Tariff Tracker, June 14: US-China Talks Restore May 12 Status, World Bank Forecasts Slowdown
In a major development that could ease tensions in global trade, the United States and China have agreed to revert to the terms of their May 12 understanding—an arrangement that had previously de-escalated a brewing tariff conflict. The decision comes after several weeks of strained negotiations and tit-for-tat tariff threats.
Back to May 12 Terms
The restored agreement sees both sides suspending any new tariffs and recommitting to dialogue over contentious trade practices, intellectual property protection, and market access. Sources close to the talks suggest the move was prompted by growing domestic pressures in both countries, including inflationary concerns and slowing exports.
US Trade Representative Katherine Tai called the reset “a necessary recalibration,” while Chinese Vice Premier He Lifeng described the move as “a gesture of responsibility toward global economic stability.”
World Bank Lowers Global Growth Outlook
The easing of trade tensions comes amid sobering news from the World Bank, which has revised its global GDP growth forecast downward for 2025. The latest projection pegs growth at 2.4%, citing factors including persistent supply chain disruptions, rising interest rates in developed economies, and geopolitical uncertainties.
Emerging markets are expected to be hit the hardest, particularly those heavily dependent on exports to the US and China. “While the tariff truce is a positive sign, the ripple effects of prolonged economic fragmentation are already in motion,” the World Bank report notes.
Market Reaction
Global markets responded positively to the US-China announcement, with Asian indices posting modest gains and European markets opening higher. However, economists warn that the real test will be whether both sides can maintain this fragile truce.
Analyst Insight
“This is less a breakthrough and more a breathing space,” said Morgan Chen, a senior economist at Global Insight Partners. “The underlying issues haven’t been resolved, but there’s now room to avoid short-term damage.”
FAQ
Q1: What is the May 12 trade status that the US and China are reverting to?
A: The May 12 status refers to a previous agreement between the US and China that paused further tariff increases and set the stage for constructive dialogue on trade issues such as intellectual property rights, technology transfer, and import-export duties. The rollback to this status effectively halts escalating trade measures for now.
Q2: What prompted the US and China to reset trade terms?
A: Rising inflation, stagnating exports, and increased pressure from domestic industries pushed both governments to seek de-escalation. The decision also follows pressure from international stakeholders to prevent further global economic disruption.
Q3: How does this development affect global trade?
A: The restoration of trade talks eases investor fears and may stabilize supply chains, particularly in electronics, agriculture, and automotive sectors. However, actual trade volumes and long-term agreements will depend on follow-through actions.
Q4: Why did the World Bank lower its growth forecast?
A: The World Bank cited global factors such as higher interest rates, prolonged geopolitical tensions, and weakened demand across major economies. Even with temporary trade relief, structural issues remain unresolved.
Q5: Will this trade truce have an immediate economic impact?
A: Market sentiment has improved in the short term, with stocks and currencies in trade-sensitive economies seeing gains. However, significant economic changes will only occur if the truce leads to long-term trade normalization.
Q6: Which sectors stand to benefit the most from the US-China agreement?
A: Technology, agriculture, semiconductors, and automotive sectors are likely to benefit first, as they were among the hardest hit by tariffs. Manufacturing and logistics firms also stand to gain from stabilized supply chains.
Publish on JUNE 14,2025 by :selvi
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