How Taiwan Became the World's Most Perilous Geopolitical Chokepoint

SPEAKER_2 (0:02)

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Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:21)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, up until recently, very recently, I would say there were two hypothetical blockades that kind of loomed large in the minds of geopolitical strategists everywhere. And the first was, of course, Iran blockading the Strait of Hormuz. That's clearly not a hypothetical anymore. It's actually happened. It's reality. And we've been doing a lot of episodes about it. And so the big hypothetical blockade that we're left with to ponder is China potentially doing something with Taiwan.

Joe Weisenthal (0:53)

Definitely. And the only thing I would actually flip them in the sense that I would say, the vast majority of discourse has been about the latter, China potentially blockading Taiwan in some way.

That was the thing that everyone has been talking about for years and years with growing intensity. And then, of course, as you mentioned, now the Hormuz situation, which sort of, I don't know, hit people by their blind spot because they didn't think it could ever really happen or whatever really happened has happened. But when this resolves, if this resolves, et cetera, I believe the question of Taiwan will very quickly return to the fore.

Tracy Alloway (1:29)

Oh, absolutely. So as you mentioned, it obviously hasn't happened yet, but people have been writing and thinking about it for years and years and years. And as you know, I consider myself an expert on this topic. Having once written a paper in college saying that China was going to invade Taiwan before the 2008 Beijing Olympics. And that obviously didn't happen.

Joe Weisenthal (1:50)

Well, being wrong has never gotten in the way of any pundit's career.

Tracy Alloway (1:54)

That's right.

Joe Weisenthal (1:54)

So I would not worry about that. That has never been an issue. As long as it was well-articulated and she definitely wasn't, et cetera, then you're fine.

Tracy Alloway (2:04)

It was written from a server closet while I was in Beijing. So it had that going for it.

But anyway, my point is that this is something that's always looming in the background. You always see headlines coming up that hint at China-Taiwan tension. So we actually had one this morning. We're recording on April 21st. The headline is, Taiwan's president canceled his visit to Eswatini. Do you know where that is? No. It's a tiny, tiny place in Africa.

SPEAKER_2 (2:34)

Huh.

Joe Weisenthal (2:35)

Did they record? Did they like, you know, is it interesting? Because there's a few countries still holding out there that recognize that's right. Taipei is the unified capital of China.

Most of like a lot most of which there's a few random ones out there that are still like they were they don't recognize the mainland, et cetera. So I'm all, you know, a little factoid here and there. I didn't know that, but um.

Tracy Alloway (2:58)

So Taiwan's presidential office is citing air route issues. I'm doing air quotes for those who can't see this video and China pressure. So you do get those kind of headlines every once in a while. And then the one other thing I would say is like, okay, the Strait of Hormuz, the blockade there, clearly an oil story and oil is something that powers the entire global economy. But as we've kind of learned over the past six or seven weeks, oil might not actually be the thing that like powers markets, right? If you think about the thing that matters for markets, it might be something much closer to AI and semiconductors and valuations.

Joe Weisenthal (3:39)

Right. That's totally. I mean, evidently the world can go a few weeks and not grind to a halt if the Strait of Hormuz is closed for a few weeks. I believe the reaction in markets would be and just all around the world and really everything would just be orders of magnitude differently if someone is like, no chips, no chips are coming out. That would be such a bigger deal. And of course, the question of Taiwan's role in the world, that would already have been a very big security question even prior to the now constant drumbeat obsession with AI chips, etc. But it only magnifies why this is such a live issue.

Tracy Alloway (4:19)

Right, so apparently we can kind of survive a few weeks without oil. Can we survive a few weeks without advanced compute or months?

Joe Weisenthal (4:27)

We can survive a few weeks without a fraction of the, a certain fraction. The, the, whereas if we, you know, the chip flow were to be disrupted on that level, it would just be, yes, much bigger deal.