Diversifying away from Taiwan by Germany and the EU would entail higher risks

"Germany and the EU should now more intensively than ever examine how they can strategically involve Taiwan as a trading partner in their diversification efforts, when seeking to reduce critical dependencies and risks in doing business with China. This applies irrespective of the outcome of the presidential election, but would be all the more urgent if Lai Ching-Te, the leading candidate in the latest polls, who is deeply mistrusted by China, were to win. If Lai from the ruling Democratic Progressive Party wins, China could exert more economic and political pressure and the conflict with Taiwan could get worse.

There would be greater risks if due to the cross-strait tensions Germany and the EU were to opt for a diversification strategy that strongly weakens Taiwan's relevance in their supply chains. This would increase the risk of Taiwan becoming isolated from the global economy and even more dependent on China. This could jeopardize the democratic and rule-of-law institutions that Taiwan has built up over decades. Germany and the EU would also lose out on the technological and economic potential of Taiwan as a trading partner, particularly in the electronics industry. This would hamper European and German efforts to reduce their critical economic dependencies on China.

Irrespective of the outcome of the election, the cross-strait tensions are unlikely to ease in the long term. China's paramount leader, Xi Jinping, reiterated in his New Year speech that reunification with Taiwan is a historical necessity. To achieve this goal, Beijing emphasized that it would never commit to renouncing the use of force. Added to this is the increasingly intense technological competition between China and the US, in which Taiwan plays an extremely important role, particularly due to its strength in critical technology areas such as semiconductors, including those for AI applications."