US Treasury Secretary Scott Bessent's last-minute diplomatic trip to Tokyo and Seoul is a critical effort to prepare the ground for the upcoming summit between Presidents Trump and Xi.
The main goal of this "shuttle diplomacy" is to establish clear guardrails on three interconnected and volatile fronts. By agreeing on some ground rules beforehand, the hope is to prevent the high-stakes leaders' summit from escalating into a full-blown geoeconomic conflict and instead achieve at least a temporary ceasefire.
First, there's the pressing issue of energy security. The war in Iran has effectively closed the Strait of Hormuz, a vital channel for global oil shipments. This has caused oil prices to spike and disrupted shipping worldwide. As major energy importers, Japan and China share a direct interest with the U.S. in reopening this corridor. Bessent's mission is to secure China's cooperation in de-escalating the conflict and ensuring safe transit.
Second is the challenge of foreign exchange stability. The Japanese yen has recently weakened dramatically, falling past the 160-per-dollar mark. This has led to strong warnings from Tokyo and reports of direct market intervention to support the currency. To prevent market chaos, close coordination between the U.S. Treasury and Japan's Ministry of Finance is essential, making it a key topic for Bessent's meetings in Tokyo.
Third, the agenda covers the delicate balancing act of tech de-risking, particularly in semiconductors. The U.S. has been tightening export controls to limit China's access to advanced technology, while also ensuring allied partners like South Korea's Samsung and SK hynix can continue their operations. This "targeted controls with allied continuity" approach requires clear communication with Beijing to avoid misunderstandings that could trigger a tech trade war.
This diplomatic push is also shaped by a recent Supreme Court ruling that limited the U.S. President's power to impose tariffs unilaterally. This legal shift makes negotiated solutions more valuable than ever. Bessent's trip is therefore a pragmatic attempt to manage these complex risks through dialogue, paving the way for a more stable and predictable outcome from the leaders' summit.
- Strait of Hormuz: A narrow waterway between the Persian Gulf and the open ocean, through which a significant portion of the world's oil supply passes.
- De-risking: A strategy to reduce dependency on a single country (like China) for critical goods, without completely cutting off economic ties (decoupling).
- FX Intervention: The act of a country's central bank buying or selling its own currency in the foreign exchange market to influence its value.