Published on: 2025-10-25

Intelligence Report: US China seek to avoid trade war escalation salvage Trump-Xi meeting in Malaysia talks – Japan Today

1. BLUF (Bottom Line Up Front)

The most supported hypothesis is that both the US and China are strategically motivated to de-escalate the trade war to stabilize their economies and maintain global economic balance. Confidence level: Moderate. Recommended action: Encourage diplomatic engagement and propose a framework for phased de-escalation and mutual concessions.

2. Competing Hypotheses

1. **Hypothesis A**: The US and China are genuinely seeking to de-escalate the trade war to prevent economic damage and maintain political stability. This is supported by the ongoing negotiations and the desire to ensure the Trump-Xi meeting proceeds smoothly.
2. **Hypothesis B**: The US and China are using the talks as a strategic delay tactic while preparing for further economic confrontation. This is suggested by the continued imposition of tariffs and export controls, indicating a lack of genuine commitment to resolution.

3. Key Assumptions and Red Flags

– **Assumptions**: Both parties are rational actors prioritizing economic stability. The Trump-Xi meeting is a critical juncture for de-escalation.
– **Red Flags**: The expansion of export blacklists and rare earth controls by China, and the US’s new tariff probes, suggest underlying tensions. The lack of detailed outcomes from the Kuala Lumpur meeting raises questions about the sincerity of de-escalation efforts.

4. Implications and Strategic Risks

– **Economic Risks**: Prolonged trade tensions could lead to global economic instability, affecting supply chains and market confidence.
– **Geopolitical Risks**: Escalation could strain US-China relations further, impacting regional alliances and global diplomatic efforts.
– **Psychological Risks**: Continued uncertainty may erode trust between the two nations, complicating future negotiations.

5. Recommendations and Outlook

• Encourage both nations to establish a clear timeline for reducing tariffs and export controls.
• Facilitate third-party mediation to ensure transparency and accountability in negotiations.
• Scenario Projections:
  • Best Case: Successful de-escalation leads to a stable trade agreement, boosting global economic confidence.
  • Worst Case: Talks collapse, leading to a full-scale trade war with severe economic repercussions.
  • Most Likely: Incremental progress with periodic setbacks, requiring sustained diplomatic efforts.

6. Key Individuals and Entities

– Donald Trump
– Xi Jinping
– Scott Bessent
– Jamieson Greer
– Lifeng
– Josh Lipsky
– Scott Kennedy

7. Thematic Tags

national security threats, economic stability, international diplomacy, trade negotiations