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Trump: "Friendly" Trade Talks with China, Relationship is "Very Good"; China Trade Breakthrough May Help U.S. Avoid A Recession; U.S. & China Agree to Roll Back Tariffs for 90 Days; Israeli-American Hostage Free After 18-Month Ordeal. Aired 3-3:30p ET

Aired May 12, 2025 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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BRIANNA KEILAR, CNN HOST: Stock surge as China and the U.S. announced a truce in their trade war. We'll look at what's in the deal and what it could mean for concerns about a possible recession.

BORIS SANCHEZ, CNN HOST: Plus, the criminal trial of Sean "Diddy" Combs beginning in New York City. The first witness on the stand right now being cross-examined by the defense. CNN's reporters are in the courtroom and updating the story minute-by-minute.

And tackling drug prices - President Trump says he will resurrect a controversial policy that could reduce the cost of pharmaceuticals. But will this plan work after it was blocked by federal courts five years ago? We're following these major developing stories and many more, all coming in right here to CNN NEWS CENTRAL.

SANCHEZ: President Trump is touting his tariff agreement with China as a major win, and U.S. markets are taking note. Stocks soaring today after U.S. and Chinese officials announced they would pause their escalating trade war for 90 days. As part of the agreement, the U.S. is promising to lower its 145 percent tariffs on China to 30 percent, while China will bring down tariffs on American imports from 125 percent down to 10 percent.

KEILAR: A senior administration official tells CNN the President was eager to strike an agreement with China before he left today for a major trip to the Middle East. Before he took off, Trump praised the negotiations while leaving the door open for direct talks with President Xi.

(BEGIN VIDEO CLIP)

DONALD TRUMP, PRESIDENT OF THE UNITED STATES: The talks in Geneva were very friendly. The relationship is very good. We're not looking to hurt China. They were very happy to be able to do something with us, and the relationship is very, very good. I'll speak to President Xi maybe at the end of the week. We have some other things we're doing.

(END VIDEO CLIP) KEILAR: We have CNN's Matt Egan watching all of this unfold. How

consequential is this 90-day pause in the tariffs between U.S. and China, Matt?

MATT EGAN, CNN REPORTER: Important, Brianna. This is a real breakthrough, no doubt about it. I think the market reaction is quite telling. We're seeing investors basically give this a market equivalent of a standing ovation, right, with the Dow up by about 1,100 points, 2.7 percent, the S&P 500 on track for its best day since April 9th, which, not coincidentally, was also a rally triggered by the President walking back some tariffs. The Nasdaq up by 4 percent, and some stocks - some individual stocks that are most exposed to this trade war - are seeing even bigger gains. Nike, Best Buy up 6- - 7 percent. Amazon, 8 percent. Wayfair, 20 percent gain. Those are all gains just today.

And this is no doubt a sense of relief on Wall Street, right? Because this was a badly needed de-escalation. I mean, we effectively had a trade embargo between the world's two biggest tariffs, right - between the world's biggest two economies, right? We had tariffs go sky-high, higher than anyone had really anticipated coming into this year. So, we needed a deal here.

Now, this agreement calls for, over the next 90 days, U.S. tariffs to go down from 145 percent down to 30 percent. Through the next 90 days at least, 125 percent tariffs that China had on U.S. goods goes down to 10 percent. And there is a sense that this will allow trade to begin flowing again, which is a very big deal, because supply chain experts had warned that we were perhaps days away from a supply chain meltdown and shortages.

[15:05:02]

So, there's a sense that now trade can flow again. There could still be some supply chain disruptions, but hopefully not as bad nor as long-lasting as what would have been if tariffs stayed sky-high.

SANCHEZ: Yes, 10- and 30 percent - not low compared to where they were before, right? So, I wonder, as we see markets respond positively, how economists feel about the potential for a recession. There was a lot of concern that we were barreling toward one.

EGAN: Yes, Boris, there was a lot of concern about that. There is a sense now that perhaps this breakthrough can allow the United States to avoid what would have been a self-inflicted recession - right - maybe. Because to your point, it's not like tariffs are going down to zero, right? They are still high - higher than the start of the year.

In fact, Moody's Analytics calculates that the effective U.S. tariff rate stands at 14 percent now. That is the highest since 1910. Think about that for a moment. And that does account for, yes, the lower tariffs on China plus the trade agreement with the United Kingdom.

I talked to Moody's economist Mark Zandi, and he told me that before this agreement, he thought there was about a 60 percent chance of a recession in the United States this year. He now sees a 45 percent chance. Justin Wolfers also says it's about a coin flip - about 50-50.

So yes, recession odds are coming down, but not nearly as low as you might think if you were just looking at the stock market.

And one last point here is there's really no playbook here, right? There's no precedent for how a modern economy responds after going through these many shocks in this short amount of time. But we're about to find out in the coming months as the new - as the incoming economic numbers come out and we see just how the economy responds to all of this whiplash on the trade front. Back to you.

KEILAR: All right. Matt Egan, thank you for that.

Let's talk more about it now with senior columnist for Yahoo Finance, Rick Newman. He's also the author of "Rebounders: How Winners Pivot from Setback to Succes."

Rick, great to have you here. So, tariffs going from 145 percent and 125 percent to, respectively, 30- and 10 percent. What does that mean for consumers?

RICK NEWMAN, SENIOR COLUMNIST, YAHOO FINANCE: It's still a tax hike, and it means prices are going to go up. They're just not going to go up by as much as they would have gone up at 145 percent. And as we just heard, those tariffs at 145 percent - nobody was paying 145 percent to bring Chinese goods into the country. They just were not coming into the country. And I think it's a good bet somebody whispered in President Trump's ear, if this goes on much longer, consumers are going to start to notice that the stuff they want, they can't get online, or they're not finding it in stores, because we were getting to the point where supply chains were empty.

So, what will probably happen now is importers are probably going to start bringing these products into the country and paying the tariff. But most of that tariff - 30 percent, I mean it varies on a lot of different products, let's call it an average of 30 percent - much of that added cost is just going to get passed on to consumers. So, you're not going to see the price of shoes doubling when you do your back-to-school shopping in a couple of months, but you might notice that they're up 25 percent or so.

KEILAR: Yes, and people will still notice that. Okay, so you heard these assessments - and everyone has one - about a recession and the possibility of it, kind of averaging out maybe to be 50-50, coin flip. What are you hearing? What are you expecting?

NEWMAN: That's about right. Anybody can look at the betting odds on Polymarket. The odds of a recession there dropped from about 60 percent. They're now around 40 percent. Let's say we don't have a recession. We are still going to have slower economic growth, higher inflation, and higher unemployment than we would have without these tariffs.

So, you know, I guess Trump will be able to say - you know, if he's lucky - by the end of the year, I averted a recession. But we're going to have lackluster growth, and it's an open question what's going to happen with inflation. If - you know, it's probably not going to go back to the 9 percent peak from 2022. But, you know, inflation - we almost won this battle against inflation, but now prices are going to be going up. You know, we have 2.8 percent right now, and inflation could end up at 4 percent by the end of the year - 4.3 percent, 4.4 percent, 4.5 percent.

So, it's going to be up to Americans. When they see these price increases, are they going to say, I don't mind paying a little bit more because I think President Trump is going the right direction? Or are they going to say, man, I'm sick of price hikes. I wish this weren't happening.

KEILAR: So, in the line that you hear kind of coming from Trump administration officials is, his policies taken as a whole, right?

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So, we're expecting, you know, to see something on tax cuts. His policies as a whole ultimately are going to benefit Americans. What they're saying they've been aiming for at these tariffs is a rebalancing of trade. They say that is going to benefit Americans. I guess the question is, does it end up being a net win for Americans? Do you have a sense of if we can see that now or when we'll know?

NEWMAN: Few economists think that this is a net win for Americans. Most of them think it's a net loss. And, I mean, in a way, it's self- defeating. So, what Trump is trying to do here is stimulate more American manufacturing by making imports more expensive. But in order to do that, you have to make imports really expensive. Because it still costs more to make stuff in the United States - even with the 30 percent tax on imports, it is still more expensive to make stuff in the United States.

And look what Trump just did. He was not willing to inflict that level of pain on American consumers, so he lowered the tariffs to a point where they're not high enough to stimulate more manufacturing in the United States. And by the way, these are the - they - generally - the jobs of the past, not the jobs of the future. So, Trump is trying to bring back the industrial smokestack economy, I guess, of the 1980s. But it - there's just very little likelihood this is going to happen.

KEILAR: Rick Newman, thank you so much. Really appreciate having you.

NEWMAN: Thanks, guys.

KEILAR: And right now, the defense is cross-examining the first witness in the sex trafficking trial of Sean "Diddy" Combs. The former director of security at the InterContinental Hotel back in 2016 is on the stand. That is when Combs was seen in that now infamous surveillance video attacking his former girlfriend, Cassie Ventura. Prosecutors actually played that video for the jury.

SANCHEZ: Yes. The former security guard testified about the moments he arrived at the scene and what happened afterward. He testified that he responded to a call for a, quote, "woman in distress." That when he stepped out of the elevator and saw Combs and the woman in the elevator lobby, he found Combs with a, quote, "devilish stare." He also testified he caught up with Cassie Ventura as she left the hotel, and he said that she had a, quote, "purple eye," and that she repeatedly said she wanted to leave. She turned down his offers to call police.

Combs' defense attorney then asked the former security guard why her purple eye and Combs' look - that he described as a devilish stare - were not in his incident report.

We're joined now by defense attorney, Misty Marris.

And Misty, as we're getting these reports from inside the courtroom right now, defense lawyer Brian Steel's cross-examining Israel Flores, asking him about the wad of cash that he claims that Combs seemed to offer him. Flores testifying that he definitely believed that it was a bribe.

Steel seems to try to bring up the possibility that that was money being offered for damages that Combs had caused. Apparently, he threw a vase and destroyed some other property. I wonder what you make of this cross-examination so far.

MISTY MARRIS, DEFENSE ATTORNEY: Yes, I'm looking at this cross- examination, and I think that they're getting some headway from the defense side. And that's because - keep in mind what we're talking about here - this video is so central to the prosecution's case. Not because it depicts Combs and Cassie in an altercation - obviously this domestic violence situation as conceded by the defense - but it's part of a bigger narrative for the prosecution. That Combs, in any instance to get individuals to comply in his criminal enterprise and with the conduct at the freak offs, that he used violence to do so.

And this all plays into what the prosecutors have to prove, which is force, fraud, and coercion. So, keeping that in mind, you hear the defense undercutting some of those points on cross. First, questioning why, if this incident was - you saw this devilish stare and Cassie had a purple eye - how is that not in your report? How did you not call the police? Wouldn't that be normal protocol?

And most importantly, the idea of the cover-up - that Combs was bribing the security guard to not say a word to anybody about this altercation, which again, prosecutors are painting as something much bigger. But also to say that, oh, couldn't this have been just to pay for damage?

It's really sowing doubt - which is the point - into the jury's mind and framing how they want these witnesses to be viewed with some skepticism moving forward. So, interesting to see this video coming out with the first witness. It just shows how critical it is to the case.

KEILAR: So, what's the implication there when - and we see time and again the defense trying to point out all the different things that Officer Flores is testifying to but is not included in his incident report. The existence of the other man, right?

SANCHEZ: Mm-hmm.

KEILAR: I think that - they said - wasn't in there. Cassie Ventura's purple eye, the devilish stare comment.

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What is the insinuation about why the officer would leave that out? And why would he leave that out? I mean, a contemporaneous memo can be incredibly effective.

MARRIS: Absolutely. The contemporaneous account of any incident is going to be something the jury will look at, and this is what they say - look at the document that was created at the time - because that's when someone's memory is the best. That's when the account is being memorialized as it's happening. Now, you're so far - years and years down the road - and you have this individual on the stand who's testifying for the prosecution, and the story is changing.

So, it's really undermining credibility of this witness because, to your point, what's closer in time is usually what the defense will say should be deemed more (INAUDIBLE), but it's part of this bigger narrative, and this is where the defense is really focused. Is this an altercation between a couple - which they had to concede, bad behavior on Combs's part - is this an altercation between a couple who has a tumultuous 10-year relationship? Or is this part of a freak-off? Is this indicative of the force that's used against not just Cassie but others?

So that's why we're seeing such a harsh cross-examination of a witness who's really just laying the foundation for the tape.

SANCHEZ: Yes. And they were going into detail about whether Combs actually threw the vase or he threw the flowers and the vase and that's how the vase broke. So, they're going very deeply into his account of every detail that happened.

Misty Marris, appreciate you joining us as now the prosecution is doing some redirect on Israel Flores. Of course, we're going to track all of these details as we get them from our reporters in the courtroom.

Still ahead on NEWS CENTRAL this afternoon, President Trump en route right now to the Middle East for his first major international trip of his second term. We're going to tell you what the administration is hoping to accomplish with this visit.

KEILAR: Plus, President Trump's latest executive order aims to cut drug prices in the U.S. - why the plan will likely face legal challenges.

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SANCHEZ: Breaking news to CNN, the last known living American hostage in Gaza is now a free man. This is the first image we're seeing of 21- year-old New Jersey native Edan Alexander as he was handed over to Red Cross officials in Gaza just a few hours ago. And moments ago, we got video of Edan's mother as she spoke on the phone with her son for the first time since he was kidnapped by Hamas militants 19 months ago. Listen to this.

(BEGIN VIDEO CLIP)

(CROSSTALK)

UNIDENTIFIED FEMALE: Oh, my god. Oh, my god.

UNIDENTIFIED FEMALE: Oh, my god. Edan? Edan? They just released a photo of you and you look unbelievable. Wow. You look beautiful. I love you so much.

(END VIDEO CLIP)

SANCHEZ: That, of course, handing the phone to her, was U.S. Special Envoy to the Middle East Steve Witkoff. Alexander is now being evaluated at a hospital in Israel and finally reuniting with his family members in person.

We want to discuss these developments with Frank Lowenstein. He is a former U.S. Special Envoy for Israel-Palestinian negotiations.

Frank, thanks so much for being with us. What do you think the Trump administration is hoping to accomplish as this release happens while the President is on his way to the Middle East?

FRANK LOWENSTEIN, U.S. SPECIAL ENVOY DURING 2014 GAZA WAR: Well, first of all, it's an extraordinary moment for Edan Alexander and his family. It's hard to even fathom the nightmare they've been going through, so it's great to see them reunited. I think what Trump would like to see is this to be the first step in a process that results in the release of all of the hostages and an end to the war in Gaza. And I think that's where we may be on a collision course with the Israelis, and Netanyahu intends to resume a massive ground invasion the minute Trump leaves. And that would be, you know, the end of any hopes for getting those hostages home.

There may be a temporary fix here. They're negotiating on an extension of the ceasefire that would have some of the hostages released in term - in return for a delay of the ground invasion (INAUDIBLE) going to be at odds with the Israelis if Trump wants to end this war, because Netanyahu has no intention of doing that.

SANCHEZ: To that point, CNN is reporting that Edan and his family may be traveling to Doha to meet with President Trump later in the week as he makes a stop in Qatar. What kind of pressure does this put-on Netanyahu? Is it enough to sway him on that view that you articulated - that this war is nowhere near finished?

LOWENSTEIN: Yes, well, first of all, I think that Trump will be hearing, obviously, from the Alexander family, but also from the Gulf States that he's going to be visiting. If they really want to see this war end - in the past, we're seen it also have a hawkish message from some of those guys in terms of the Iran negotiations and really trying to destroy Hamas - now they want stability. They want peace because it's better for business.

So, the question then becomes, as you point out, what is Trump willing to do to pressure Netanyahu? And it's really uncharted territory for Bibi, in the sense of - he's always been able to pressure U.S. presidents by using Republicans in Congress to make the case that he's soft on terror, or weak on Iran, or whatever the case may be. And whenever he's had to choose between his coalition - which really wants to resume the war - and the American president, he's always chosen his coalition.

But Trump's a different kind of animal altogether. And I think he's more popular in Israel than Netanyahu is. So, it's a different kind of fight for Bibi, and it remains to be seen, you know, how much he's willing to really confront Trump on that.

SANCHEZ: Yes, it seems like a difficult choice for him, right? Because the end of his coalition also means the resumption of these prosecutions, these investigations into the prime minister - potentially jail time in his future. So, I wonder, how do you square that decision?

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LOWENSTEIN: Yes, exactly. It's a rock and a hard place for Netanyahu, unlike one he's ever seen before in the past. But my guess is that they will find a way to massage this issue. I think, first of all, Hamas is really not interested in partial prisoner releases. You know, they're pretty clear on that now. So, it may very well be that the Israelis, you know, blame Hamas for the failure to achieve an extension of the ceasefire. And Trump will sort of go along with that, in which case I think they would allow the Israelis to do, you know, whatever they were planning to do militarily, but just keep a real hands-off approach on that in terms of the U.S. engagement and U.S. involvement.

The next step would, of course, be withholding weapons or diplomatic support if you really want to try to put pressure on Netanyahu. But it's hard for me to imagine him actually following through on that kind of thing.

SANCHEZ: Yes, it's really a fascinating time because you have the U.S. negotiating not only this release unilaterally - without Israel's help - but also this ceasefire with the Houthis, and these ongoing talks with Iran. I mean, what does that tell you about the broader picture of where the Middle East is headed if the U.S. and Israel, seemingly at the moment, are not as closely aligned as they were only a few months ago?

LOWENSTEIN: Yes, that's a good question. It really is uncharted territory. I think in the past, we've always had a sort of "no daylight" policy when it came to the U.S. and Israel - certainly when it comes to Iran or terrorist organizations like Hamas. And now you're seeing Trump has his own agenda now. And that agenda is to, you know, be able to point to economic, you know, interests as being the product of his foreign policy successes. And that's really at odds with what Netanyahu wants.

A war with Iran is going to be extremely disruptive to the region. It'll be very bad for business over there. The ongoing war with Hamas really causes political problems for Trump's allies in the Gulf States there, and they will be pushing on him in a way that he's really never experienced before.

Whether Trump chooses to extend that to Netanyahu or not, you know, that remains to be seen. I'm sort of skeptical, but I think certainly he'll do everything he can behind the scenes to push Bibi in the direction where he wants this to head.

SANCHEZ: Uncharted territory indeed. Frank Lowenstein, appreciate your time.

LOWENSTEIN: Thanks for having me.

SANCHEZ: Coming up, the latest in the sex trafficking trial of music and media mogul Sean "Diddy" Combs. A second witness on the stand right now as the prosecution presents its case. Stay with CNN Central for the latest details.

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