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TARIFF
U.S.-China trade talks show progress

The U.S. and China, after two days of talks in Switzerland, claimed “substantial progress” in easing their trade war, with tariffs at 145% and 125% respectively. A new negotiation framework was set, led by U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, with a joint statement expected Monday, May 12. Hosted by the Swiss UN ambassador, the talks sparked cautious hope—Chinese stocks rose 1.2%, and the yuan firmed—but issues like rare earths and fentanyl linger, and analysts question the depth of the deal. A potential Trump-Xi call looms, hinting at a thaw in the tense economic standoff.

The U.S.-China trade war escalated with Trump’s April 2, 2025, tariffs, driving a 21% drop in Chinese exports to the U.S. last month. The May 9-10 talks aimed to address U.S. demands: tariff cuts below 60%, rare earth access, and fentanyl export curbs.

Bessent, He Lifeng, U.S. Trade Representative Jamieson Greer, and Vice Finance Minister Liao Min led the discussions, emphasizing a positive tone. No immediate tariff reductions were announced, with details deferred to Monday.

The CSI 300 Index gained 1.2% on May 12, reflecting market optimism, though Bloomberg Economics warns tariffs above 30% could still slash China’s U.S. exports by 60% medium-term. Win Thin of Brown Brothers Harriman doubts significant outcomes from brief talks.

The U.S. seeks tariff reductions, rare earth access, and fentanyl curbs, while China, less pressured by political timelines, holds a strategic edge, per the Atlantic Council’s Dexter Roberts. China’s pre-talks rate cuts signal economic strain amid April deflation.

The talks could lead to a Trump-Xi call, the first since Trump’s return. A 2020 trade deal, with China’s $200 billion U.S. goods pledge, remains active but unaddressed here. Martin Chorzempa of the Peterson Institute notes uncertainty on final tariffs but sees a resolution as a positive signal for global trade. The outcome will test Trump’s balancing of domestic and global pressures. A U.S.-China détente could ease global trade tensions, encouraging other nations to negotiate tariff relief. The May 12 statement will clarify the talks’ scope.

ECONOMY
Singapore dollar faces economic turbulence

The Singapore dollar, Southeast Asia’s top currency in 2025 with a 5% gain against the U.S. dollar, is nearing a turning point. Economic challenges, including global trade tensions and revised growth forecasts, threaten its momentum, while the Monetary Authority of Singapore (MAS) signals potential policy easing.

Singapore’s trade ministry slashed its 2025 GDP growth forecast to 0-2%, citing U.S. tariffs and global trade disruptions. Non-oil domestic exports data, due May 16, 2025, will reveal early tariff impacts, potentially weakening economic sentiment further.

The Singapore dollar’s nominal effective exchange rate (S$NEER) is 1.1% above the MAS policy band’s midpoint, per DBS Bank’s Philip Wee. This reflects earlier strength, but revised economic forecasts suggest a retreat toward the midpoint.

MAS, using the exchange rate as its primary tool, lowered its core inflation target, hinting at easing in 2025. Moh Siong Sim of Bank of Singapore predicts the S$NEER may ease as economic data aligns with pessimistic surveys.

Philip Wee argues the S$NEER “should be closer to mid” given the outlook. Saktiandi Supaat of Malayan Banking Berhad expects MAS to moderate any excessive S$NEER strength, ensuring stability.

A softer S$NEER could boost export competitiveness but raise import costs. The MAS aims to balance these pressures, with Friday’s export data a key indicator. Singapore’s challenges reflect Southeast Asian trends, with U.S.-China trade tensions impacting the region. Upcoming data, like Japan’s GDP on May 16, may influence currency dynamics.

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ENERGY
Aramco hit by oil price drop

Saudi Aramco, the world’s top oil exporter, saw Q1 profits dip 4.6% to 97.5 billion riyals ($26 billion) as crude prices slumped to $76.30 a barrel from $83 last year, per its Sunday statement. The decline, alongside a 5.3% drop in operating profit, underscores the strain on Aramco’s finances, even as it beat analyst forecasts. Free cash flow couldn’t cover the reduced $21.36 billion dividend, down from $31 billion last year, after Aramco cut its 2025 payout by a third to $85 billion.

The Saudi government, owning over 97% of Aramco with its wealth fund, feels the heat as oil prices linger near $64—well below the $92 needed to balance its budget, per the IMF. Crown Prince Mohammed bin Salman’s pricey projects, like Neom, widen the deficit, with debt soaring in Q1. OPEC+ supply hikes and Trump’s trade war crashed oil to a four-year low below $60, adding pressure as Trump heads to Riyadh Tuesday, urging more output to curb inflation and pressure Russia.

Aramco’s lower dividends and oil’s slump signal tougher times for Saudi’s economic ambitions, caught between global market forces and geopolitical chess. The desert kingdom braces for a bumpy ride as oil’s decline tests its modernizing dreams.