Economy
US-China to resume trade talks on export controls for 2nd day
Top U.S. and Chinese officials will restart trade talks for a second day in London on Tuesday, aiming to secure a breakthrough over export controls for rare earths and other goods that have threatened a new rupture between the two superpowers.
Investors are hoping for an improvement in ties after the relief sparked by a preliminary deal agreed in Geneva last month gave way to fresh doubts after Washington accused Beijing of blocking exports which are critical to sectors including autos, aerospace, semiconductors and defense.
White House economic adviser Kevin Hassett said on Monday that the U.S. was likely to agree to lift export controls on some semiconductors in return for China speeding up the delivery of rare earths.
U.S. President Donald Trump said the talks were going well: “We’re doing well with China. China’s not easy.”
Trump’s often erratic policymaking on tariffs has roiled global markets, sparked congestion and confusion in major ports and cost companies tens of billions of dollars in lost sales and higher costs.
The second round of U.S.-China talks, which followed a rare phone call between Trump and Chinese President Xi Jinping last week, comes at a crucial time for both economies.
Customs data published on Monday showed that China’s exports to the U.S. plunged 34.5% in May, the sharpest drop since the outbreak of the COVID-19 pandemic.
While the impact on U.S. inflation and the jobs market has so far been muted, tariffs have hammered U.S. business and household confidence and the dollar remains under pressure.
Discussing disagreements
The two sides, led at the talks by U.S. Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer, with the Chinese contingent helmed by Vice Premier He Lifeng, are meeting at the ornate Lancaster House in the British capital.
The talks ran for almost seven hours on Monday and are set to resume after 9:00 a.m. GMT on Tuesday, with both sides expected to issue updates later in the day.
The inclusion of Lutnick, whose agency oversees export controls for the U.S., is one indication of how central rare earths have become. He did not attend the Geneva talks, when the countries struck a 90-day deal to roll back some of the triple-digit tariffs they had placed on each other.
China holds a near-monopoly on rare earth magnets, a crucial component in electric vehicle motors, and its decision in April to suspend exports of a wide range of critical minerals and magnets upended global supply chains and sparked alarm in boardrooms and factory floors around the world.
Kelly Ann Shaw, a former White House trade adviser during Trump’s first term and now a trade partner at the Akin Gump law firm in Washington, said she expected China to reaffirm its commitment to lift retaliatory measures, including export restrictions, “plus some concessions on the U.S. side, with respect to export controls measures over the past week or two.”
But Shaw said she expected the U.S. only to agree to lift some new export curbs, not longstanding ones such as for advanced artificial intelligence chips.
In May, the U.S. ordered a halt to shipments of semiconductor design software and chemicals and aviation equipment, revoking export licences that had been previously issued.
The World Bank on Tuesday revised its growth forecast for Türkiye upward for 2025, citing continued economic momentum and favorable external conditions, even as it slightly lowered expectations for next year.
In its twice-yearly Global Economic Prospects report, the 189-country lender said it now sees the Turkish economy expanding by 3.1% in 2025, up from its previous estimate of 2.6% made in January.
The upward revision stemmed from what the bank said was the previous momentum, including stronger-than-expected growth in the final quarter of 2024, and lower global oil prices.
Türkiye’s growth eased slightly to 3.2% in 2024, mainly due to aggressive monetary tightening, aimed at combating high inflation that has almost halved over the last year.
Treasury and Finance Minister Mehmet Şimşek on Wednesday linked the improved expectations to confidence in the government’s economic program.
“While the World Bank has downgraded growth forecasts for nearly 70% of economies for 2025, it has increased Türkiye’s growth forecast by 0.5 percentage points,” Şimşek wrote on the social media platform X.
“We will resolutely continue with our policies that reinforce the foundations of sustainable high growth.”
Global forecast sharply downgraded
The World Bank slashed its global growth forecast for 2025 by four-tenths of a percentage point to 2.3%, saying that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.
The lender lowered its estimate for nearly 70% of all economies – including the U.S., China and Europe, as well as six emerging market regions – from the levels it projected six months ago before U.S. President Donald Trump took office.
In a forward to the latest version of the report, World Bank chief economist Indermit Gill wrote that the global economy has missed its chance for the “soft landing” – slowing enough to tame inflation without generating serious pain – it appeared headed for just six months ago.
“The world economy today is once more running into turbulence,” Gill wrote. “Without a swift course correction, the harm to living standards could be deep.”
Trump has upended global trade with a series of on-again, off-again tariff hikes that have increased the effective U.S. tariff rate from below 3% to the mid-teens – its highest level in almost a century – and triggered retaliation by China and other countries.
The World Bank is the latest body to cut its growth forecast as a result of Trump’s erratic trade policies, although U.S. officials insist the negative consequences will be offset by a surge in investment and still-to-be-approved tax cuts.
Still-tight monetary policy
For 2026, the bank slightly reduced its projection for Turkish gross domestic product (GDP) growth from 3.8% to 3.6%, as the effects of tight monetary policy and expected fiscal reforms are estimated to temper expansion.
For the global economy, the bank’s forecast was lowered to 2.4% from 2.7%.
The report acknowledged Türkiye’s ongoing efforts to rein in inflation through a combination of restrictive monetary policy and anticipated fiscal adjustments.
“Relatively moderate growth in 2025 reflects the effects of still-tight monetary policy, expected fiscal consolidation, and subdued global activity amid heightened uncertainty,” the bank said.
Looking ahead, the World Bank projects that consumption will be the primary driver of growth in 2026 and 2027, supported by continuing disinflation.
“Export growth is likely to be limited by the real appreciation of the (Turkish) lira, subdued euro area demand, and uncertainty surrounding trade policies in major economies,” the report read.
The Central Bank of the Republic of Türkiye (CBRT) pivoted to raising its key policy rate by 350 basis points in April to 46% and pushed the overnight lending rate to 49% after Turkish assets and the lira fell sharply after Istanbul Mayor Ekrem Imamoğlu was jailed pending trial over graft charges.
Before that, the bank had begun an easing cycle and gradually cut its one-week repo rate to 42.5% in March as inflation eased significantly from 75% it had reached in May 2024.
A sharper-than-anticipated slowdown in annual inflation to 35.41% in May has reignited speculation that the bank could resume rate cuts soon.
Weakest global growth since 2008
The World Bank stopped short of forecasting a global recession, but said economic growth this year would be the weakest outside of a recession since 2008. By 2027, global gross domestic product growth was expected to average just 2.5%, the slowest pace of any decade since the 1960s.
The report forecast that global trade would grow by 1.8% in 2025, down from 3.4% in 2024 and roughly a third of its 5.9% level in the 2000s. The forecast is based on tariffs in effect as of late May, including a 10% U.S. tariff on imports from most countries. It excludes increases that were announced by Trump in April and then postponed until July 9 to allow for negotiations.
The World Bank said global inflation was expected to reach 2.9% in 2025, remaining above pre-COVID-19 levels, given tariff increases and tight labor markets.
“Risks to the global outlook remain tilted decidedly to the downside,” it wrote. The lender said its models showed that a further increase of 10 percentage points in average U.S. tariffs, on top of the 10% rate already implemented, and proportional retaliation by other countries, could shave another half of a percentage point off the outlook for 2025.
Such an escalation in trade barriers would result “in global trade seizing up in the second half of this year… accompanied by a widespread collapse in confidence, surging uncertainty and turmoil in financial markets,” the report said.
Nonetheless, it said the risk of a global recession was less than 10%.
2 decades to recoup losses
The bank predicted that the U.S. economy – the world’s largest – would grow half as fast (1.4%) this year as it did in 2024 (2.8%). That marked a downgrade from the 2.3% U.S. growth it had forecast back for 2025 back in January.
The Chinese economy is forecast to see growth slow from 5% in 2024 to 4.5% this year and 4% next. The world’s second-largest economy has been hobbled by the tariffs that Trump has imposed on its exports, by the collapse of its real estate market and by an aging workforce.
U.S. and Chinese officials said on Tuesday they had agreed on a framework to get their trade truce back on track and remove China’s export restrictions on rare earths while offering little sign of a durable resolution to longstanding trade tensions.
The World Bank expects the 20 European countries that share the euro currency to collectively grow just 0.7% this year, down from an already lackluster 0.9% in 2024.
Trump’s tariffs are expected to hurt European exports. And the unpredictable way he rolls them out – announcing them, suspending them, coming up with new ones — has created uncertainty that discourages business investment.
India is once again expected to be the world’s fastest-growing major economy, expanding at a 6.3% clip this year. But that’s down from 6.5% in 2024 and from the 6.7% the bank had forecast for 2025 in January.
In Japan, economic growth is expected to accelerate this year – but only from 0.2% in 2024 to a sluggish 0.7% this year, well short of the 1.2% the World Bank had forecast in January.
The lender said emerging markets and developing economies were expected to grow by 3.8% in 2025 versus 4.1% in the forecast in January.
Poor countries would suffer the most, the report said. By 2027, developing economies’ per capita GDP would be 6% below pre-pandemic levels, and it could take these countries – minus China – two decades to recoup the economic losses of the 2020s.
U.S. inflation picked up slightly in May as food costs rose, though overall inflation remained mostly tame, official data released by the Labor Department revealed.
Consumer prices increased 2.4% in May compared with a year ago, according to the report released Wednesday. That is up from a 2.3% yearly increase in April. Excluding the volatile food and energy categories, core prices rose 2.8% for the third straight month. Economists pay close attention to core prices because they generally provide a better sense of where inflation is headed.
The figures suggest inflation remains stubbornly above the Federal Reserve’s (Fed) 2% target, which makes it less likely that the central bank will cut its key short-term interest rate. U.S. President Donald Trump has repeatedly urged the central bank to reduce borrowing costs.
Senior U.S. and Chinese negotiators have agreed on a framework to get their trade negotiations back on track after a series of disputes that threatened to derail them, both sides said at the end of two days of talks in London, which wrapped up late Tuesday.
The meetings appeared to focus on resolving disputes over mineral and technology exports that had shaken a fragile truce on trade reached in Geneva last month. It was not clear whether progress was made on the more fundamental differences over China’s sizeable trade surplus with the United States.
“First, we had to get sort of the negativity out and now we can go forward,” U.S. Commerce Secretary Howard Lutnick told reporters after the meetings.
Asian stock markets rose Wednesday after the agreement was announced.
The talks followed a phone call last week between U.S. President Donald Trump and Chinese leader Xi Jinping to try to calm the waters.
Li Chenggang, a vice minister of commerce and China’s international trade representative, said the two sides had agreed in principle on a framework for implementing the consensus reached on the phone call and at the talks in Geneva, the official Xinhua News Agency said.
Further details, including any plans for a potential next round of talks, were not immediately available.
Li and Wang Wentao, China’s commerce minister, were part of the delegation led by Vice Premier He Lifeng. They met with Lutnick, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer at Lancaster House, a 200-year-old mansion near Buckingham Palace.
Wendy Cutler, a former U.S. trade negotiator, said the disputes had frittered away 30 of the 90 days the two sides have to try to resolve their disputes.
They agreed in Geneva to a 90-day suspension of most of the 100%-plus tariffs they had imposed on each other in an escalating trade war that sparked fears of recession. The World Bank, citing a rise in trade barriers, cut its projections for U.S. and global economic growth on Tuesday.
“The U.S. and China lost valuable time in restoring their Geneva agreements,” said Cutler, now vice president at the Asia Society Policy Institute. “Now, only sixty days remain to address issues of concern, including unfair trade practices, excess capacity, transshipment and fentanyl.”
Since the Geneva talks, the United States and China have exchanged angry words over advanced semiconductors that power artificial intelligence, visas for Chinese students at American universities and rare earth minerals that are vital to carmakers and other industries.
China, the world’s biggest producer of rare earths, has signaled it may speed up issuing export licenses for the elements. Beijing, in turn, wants the U.S. to lift restrictions on Chinese access to the technology used to make advanced semiconductors.
Lutnick said that resolving the rare earths issue is a fundamental part of the agreed-upon framework, and that the U.S. will remove measures it had imposed in response. He did not specify which measures.
“When they approve the licenses, then you should expect that our export implementation will come down as well,” he said.
Cutler said it would be unprecedented for the U.S. to negotiate on its export controls, which she described as an irritant that China has been raising for nearly 20 years.
“By doing so, the U.S. has opened a door for China to insist on adding export controls to future negotiating agendas,” she said.
In Washington, a federal appeals court agreed Tuesday to let the government keep collecting tariffs that Trump has imposed not just on China but also on other countries worldwide while the administration appeals a ruling against his signature trade policy.
Trump said earlier that he wants to “open up China,” the world’s dominant manufacturer, to U.S. products.
“If we don’t open up China, maybe we won’t do anything,” Trump said at the White House. “But we want to open up China.”
U.S. Treasury Secretary Scott Bessent has been floated as a potential successor to Federal Reserve (Fed) Chair Jerome Powell, a report said on Tuesday.
The report by Bloomberg News cited sources familiar with the matter, a claim the White House immediately denied.
Bessent joins a small list of Fed chair candidates that has included Kevin Warsh, a former Fed official whom President Donald Trump previously interviewed for Treasury secretary, Bloomberg added.
A White House official dismissed the report as false.
Trump said on Friday he would name a successor to Powell very soon. Bloomberg, citing two unidentified people familiar with the matter, reported that formal interviews for the job have not begun.
Bessent is leading Trump’s sweeping global trade overhaul and has a hand in pushing for changes to taxes and regulations.
Türkiye is drawing up a plan to relocate industrial zones in Istanbul to more disaster-resilient areas as part of a strategy to mitigate the economic fallout of a possible major earthquake in the region, a report said on Wednesday.
The plan comes amid rising concerns about the long-anticipated Istanbul earthquake, which experts say could pose a severe threat not only to the metropolis’ population but also to the country’s industrial base.
A magnitude 6.2 tremor rattled the city this April, reviving memories of a historic quake that devastated the country’s southeast two years ago and raising anxieties about the city’s lack of preparedness.
The quake marked the biggest in years in Istanbul, which straddles the Bosporus dividing Europe and Asia and sits just north of a fault line crossing the Marmara Sea.
A significant share of Türkiye’s manufacturing and exports are concentrated in and around the Istanbul metropolitan area, zones that are highly vulnerable to seismic activity.
Any disaster would stagger Türkiye’s economy, given that the broader Marmara region accounts for more than 40% of the national gross domestic product (GDP).
There are nine industrial areas in Istanbul, according to OSBÜK, the umbrella organization representing the zones.
The Industry and Technology Ministry’s 2030 Industrial Strategy includes a dedicated chapter on earthquake resilience.
The new plan will prioritize risk analysis of existing industrial areas, followed by the identification of relocation zones that meet stringent disaster-resilience standards, a report by private broadcaster NTV said.
Quake-resilience will be a primary criterion and new industrial zones will be developed with robust infrastructure and modern safety standards, it noted.
Where relocation is not feasible, authorities plan to reinforce existing industrial facilities to improve their earthquake resistance.
The envisioned industrial areas will be strategically placed with rail and port connections, according to the report.
To facilitate this, the government will encourage private-sector investment and explore alternative financing models.
An International Monetary Fund (IMF) delegation visited Syria for the first time in 15 years, signaling renewed engagement with the war-torn nation following the fall of Bashar Assad and years of devastating conflict, the IMF said Tuesday.
The team traveled to Damascus from June 1 to 5 to assess economic conditions and discuss priorities with Syrian officials as the country seeks to rebuild after more than a decade of war.
“Syria faces enormous challenges following years of conflict that caused immense human suffering and reduced its economy to a fraction of its former size,” said Ron van Rooden, who led the IMF mission.
The country’s economy has been severely battered, with millions displaced and much of its infrastructure destroyed. Roughly six million Syrians have fled the country, while another seven million remain internally displaced, van Rooden noted.
“Output has plummeted, real incomes have fallen sharply, and poverty rates are high,” he added. “State institutions have also been weakened, and the destruction of infrastructure has left deep scars.”
The civil war began in 2011 after a violent crackdown on pro-democracy protests. Assad was ousted in December 2023 by a lightning offensive led by anti-regime forces. Syria’s new leadership has since sought to reestablish diplomatic and financial ties with international institutions.
The IMF said it aimed to explore how it could support Syria’s economic recovery and noted that urgent action is needed to stabilize the economy and rebuild public services.
The IMF’s last in-depth assessment of Syria’s economy was in 2009, prior to the onset of the conflict. In April, Saudi Arabia and Qatar announced they would jointly settle Syria’s $15 million debt to the World Bank. The move paves the way for renewed World Bank operations in the country, which were suspended at the start of the war.
The IMF called recent discussions with Syria’s economic team “useful” and said future engagement will focus on policies that support inclusive growth and rebuild economic institutions.
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