Nancy Pelosi's looming visit to Taiwan is dragging the island's stock market down

• With US House Speaker Nancy Pelosi expected to visit Taiwan, stocks on the island dropped Tuesday.
• The benchmark Taiwan Stock Exchange Weighted Index fell as much as 2.1% in Tuesday's session.

Nancy Pelosi is expected to arrive in Taiwan Tuesday evening on the island's local time, and local stocks dropped ahead of her visit.

The Taiwan Stock Exchange Weighted Index slipped as much as 2.1%, and Taiwan Semiconductor Manufacturing dropped as much as 3.1% before paring losses to 2.38%.

If geopolitical tensions escalate as Pelosi's trip takes place, more downward pressure could hit local stocks, which have already taken a beating through 2022. The benchmark weighted index is roughly 20% from the peak it hit earlier this year.

On Monday, the Taiwan dollar weakened on prospects of Pelosi's visit, too. The currency declined as much as 0.2% to move below the key symbolic threshold of 30-per-one US dollar before retracing some gains.

Should the US Speaker of the House touch down, it would signify a visit by the highest-ranking official in Taiwan in 25 years.

China has reiterated severe consequences could come as a result of the trip, though the White House has attempted to ease tensions.

"Put simply, there is no reason for Beijing to turn a potential visit consistent with long-standing US policy into some sort of crisis or conflict or use it as a pretext to increase aggressive military activity," National Security Council spokesman John Kirby told reporters Monday at a press briefing.

Taiwan's president, Tsai Ing-Wen, is slated for a meeting with Pelosi on Wednesday, sources told Bloomberg.