Musk, Buffett warn about China-Taiwan ahead of 2024 election

With deteriorating U.S.-China relations and heightened tensions over Taiwan, influential business leaders including Elon Musk and Warren Buffett have warned of a possible invasion — which could affect the 2024 election .

China is already destined to become a major issue in the U.S. election campaign as Chinese President Xi Jinping pushes to expand his national power. China’s policy toward Taiwan, the world leader in the semiconductor industry, may eventually bring it into greater focus.

The cross-strait conflict has prompted comments from some of the leading contenders in the Republican presidential primary, who have emphasized the need to deter a possible Chinese invasion of the island. Taiwan is also a topic of discussion during this week’s Group of Seven meeting in Japan, which will be attended by President Joe Biden.

Xi Jinping has made Taiwan’s “unification” a high point of his agenda, while Beijing has stepped up hostilities against the island, highlighting Taiwan’s importance to the global economy and stoking fears of a major international conflict that could would cover up Russia’s devastating war in Ukraine.

“China’s official policy is that Taiwan should be integrated. One doesn’t need to read between the lines, one can simply read between the lines,” tesla CEO Musk said in an interview with CNBC’s David Faber on Tuesday.

“So I think there’s a certain — that’s inevitable,” Musk said, adding that it would be bad for “any company in the world.”

Tesla just last month announced plans to open a new factory in Shanghai to make “Megapack” batteries.

Musk’s comments come a day after Buffett’s comments Berkshire Hathaway In a filing, it revealed that it has completely abandoned the recently acquired TSMC, was once worth more than $4 billion.The world’s largest chipmaker, headquartered in Hsinchu, Taiwan, produces advanced semiconductors used by most of the top technology companies, such as apple, amazon, Google, Qualcomm and more.

Buffett explain In recent weeks, Taiwan’s geopolitical conflict “certainly” factored into his decision to sell shares over the past two fiscal quarters. On an analyst call earlier this month, Buffett said that while the company was “terrific,” he had “reassessed” his position “in light of certain things that were going on.”

“I feel like we have a better capital deployed in Japan than in Taiwan. I hope that’s not the case, but I think that’s the reality,” he said.

Meanwhile, Ray Dalio, founder of hedge fund giant Bridgewater Associates, wrote in late April lengthy post Warned on LinkedIn that the U.S. and China were “on the brink of war” – though he noted that this could mean a war of sanctions, not military power.

Apparent concern for three members of Forbes the list Dewardric McNeal, senior policy analyst at Longview Global, told CNBC in an interview that the world’s wealthiest people are “a little bit late.”

“It frustrates me,” McNeill said. “We’ve been talking about this for years, and we’ve been warning against over-reliance on China as a source for selling (and) manufacturing.”

He also noted that Berkshire Hathaway still owns shares in BYD, an electric car maker based in Shenzhen, China. “Frankly, it’s in China’s interest to scare investors away from Taiwan and damage or tarnish that economy because that’s one of those situations where they can bring Taiwan to its knees without armed intervention,” McNeil said.

Buffett’s company has Sell As of last year, it held more than half of BYD shares.

“I don’t think an attack is imminent, but that doesn’t mean you shouldn’t use this time to plan,” McNeil said. “And what I’ve often seen is businesses talking a little bit off topic, hoping — hoping is not a strategy — that it won’t happen.”

U.S. intelligence officials have explain Xi Jinping is pushing the Chinese military to prepare to seize Taiwan by 2027. The Pentagon said in 2021 that China “may be preparing for an emergency to unify Taiwan with (the People’s Republic of China) by force.”

China claims Taiwan is a self-governing democracy as part of its territory. It has pushed to annex Taiwan under the banner of “one country, two systems,” a status rejected by the Taiwanese government in Taipei.

Beijing has steadily increased pressure on Taiwan, both economically and militarily, in recent years.Just last month, it held a large Practical exercise Near Taiwan, meanwhile, has vowed to fight any hint of Taiwanese independence.

China does not rule out using force to control Taiwan.

Taiwan’s recent interactions with the U.S. have drawn a sharp response from China.After then-House Speaker Nancy Pelosi, D-Calif., visited Chinese Taipei last summer launch missile Taiwan issue, cutting off some diplomatic channels with the United States

Taiwan’s President Tsai Ing-wen and current House Speaker Kevin McCarthy (R-Calif.) met in California last month, sparking more threats and anger from Beijing.

Even in a political climate where both major U.S. political parties are critical of China and wary of its growing global influence, leaders are cautiously handling the volatile topic of Taiwan. For more than four decades, the United States has formally recognized the “one China” policy — that is, Taiwan is part of the mainland — while China has vowed to sever diplomatic ties with countries that seek to establish formal diplomatic ties with Taiwan.

During her visit to Taipei, Pelosi spoke of the United States’ interest in preserving Taiwan’s democracy, but she emphasized in the Washington Post column Her visit at the time “had no contradiction whatsoever with the longstanding one-China policy”.

Biden said last year that the U.S. military would defend the island if it were attacked by China, seen as a break with a longstanding U.S. position on Taiwan. The White House, however, insisted that U.S. policy toward Taiwan has not changed.

Dalio predicts that brinkmanship between the two superpowers will become more aggressive over the next 18 months, in part because the 2024 US election cycle is likely to usher in a wave of anti-China rhetoric.

China will undoubtedly be a major talking point in the campaign. At least three Republicans seen as potential presidential candidates — Florida Gov. Ron DeSantis, Virginia Gov. Glenn Yonkin and former U.N. ambassador John Bolton — have recently begun traveling to Asia, including Taiwan, meeting with allied leaders.

At the same time, U.S. legislators at all levels have enacted a series of Legislation aimed at reversing China’s growing influence, some of which has drawn criticism panic. Some potential presidential candidates have weighed in, calling for a forceful response to Chinese aggression.

“Xi clearly wants to take Taiwan at some point,” DeSantis said in a statement. interview When in Japan with the Nikkei. “He has a time frame. He can have the courage to shorten that time frame. But I think what China ultimately respects is strength,” DeSantis said.

DeSantis describes Russia’s war in Ukraine as ‘aterritorial disputeIn contrast, his views on U.S. policy toward Taiwan are more ambiguous.

“I think our policies should really shape the environment in a way that really prevents them from doing that,” DeSantis said of a possible Chinese invasion of Taiwan. “I think if they think the costs are going to outweigh any benefits, then I do think they’ll hold off. That should be our goal.”

DeSantis, who is seen as former President Donald Trump’s biggest rival for the Republican nomination, is preparing to formally announce his presidential campaign next week.

trump card explain Last year, he predicted China would invade Taiwan because Beijing “sees that our leaders are incompetent,” referring to the Biden administration.

Former Vice President Mike Pence, who said he will make his own decision about running for president next month, said in April that the U.S. should increase military hardware sales to Taiwan “so that the Chinese have to calculate the cost before they do. That country takes any action.”

In an interview on CNBC’s “Squawk Box” on Wednesday, Pence cited cross-strait tensions as a reason to oppose cuts in U.S. military spending.

“At a time when China is sending out a new warship almost every month, military provocations are continuing in the Asia-Pacific region, and Russia is waging unprovoked wars in Eastern Europe, the last thing we should be doing is cutting defense spending,” he said.

“America’s resolve matters to China,” former U.N. ambassador Nikki Haley, who launched her presidential campaign in February, said in a statement to CNBC.

“They’re watching what we do in Ukraine. If we abandon our friends in Ukraine, as some want, that will only encourage China to attack our friends in Taiwan,” Haley said.

Some CEOs of the largest U.S. banks say they will pull their business If instructed to do so after invading Taiwan, it is from China. But Musk’s description of the intricacies of the global economy is not hyperbolic – and much of the focus falls on TSMC.

John Rutledge, Safanad’s chief investment strategist, said on CNBC on Wednesday: “If Taiwan is taken, it’s like cutting off our brains, because if there is no (TSMC) and come out of Taiwan today chips, the world economy will not function.” “Power Lunch” responded to Musk’s comments.

David Sacks, a fellow at the Council on Foreign Relations, told CNBC that Apple is in a “very difficult position” because the most advanced chips it needs are manufactured in a building on TSMC’s Taiwan campus.

The company’s technological edge in the production of semiconductors, which are used in everything from cars to washing machines, has made it a potential “single point of failure” for many companies, McNeill said.

But he also pointed to the global reliance on TSMC — including China, which is reportedly dependent on the company for about 70% The chips needed to fuel its electronics industry — which could serve as a bulwark against invasion.

A Paper The Stimson Center makes a good point about Taiwan’s “Silicon Shield”: “There is no doubt that the first Chinese bomb or rocket to land on the island will make the impact of the COVID pandemic on supply chains look like a minor issue compared to Down.”

Still, the industry is struggling to diversify geographically, including by investing $40 billion to expand TSMC’s chip production in Arizona.

McNeal said the question shouldn’t just focus on TSMC and possible supply chain issues.

“For our friends in Taiwan, that message is that you don’t care about them, their lives, their safety. You just because of what it means to your bottom line,” he said. “Personally, that’s not the message I want to send.”

— CNBC’s Amanda Macias and Michael Bloom contributed to this report.

Disclosure: DeWoderick McNeil is a CNBC contributor.