroad expanded ties with the island as a result of a broader push back against China's ambitions on the international stage, and the impact of the global supply chain crisis revolving around the shortage of chips. Taiwan's essential role in the supply chain crisis, a result of Taiwan Semiconductor Manufacturing Company's dominance in this strategic industrial sector and of the geographic concentration of chip plants on the island, has presented the Tsai administration with new geo-economic challenges and opportunities. On the domestic front, President Tsai and the DPP obtained an important political victory after the rejection of the referendums on trade, energy, and the electoral law that were supported by the major opposition party, the KMT.