Likelihood, two years: 1Remote; to end-2028
Likelihood, ten years: 3Possible; to end-2036
Systemic impact: 4Major; global
National impact: 4Major; typical highly exposed nation
Onset pace: Months
Duration (acute phase): 3 years (implementation and first review)
Warning time: Months
Scope: Global
Recovery horizon: Years (adjustment for protected producers)
Capability load: Hard 2/3Soft 1/3Economic 1/3; domains loaded High
Concurrency: Standalone; triggers 7 · triggered by 3
Confidence · movement: low; new

Rated at Standard Severe. Event reach: global event. Source of scores: model-panel-v0.5. Upside scenario: impact levels measure the scale of change, not loss.

Capture test: results by nation

03Narrative

Dateline: June 2031

The agreement was signed in Geneva in September 2029 and entered into force in January 2030, after fourteen months of talks that began with a near-collision between naval vessels in the Taiwan Strait. It had three parts. The first removed, in four stages over 18 months, about 80 per cent of the bilateral tariffs imposed since 2018. The second replaced blanket export restrictions on mature semiconductors, rare earth materials and commercial software with a published list and a 60-day licensing deadline. Controls on the most advanced chips, on leading-edge chipmaking equipment and on military end uses stayed in place. The third set rules for encounters between military ships and aircraft, opened a staffed crisis line between theatre commands and required notice of large exercises near Taiwan. It did not address sovereignty. Each government restated its existing position in a separate annex.

A joint commission met each quarter and published compliance data. By June 2031 it had recorded two disputes over licensing delays, both settled within the 90-day procedure. Bilateral goods trade was 35 per cent higher than in 2029. Counting inputs and equipment that third-country firms could again sell to both markets, the trade reopened was a little over 1 per cent of global GDP. Container rates on Pacific routes fell and insurers reduced war-risk loadings for the Taiwan Strait.

The adjustment was immediate for some. Battery, solar module and mature chip plants in North America and Europe that had been financed on a tariff margin reported losses within two quarters, and three governments extended subsidies they had planned to end. Assembly orders that had moved to Vietnam, Mexico, Malaysia and India after 2018 partly returned to direct routes. Export growth in those economies slowed sharply in 2030, although capacity already built stayed in place. Suppliers of rare earths and gallium outside China lost the price premium that had supported new mines.

Allied governments had not been party to the talks. Several in the Indo-Pacific and Europe reviewed defence plans that had assumed a rising risk of confrontation. Most held spending flat in real terms and did not cut it, because wars elsewhere continued and either party could end the agreement on six months' notice. Legislatures in both capitals held hearings on verification. One chamber voted on a motion to suspend the second tariff stage, and the motion failed.

By the first review, the states that had gained most were those with open trade, competitive exporters and regulators able to revise industrial policy quickly. Those that had lost most had built capacity or diplomatic leverage that depended on the restrictions remaining.

The dateline is illustrative, not a forecast. The narrative is hypothetical; the historical anchors below are real events.

04Summary

The United States and China implement a monitored agreement that removes most bilateral tariffs imposed since 2018 and relaxes selected technology restrictions, while controls on the most advanced and military-use items remain. Crisis communication and military incident rules reduce the risk of confrontation around Taiwan without resolving sovereignty claims. Within 18 months of entry into force, restricted trade worth at least 1 per cent of global GDP becomes accessible again. Competition continues under clearer rules, and unrelated regional wars are not assumed to end. Nations must revise industrial policy, supplier arrangements and defence planning. Protected producers and economies that gained from trade diversion face immediate adjustment.

Who gains: Trade-dependent economies with competitive exporters selling to both markets
Technology users regaining access to mature chips, processed minerals and equipment
Consumers and manufacturers in the two parties, through lower import and input prices
Shipping, insurance and trade finance on Pacific routes
States near the Taiwan Strait, through a lower risk of military confrontation
Who loses: Producers financed on tariff protection or on subsidy premised on continued restrictions
Economies that gained assembly orders and investment from trade diversion after 2018
Alternative suppliers of rare earths and critical minerals that relied on a security premium
Middle powers whose leverage came from being sought as partners by both sides
Allies outside the talks whose security assumptions are revised without them

A shock most would count as progress. It is not upside for everyone: each record names who gains and who loses. Impact levels measure the scale of change, in either direction, and loads mark the capabilities a nation needs in order to capture the gain or absorb the loss.

05Historical anchors

Event	Date	What happened	Calibrates
Nixon's visit to China	February 1972	Ended more than two decades without official contact between the United States and the People's Republic of China. The Shanghai Communiqué recorded each side's position on Taiwan without resolving it. Full diplomatic relations followed in January 1979. Allies, including Japan, were given little notice of the opening.	A rivalry can be stabilised by setting the sovereignty question aside in agreed language. Allies outside the talks adjust afterwards, which is the basis for the High load on influence and cohesion.
US–Soviet Incidents at Sea Agreement	25 May 1972	The United States and the Soviet Union agreed rules for encounters between their naval ships and aircraft on and over the high seas, including signalling, safe distances and annual review meetings. The agreement stayed in force through later periods of tension.	Military incident rules can be agreed and kept between rivals without a political settlement. This is the model for the scenario's encounter rules, crisis line and exercise notification.
INF Treaty	December 1987	The United States and the Soviet Union agreed to eliminate all ground-launched missiles with ranges of 500 to 5,500 kilometres. By June 1991 2,692 missiles had been destroyed under on-site inspection. The United States withdrew from the treaty in 2019.	Intrusive verification between rivals is feasible, and a verified agreement can still end. Sets the monitoring assumption and the durability parameter.
China's WTO accession	December 2001	China joined the WTO on 11 December 2001 after committing to tariff cuts and legal changes. Its goods exports rose from about US$266 billion in 2001 to about US$1.58 trillion in 2010.	The scale and speed of the trade response when market access is secured by rules, and the adjustment cost for import-competing producers elsewhere.
US–China Phase One agreement	15 January 2020	China committed to buy an additional US$200 billion of United States goods and services over 2020 and 2021. On the Peterson Institute for International Economics count, purchases reached about 58 per cent of the target. Most tariffs imposed since 2018 stayed in place.	Counter-anchor on likelihood and design. A narrow bargain built on purchase targets, without effective monitoring, did not lower barriers. Standard Severe requires tariff removal and published compliance data.
US–China leaders' meeting	30 October 2025	The two leaders met in Busan. The United States halved its fentanyl-related tariff on Chinese goods to 10 per cent, and China suspended for one year the rare earth export controls it had announced on 9 October.	Distance from Standard Severe: a one-year suspension of selected measures, with core tariffs, chip controls and military issues left open.

06Parameters

Shown at their preset values. Parameters are not adjustable in this release and nothing on this page is computed from them. Custom settings run (Phase B) but are labelled 'non-standard run' and excluded from comparisons.

Common variables at Standard Severe · read-only

1. Severity: major
severe (Standard Severe)
extreme
2. Duration (acute phase): 30 days
90 days
1 year
3 years (Standard Severe)
5 years
3. Onset pace: days
weeks
months (Standard Severe)
years
4. Warning time: none
days
months (Standard Severe)
5. Scope: national
regional
global (Standard Severe)
6. Origin: natural
accidental
adversarial (great power / neighbour / non-state)
negotiated (Standard Severe)
7. External support: full (Standard Severe)
partial
none
8. Concurrency: standalone (Standard Severe)
plus one named scenario
plus two
9. Policy response assumed: none (pure exposure)
current plans executed (Standard Severe)
best practice
10. Recovery horizon: months
years (Standard Severe)
structural

Scenario-specific parameters · read-only

Parameter	Default	Range or options	Note
Share of bilateral tariffs imposed since 2018 that is removed	80 per cent	50 to 100	Measured on the trade-weighted average tariff each party applies to the other's goods.
Restricted trade made accessible within 18 months	1 per cent of global GDP	0.5 to 2	Counts bilateral trade and third-country sales of inputs and equipment that the restrictions had blocked.
Technology restrictions relaxed	mature semiconductors, rare earth materials and commercial software	options: none / mature semiconductors only / most controls outside military end use	Controls on the most advanced chips, leading-edge equipment and military end uses remain in every setting.
Implementation period for tariff stages	18 months	12 to 36	A shorter period raises the adjustment cost for protected producers.
Monitoring arrangement	joint commission with published quarterly compliance data	options: declaratory only / joint commission / third-party verification	The declaratory setting corresponds to the 2020 Phase One design.
Military incident arrangements	encounter rules, staffed crisis line and exercise notification	options: crisis line only / encounter rules and crisis line / all three	Sovereignty claims over Taiwan are unchanged in every setting.
Withdrawal notice	6 months	3 to 24	Sets how much reversal risk remains in investment and defence planning.

07Transmission channels

1
A military incident near Taiwan is contained, and both governments open talks covering trade, technology restrictions and military encounters.
2
The agreement enters into force. Bilateral tariffs imposed since 2018 are removed in stages over 18 months and selected technology controls move to a published list.
3
Encounter rules, a staffed crisis line and exercise notification lower the assessed risk of confrontation. War-risk insurance loadings and shipping costs fall.
4
Direct bilateral trade and third-country sales to both markets recover. Input prices fall for manufacturers and technology users.
5
Producers financed on tariff protection and economies that gained diverted orders lose margins, orders and new investment.
6
Governments revise industrial policy, subsidy programmes and supplier requirements. Some extend support to protected plants.
7
Allies and middle powers review defence plans and alignment as the leverage gained from rivalry declines. Most hold defence spending flat.
8
Domestic opponents in both capitals contest verification, and the withdrawal clause keeps reversal risk in investment decisions.

08Capability loading

High: capability band shifts expected under current plans. Medium: band shifts under 'none' policy response only. Low: strain without band shift. Loads are judgement-based until the Atlas connects. Domains link to the Atlas.

Domain	Load	Channel
Hard
Defence and security	High	Force posture, alliance guarantees and procurement plans are revised as confrontation risk falls and competition continues
Strategic infrastructure	Low	Ports and shipping routes carry redirected trade; networks are not placed under new stress
Critical technology	High	Selected chip, mineral and software controls are relaxed; subsidised domestic capacity loses its protected market
Soft
Government effectiveness	Medium	Industrial policy, licensing and subsidy programmes must be revised within the 18-month schedule
Human capital	Low	Research and student exchange reopen in part; workers in protected plants need redeployment
Influence and cohesion	High	Allies and middle powers lose leverage gained from rivalry; domestic opponents contest the agreement
Economic
Macro-financial	Medium	Import prices and risk premia fall; capital moves away from economies that gained from diversion
Industry, trade and supply	High	Direct trade recovers; diversion economies and protected producers lose orders and margins
Energy and resources	Medium	Rare earth and critical mineral licensing eases; alternative mining and processing projects lose their price premium

09Stakeholders

Government: Exposure
Industrial policy, export control regimes and defence planning premised on sustained rivalry; alliance commitments discussed without the allies present
Actions
Test each industrial subsidy and tariff-dependent project against bilateral tariffs at their pre-2018 levels
Seek written assurances on alliance commitments and on consultation before each review date of the agreement
Prepare adjustment support for regions and workers in protected and diversion-dependent industries
Watch
Tariff stage schedules and compliance reports from the joint commission
Changes to export control lists and licence approval times
Exercise notifications and reported unsafe military encounters near Taiwan
Technology: Exposure
Plants, supplier contracts and product plans designed around export controls and restricted market access
Actions
Model plant economics and supplier contracts with selected controls lifted and tariff margins removed
Maintain compliance systems for the controls on advanced and military-use items that remain
Review second-source commitments against the withdrawal clause before cancelling any of them
Watch
Published control lists and licence approval times
Reviews of semiconductor and battery subsidy programmes
Mutual recognition decisions and participation in standards bodies
Investors: Exposure
Holdings in protected manufacturing, diversion economies and alternative mineral supply lose value; shipping, trade finance and exporters to both markets gain
Actions
Test portfolios against tariff removal over 18 months and a withdrawal on six months' notice
Review assets whose returns depend on tariff protection or on a security price premium
Reassess sovereign and currency exposure to economies reliant on diverted trade
Watch
War-risk insurance loadings for the Taiwan Strait
Export orders in Vietnam, Mexico, Malaysia and India
Legislative votes on implementation in either capital
Public: Exposure
Lower prices for traded goods; employment at risk in protected plants and in export zones built on diverted trade
Actions
Local governments should identify employers in their area that depend on tariff protection
Media and civil society should track which commitments are monitored and which results are published
Workers in exposed industries should take up retraining support when it is offered
Watch
Tariff changes on consumer goods
Announcements of plant closures or subsidy extensions
Legislative hearings on the agreement

10Regional exposure

Region	Exposure	Rationale
North America	High	The United States is a party; consumers and exporters gain, while protected plants and Mexico's nearshoring trade lose
Europe	High	Faces renewed Chinese competition without tariff parity, and must review de-risking policy and defence assumptions
China	High	Party to the agreement; export access and selected technology inputs are restored under monitoring
Indo-Pacific	High	Incident risk around Taiwan falls; Vietnam, Malaysia and Thailand lose diverted orders and allies review defence plans
South Asia	Medium	India loses part of its diversion gain and some leverage; lower input costs offset a share of the loss
Gulf and Middle East	Medium	Stronger trade supports energy demand; there is less room to balance between the two powers
Africa	Medium	Mineral exporters lose the premium from rival bidding; importers gain from lower prices of manufactured goods
Latin America and Caribbean	Medium	Mexico loses part of its nearshoring advantage; commodity exporters gain from firmer demand in both markets
Russia and Eurasia	High	Russia's value to China as a strategic partner falls; Central Asian transit and re-export trade is exposed

11Early-warning indicators

Indicator	Source	Threshold
Average tariff each party applies to the other's goods	Peterson Institute for International Economics, US–China tariff tracker; WTO Tariff Profiles	Trade-weighted average below 10 per cent on both sides
Export control list additions and removals	US Bureau of Industry and Security, Entity List notices; China Ministry of Commerce announcements	Net removals in two consecutive quarters
Bilateral goods trade between the United States and China	US Census Bureau; General Administration of Customs of China	Year-on-year growth above 15 per cent for four consecutive quarters
Military-to-military contacts and reported unsafe encounters	US Department of Defense, annual report on military and security developments involving China	—
Military aircraft and vessel activity around Taiwan	Taiwan Ministry of National Defence daily reports	Sustained fall in monthly totals over six months
New trade-restricting and trade-liberalising measures by the two parties	Global Trade Alert	Liberalising measures exceed restricting measures for two consecutive quarters
Foreign direct investment into economies that gained from trade diversion	UNCTAD World Investment Report	—
Defence spending plans as a share of GDP	SIPRI Military Expenditure Database; NATO defence expenditure reports	—

12Compounds

Triggers: S12 Market access opening · Lower barriers between the two largest economies make a wider market access compact easier to conclude
S11 Debt service reset · Cooperation between the largest official creditors makes a common restructuring framework workable
S14 Middle East settlement · External guarantors acting together can support a regional security framework
S20 Outbreak defence succeeds · Shared surveillance and data exchange are easier to agree under reduced rivalry
S08 AI labour shock · Relaxed technology restrictions widen access to frontier models and chips and speed deployment.
S15 Clean power threshold · Freer trade in modules, cells and grid equipment
S17 Automated discovery step · Relaxed technology restrictions widen access to chips and licensed systems
Triggered by: S01 Trade bloc rupture · The cost of divided trade creates the incentive to negotiate
S03 Regional war spillover · A war that closes a sea route shows both powers the cost of unmanaged escalation
S02 Global funding seizure · Shared financial distress has prompted cooperation between the two before
A military incident near Taiwan that both governments choose to containA change of leadership or of electoral mandate in either capital
Amplifying trends: Great-power competitionTariff barrier normalisationExport controls & economic coercionTrade & investment fragmentationTechnical standards competitionCredibility of external commitmentsAlliance realignment & burden-shiftingRearmament & defence spending
Key trends: Great-power competitionCritical Industrial policy competitionVery high Export controls & economic coercionVery high Tariff barrier normalisationVery high Research security & science decouplingVery high
From GINC Trends: the trends rated Very high or Critical for this scenario, of 250. All S13 trend scores.

13Rating rationale

Rating	Band or level	Why
Likelihood, two years	1Remote	The October 2025 leaders' meeting suspended selected measures for one year and removed few of them. The Standard Severe event requires most tariffs imposed since 2018 removed, technology restrictions relaxed, monitoring in force and military incident rules agreed, all in one package. The 2020 Phase One agreement, a narrower bargain, left most tariffs in place and missed its purchase targets. No negotiation of this breadth is under way, and technology controls now rest on national security law in both capitals.
Likelihood, ten years	3Possible	Rivalries have been stabilised by negotiation before: the United States and China in 1972, and the United States and the Soviet Union in 1972 and 1987. Each followed a crisis or a change of strategic calculation, and none was widely expected two years ahead. Over ten years several leadership transitions and at least one serious military incident are probable. The combination of tariff removal, relaxed controls and monitoring is demanding, which holds the rating at Possible.
Systemic impact	4Major	IMF staff estimates published in 2023 put the long-run cost of severe trade fragmentation at up to 7 per cent of global output. The scenario reverses a material part of that cost between the two largest economies and their suppliers. Restricted trade worth at least 1 per cent of global GDP reopens within 18 months, and investment, technology diffusion and lower risk premia add to the direct effect. Shifts are widespread across trade, technology and defence, and some are structural.
National impact	4Major	For a typical highly exposed nation the highest dimensions are economic damage and international position. Economies that gained assembly orders and investment from diversion after 2018, producers financed on tariff protection and allies whose defence planning assumed sustained confrontation each face a change large enough to move capability bands. The two parties and trade-dependent technology users record gains of the same scale. Level 4 marks the size of the change in either direction.
Confidence	low	The event has no close precedent between these two powers, output estimates rest on contested fragmentation models and the panel differed on national impact and on two-year likelihood.

Source of scores: model-panel-v0.5. Confidence refers to the rating, not the scenario. Calibration sources are listed with the anchors above and on the scenario methodology page.

14Open questions

Contested assumptions for the panel to resolve.

Whether restricted trade worth 1 per cent of global GDP can be reached from bilateral flows alone, or requires counting third-country trade that the controls had blocked.
Whether an agreement that either party can end at short notice should be rated as a durable change or as a pause.
How to rate allies and diversion economies, for which the event is a loss, within a record classed as upside.
Whether the specification should fix which technology restrictions are relaxed, since national impact depends heavily on that list.

15Commentary

No signed commentary in this build.

16Version and citation

Version: 0.5.0 · active · great-power-detente
Change log: 0.5.0 · 9 October 2026 · Rebuilt in the second pass from Great-power détente and peace dividend: narrowed to a monitored United States and China agreement on tariffs, technology restrictions and military incident rules; the Ukraine settlement and peace dividend were removed and the ratings reset by the model panel.
Full change log

Rating history

One row per edition. Each edition page is frozen at release; corrections are published as errata.

Edition	Rank	L2y	L10y	Systemic	National	Confidence	Edition view
2027	Not ranked	1Remote	3Possible	4Major	4Major	low	Open

Versions

Version	Date	Change
0.5.0	9 October 2026	Rebuilt in the second pass from Great-power détente and peace dividend: narrowed to a monitored United States and China agreement on tariffs, technology restrictions and military incident rules; the Ukraine settlement and peace dividend were removed and the ratings reset by the model panel.

Citation and downloads

Cite as

GINC (2027). Scenario S13 A great-power agreement lowers economic security barriers, Scenario Library v0.5. scenarios.ginc.org/scenarios/great-power-detente

Content and data are published under CC BY 4.0.

Download JSON Download CSV