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Xi Hails New Era In U.S.-China Relations, But Warns Trump On Taiwan; CNN Reports From Inside Wartime Iran As Talks Stall; Ship Anchored Off UAE Coast Seized, Heads Towards Iranian Waters; U.S. Producer Prices Surprise With Largest Increase In Four Years; Tariffs, War Send Tomato Prices Soaring. Aired 4-4:30a ET

Aired May 14, 2026 - 04:00   ET

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

[04:00:10]

POLO SANDOVAL, CNN CORRESPONDENT: Hey, everybody, Good morning. Welcome to CNN Newsroom. I'm Polo Sandoval in New York. And here's what's coming your way.

President Donald Trump and Chinese leader Xi Jinping sit down for critical talks as they navigate a host of thorny issues in a closely watched summit.

Plus, with costs rising across the U.S., we'll hear from a small business owner who says it's soaring prices for one key ingredient are putting a squeeze on his restaurant.

And Britain's prime minister facing new pressure in Parliament, Keir Starmer is responding to calls for him to step down and who could emerge as a challenger against him.

UNIDENTIFIED MALE: Live from New York, this is CNN Newsroom with Polo Sandoval.

SANDOVAL: So let's get straight to Chinese leader Xi Jinping as he hails what he describes as a new era of stable relations on the first day of his summit with U.S. President Donald Trump. But he's also making it clear, if not if the issue of Taiwan is not handled properly, he says that the two countries could clash or even enter into a conflict.

I reminded, President Xi welcomed his U.S. counterpart to the Great Hall of the People earlier today. Chinese state media reporting that they exchanged views on the Middle East and on Ukraine.

Remember, President Trump had previously indicated that he would speak with President Xi about Iran, but he also downplayed the need for Beijing's help to end that ongoing conflict. And the day was also filled with pageantry, plenty of it. A military band there playing the national anthems at a welcoming ceremony. And President Trump offered some of this praise for the Chinese leader.

(BEGIN VIDEO CLIP) DONALD TRUMP, U.S. PRESIDENT: You and I have known each other now for a long time. In fact, the longest relationship of our two countries that any president and president has had. And that's to me, an honor. We've had a fantastic relationship. We've gotten along. When there were difficulties, we worked it out. I would call you and you would call me. And whenever we had A problem people don't know. Whenever we had a problem, we worked it out very quickly.

(END VIDEO CLIP)

SANDOVAL: All right, let's take you live now to the Chinese capital and CNN's Beijing bureau chief, Steven Jiang. Steven, the president mentioning that both leaders tend to work out any issues. What are some of those issues that they may work out?

STEVEN JIANG, CNN BEIJING BUREAU CHIEF: Yes, I think the Chinese readout made it clear they talked about a lot of issues, but a lot of that also was just mentioned in passing, including the situations in the Middle East, obviously reference to the Iran war as well as Ukraine and North Korea.

But just because the brevity of the phrasing in a statement doesn't mean extensive discussions didn't take place behind closed doors. So a lot of is -- a lot of that we still have to see what would actually come out of these behind closed door discussions.

But as you mentioned, so far everything seems to have gone according to plan. The two leaders have largely stuck to the script, which must be such a relief for Chinese officials given President Trump's reputation of making off the cuff remarks and giving impromptu interviews.

As you heard just now in his opening remarks, the president sounded very diplomatic, very complimentary, even made a point of calling Xi Jinping a great leader in person before pivoting to highlight the caliber of his CEO delegation.

Now, Xi Jinping, obviously keenly aware of President Trump's priority being trade, also very much threw around several Chinese buzzwords to describe the trade relationship between the two countries, using phrases like mutual, mutually beneficial and win cooperation, and also even telling the CEOs himself that the Chinese will open their doors wider and wider to welcome their products and investments.

Xi Jinping also mentioned that pre-summit trade negotiation that took place less than 24 hours -- 24 hours ago in South Korea also went well and producing, as he put it, overall balanced and positive results. So that must be music to the ears of all the CEOs in the room now.

So, I think as of now, they still have quite a few items on the agenda. The president has a lavish state dinner to attend tonight and on Friday. Tomorrow, the two leaders have more face time inside the secret -- very secretive, heavily guarded leadership compound Zhongnanhai for a chat over tea before they do a working lunch and before the Air Force One takes off.

[04:05:10]

So they still have more time to discuss more issues and perhaps have some signable agreements to announce. But as of now, beneath all the pomp and ceremony and beneath behind all the smiles and warmth lies this reality of low expectations.

And the low bar seems to have been cleared. Both leaders have injected certainty in this often rocky relationship, or as Xi Jinping put it, providing some constructive strategic stability to this relationship. Polo.

SANDOVAL: CNN's Steven Jiang with that report out of Beijing, where it's just past 4:00 pm. Thank you, Steven.

Let's stay in the region. Actually take you live to Taipei now for a conversation with Lev Nachman. He's a political science professor at the National Taiwan University in Taipei. He's also the author of the book "Contested Taiwan: Sovereignty, Social Movements and Party Formation."

Lev, it's so good to have you with us. Thank you so much.

LEV NACHMAN, POLITICAL SCIENCE PROFESSOR, NATIONAL TAIWAN UNIVERSITY: Thank you.

SANDOVAL: So Chinese state media, as we discussed, providing that readout pretty immediately saying that Taiwan is the most important issue in U.S.-China relations, not trade, not AI fentanyl or even the ongoing war with Iran that Taiwan is.

And according to that report that President Xi warned of a potential conflict between the U.S. and China over that issue. So help us read between the lines here. What message is China sending directly to President Trump?

NACHMAN: It's no secret that Xi sees this as a potential opportunity to push Trump towards a direction that it would see as more beneficial for slowly creating a context for the PRC to try to unify or annex Taiwan. Of course, the one silver lining is that Donald Trump, despite being notorious for speaking his mind and not sticking to a script, has managed to stay very quiet on the matter. Even today, being asked by reporters, did you talk about Taiwan? He said absolutely nothing in response.

What this sort of tells us is that they're most certainly talking about it behind closed doors. But Donald Trump is not going to say anything on Taiwan that is overtly going to upset the current negotiations. I think Donald Trump, even if he doesn't say it out loud, is keenly aware of Xi's desire to try to leverage something for Taiwan.

But so far, I think there is reason to be optimistic that there's not going to be any sort of major change towards Taiwan simply because there is too much at stake for the United States and its current domestic economic context to be able to try to create any sort of uncertainty in the Taiwan Strait. SANDOVAL: And just to remind us of just how high the stakes are particularly for Taiwan. If either on this trip or in a future visit, the Chinese government or the president of China would ask the U.S. government to either delay or scale back on some of its weapons support to Taiwan, what would be some of the ramifications for Taiwan?

NACHMAN: Yes, so it's important to keep in mind they're not going to settle the issue of Taiwan here. Xi Jinping's goals instead are to try to chip away at a lot of its key objectives, things like, as you said, delaying weapon shipments or weapon sales. The big sort of unknown is whether or not he's going to be able to push Donald Trump to say something overt about not supporting Taiwanese independence.

That would be a very major rhetorical change from the United States, because what that would effectively do is to tell large swaths of Taiwanese voters that a major option that they once might have had is no longer going to be backed by their most important ally in the world.

This comes at the time when perceptions of the United States here in Taiwan are declining. And it's not just a matter of perceptions of the United States, but asking the question in public opinion polls, do you believe that the United States is a trustworthy ally. We see that number decline, and that number has been declining over quite a number of years, and it has not gone up since Donald Trump has come back into office.

The reason this matters is whether or not Taiwanese people see the United States positively is because at the same time, one of the big questions we have here in Taiwan is this idea of willingness to defend or willingness to fight for Taiwan.

And we know that whether or not America is coming, this factor is a really big motivating issue as to whether or not Taiwanese are willing to defend Taiwan. So the more that Donald Trump signals a reluctancy to stand by Taiwan or to even shift the United States narrative on Taiwan, it's going to have major ramifications, not just at the public opinion level, but also on these really important national security level issues here in Taiwan.

[04:10:02]

SANDOVAL: And we know that Taiwan watching this very closely because of that last point that you just made. Some interesting reporting also coming out that almost immediately after the Chinese president's comments that the cabinet spokesperson Michelle Lee responded saying that China's military threat is the sole source of insecurity in the Taiwan Strait.

So they're quickly firing back with that statement against China. Give us a sense of what people are talking about where you are in Taipei, as they too, I'm sure, are watching this very closely.

NACHMAN: Yes, this is absolutely the number one thing being talked about today. And what people here want, as the saying goes, is no news is good news. People would love for very little to be publicly said about Taiwan and not just civil society, but the government especially would love for nothing major to be said during this visit.

Because the more we are able to sort of stick to what we know and maintain the current status quo, the more that people in Taiwan will continue to feel at ease and the more likely that we're like that we're not going to see any sort of major conflict in the Taiwan Strait.

But the more changes and the more uncertainty from the United States, it makes people here feel uneasy and it creates a level of insecurity and uncertainty that people in Taiwan and politicians in Taiwan absolutely do not want to.

SANDOVAL: Lev Nachman, thank you so much for your time. Keep checking back with us. We know that there's certainly high interest in what's happening in Beijing right there where you are. Thank you.

NACHMAN: Thank you.

SANDOVAL: And while President Trump is in China, he's expected to encourage Xi Jinping to push Iran toward a peace deal with the U.S. and also to reopen the Strait of Hormuz. Vice President JD Vance back in the U.S. he says that negotiators are still making progress, even though the U.S. has been pretty much unhappy with Iranian proposals thus far.

Vance says that the administration remains focused on ensuring Tehran can never obtain a nuclear weapon.

(BEGIN VIDEO CLIP)

JD VANCE, U.S. VICE PRESIDENT: Look, I think that we are making progress. The fundamental question is, do we make enough progress that we satisfy the president's red line? And the red line is very simple. He needs to feel confident that we've put a number of protections in place such that Iran will never have a nuclear weapon.

Right? That is the question. Do we meet that threshold or not?

(END VIDEO CLIP)

SANDOVAL: CNN's Matthew Chance is now in Iran along with photojournalist Alex Platt with an inside look at how the war is impacting Iranians. But first, a quick note. CNN only operates there with the permission of Iran's government. As required under local regulations. But CNN maintains full editorial control over what it reports.

(BEGIN VIDEOTAPE)

MATTHEW CHANCE, CNN CHIEF GLOBAL AFFAIRS CORRESPONDENT: Well, we're on a long drive towards the Iranian capital, but we've had to stop because we've come to a bridge that was struck by a U.S. or an Israeli airstrike during the recent bombing campaign.

You can see a whole section of it has fallen into the river. And if you look round over here, all the cars and trucks have had to go around on this detour. When you consider all the other roads and bridges that have been hit, it's added hours to the journey time.

Well, before we arrived in Iran, some Iranians told us, don't go in, it's too dangerous. The war could resume at any time, especially amid growing tensions over the closure of the Strait of Hormuz and the failure of the U.S. and Iran to reach a compromise over nuclear activities.

But with President Trump on that state visit to China, both the U.S. and Iran seem to be looking to Beijing as a possible way out of their deadlock. Iran is China or China is Iran's major trading partner. China buys most of Iranian oil, has a shared interest with Washington, in getting the energy supplies unblocked.

Meanwhile, here in Iran, we're glimpsing how the country is being shaped by the conflict and the pressure it's under from crowds of Iranians at the border. We've just been to hauling cooking oil across from Turkey where it's much cheaper. An acute cost of living crisis, remember, sparked nationwide protests late last year that ended in horrific violence.

To the words of one Iranian father who told me that what he called Trump's war had silenced people and made the Iranian government stronger, in his words, at least for now. Matthew Chance, CNN, on the long road to terror.

(END VIDEOTAPE)

SANDOVAL: The United Arab Emirates, they are denying reports that Israeli Prime Minister Benjamin Netanyahu secretly visited that country. Netanyahu's office had said the prime minister made a, quote, covert visit to the UAE to meet with the Emirati president and that it yielded a, quote, historic breakthrough for the two nations.

[01:15:02]

But the UAE's foreign ministry maintaining that there was no meeting, posting online, that their relations with Israel are, quote, crystal clear and are not conducted through secretive backchanneling.

Let's get you some information that's just into CNN, the UK's Maritime Trade Operations Center it says that it's received a report of a vessel that's been seized just off the coast of the UAE, actually near the Strait of Hormuz.

It says that the ship was taken by, quote, unauthorized personnel while it was anchored and that it is now headed for Iran's territorial waters, according to that agency. We are currently trying to track down more information, including potentially what flag that ship was under. And of course, we'll get you more updates as soon as they come in here into CNN.

Elsewhere, a rescue operation is currently underway after Russian strikes partly collapsed a residential building in Kyiv. President Volodymyr Zelenskyy says that some people may still be trapped underneath this rubble following the strikes just a few hours ago. Officials say that one person was killed and that 32 others were

injured. Mr. Zelenskyy says that Russia launched more than 700 drones and missiles overnight, mainly targeting the capital city of Kyiv. And that's happening after one of Russia's biggest strikes since the war started.

At least 800 drones were launched on Ukraine on Wednesday, killing six people and leaving dozens others injured. Kyiv's foreign minister said that the timing of the Russian attacks, while the U.S. and Chinese leaders are meeting that shows that Moscow is not interested in peace.

Well, new concerns about the U.S. economy as data is now showing inflation is accelerating after weeks of war with Iran. A closer look at those numbers coming up.

Plus, we'll also talk to a restaurant owner here in the U.S. who's taken a hit as the price of one of his key ingredients skyrocketing.

(COMMERCIAL BREAK)

[04:20:48]

SANDOVAL: Welcome back. We want to get you some new data now that shows that the war with Iran is raising costs for U.S. businesses at a rate not seen in near years. The producer price index, which is a measure of wholesale inflation, as you see here, it surged to 6 percent in April on an annual basis.

You look at the monthly basis numbers, that was actually more than expected as well, up to 2 -- up to 1.4 percent, you see there. And this marks the biggest increase since 2022. Energy that is a big driver of this jump as Americans are already feeling the pain at the gas pumps.

Joining me now is Gbenga Ajilore. He's the chief economist at the Center on Budget and Policy Priorities and also a former official in the Biden Administration focusing on rural economic development. Gbenga, thank you so much for joining us.

GBENGA AJILORE, CHIEF ECONOMIST, CENTER ON BUDGET AND POLICY PRIORITIES: Thank you for having me.

SANDOVAL: So what are the latest consumer price index numbers showing you? Just a reminder our viewers, that essentially serves as a key economic indicator. What do the new numbers tell you, especially when it comes to two higher energy costs.

AJILORE: So the simple answer is that we're seeing very high inflation print or that we're just seeing higher prices. And this has been happening for the last couple of months. Just a recent one was 3.8 percent and last month it was 3.3 percent. So we see a big jump from month to month.

SANDOVAL: With the pre-war tariffs also obviously paying a role in -- playing a role in significant higher prices for consumers. How much of a factor is the war and also the strait, the closure of the Strait of Hormuz.

AJILORE: So closure of the Strait of Hormuz has been the biggest factor going in. So as you mentioned before, we had tariffs from a year ago, Liberation Day, around April 2025. That's been having an impact, but it was a smaller impact. But since the war, we're going over 60 days caused a really huge increase in prices, particularly gas prices. We've seen gas prices go up over 50 percent over the last two months. And that's fed into a lot of other factors.

SANDOVAL: When you look at the data also, that shows that paychecks grew about 3.6 percent from April of last year. Problem is, so did the prices rising at about 3.8 percent. For our viewers, I wonder if you can explain what that means, especially for Americans that were perhaps finally catching up with their finances over the last several years if their pay was rising at a faster rate than inflation. It seems now, if you look at these banks, that that's really not the case anymore.

AJILORE: It is not the case. It was actually kind of one of the more surprising things that we saw this month. For the past couple of years, we've had that the average wage growth has been about 4 percent per year, and then inflation was 2 and a half percent, maybe up to 3 percent. So that means that the average American was able to get more money and be able to have their purchasing power increase.

Now, for the first time in a long time, in about a couple of years, we have that price prices grew by 3.8 percent, wages grew by 3.6 percent. So over the month, they're basically losing ground in terms of being able to afford goods.

SANDOVAL: And then, of course, the question of whether or not we may see a breaking point when it comes to the war with Iran. It seems that both sides are these, that Iran and the United States are still deadlocked. We'll see if President Trump's current visit to China may potentially move the needle and advance some progress in negotiations with the Iranian regime.

But ultimately, when you look at it as an expert here, is there a breaking point if we continue to see no end in sight in this war?

AJILORE: Yes, it just -- people are not going to be able to continue to spend money right now. You know, we have gas prices are the kind of the one that, the most salient that people see every day. But we're looking at increases in food prices. We're looking at increase in electricity as we get towards the summer. People are going to be using AC just to be spending more money there.

The other thing is there's going to be these long run where we see that the Strait of Hormuz has had impacts on fertilizer, plastics, things like that. That's going to translate into what we see at the grocery store for food later on this year.

And even if the war were to end today, there's still going to be a long time for energy infrastructure to be rebuilt and the ships to go through the strait. That is going to have a long time going back.

[04:25:05]

But it's just one of those things that's going to be even difficult. And then one final factor is that with the one Big Beautiful Bill that cuts the staff, cuts to health care, so people are already being squeezed in terms of trying to afford food, be able to have medical coverage. Now prices are going up faster than their wages.

It's just kind of putting a burden on the average American and it's going to be difficult for them to weather that over the summer and fall.

SANDOVAL: And as a follow up to that, obviously if we do reach that breaking point and we begin to see some consumers, especially even those with, with some higher wages, begin to make some of the very difficult decisions to perhaps scale back on some of that spending where they can.

How immediate would any further harm on the economy do you think? We may see that?

AJILORE: So we will price it at towards the end of the year. One of the things about GDP growth is that 70% is consumer spending. If people are pulling back on their spending, spending less going out last. And that's going to have a real impact and reverberate through the economy.

SANDOVAL: Gbenga Ajilore as always, thank you so much for your insight. Appreciate your time.

AJILORE: Thank you for having me.

SANDOVAL: And as you just heard, Americans wallets, they are being hit hard. Consumers and retailers alike, they are feeling the impact of rising inflation and it's not just at the gas pumps. Prices of groceries up 0.7 percent But that can add up.

Take tomatoes as an example. They are now selling for more than $2 a pound. That is the highest level in nearly eight years. And those prices, they are squeezing some pizza chains that as you can imagine, use a lot of tomatoes every day.

Thomas Quijada is the owner of Mozza Pizza. It's a small business located in Huntsville, Alabama. Thomas, it's great to see you. Thank you so much for joining us.

THOMAS QUIJADA, OWNER, MOZZA PIZZA: No, thank you for the invitation.

SANDOVAL: So as you know, one of the most commonly purchased items that has gone up significantly, tomatoes. You know, most of us could choose to just leave it out of our recipes, but when you own and operate a pizzeria, that's completely or very much not an option. So tell me about how you may be feeling this what appears to be a 40 percent price hike on tomatoes over the past year. How is that affecting your bottom line?

QUIJADA: It's affecting us very, very much. Especially small, small restaurant owned by, you know, family owned business. It's very, very rough on us. You know, you see inflation on the news and you say, OK, yes, it's a little bit up, but for a restaurant business, it's very, very hard to deal with.

We have standards here at Mozza Pizza, so you can't lower those standards, you can't lower quality, and you have to pay the price for it.

SANDOVAL: Yes. And one thing is to hear about this price hike. But I want to share with our viewers some of the latest federal numbers and the data that's showing that really one of the biggest spikes in tomato prices that, that came this year. In this chart, you can see just that sharp increase. And when you look back, even, you know, just over the last several years, how that has been going up.

Obviously there are multiple factors here that are being taken into consideration. There's weather in growing regions, of course, the tariff on Mexican tomatoes, but also, of course, diesel prices, the cost to transport tomatoes to your shop. I'm wondering, that increased cost, have you been forced to pass it along to consumers or are you forced to take the hit?

QUIJADA: We are actually here at Mozza Pizza, we're taking the hit ourselves. We understand it's rough times for everybody. We don't want customers feeling this just we are. So we're just cutting profits and, you know, sticking to what we know, good quality, good food, and we just got to live with it.

SANDOVAL: Yes. And I'm curious if you could just sort of quantify how much of an increase it has been in your -- that you've seen in your operating costs. You know, just doing the math here. If the average cost of a pound of tomatoes was about buck 70 this time last year, folks are paying about $43 for 25 pound box.

That is now $67. Obviously, if you buy multiple boxes a week, I mean, how much more are you having to dedicate now strictly to tomato purchases for your kitchen?

QUIJADA: I wish it was just tomatoes, but unfortunately that's not the case. It's more than just the tomatoes. Most toppings for pizza are up. The cheese, which is the most expensive part of the pizza, is really, really up as well. At least 25 percent.

One food cost, we're talking about maybe a 5 to 10 percent increase. So that turns out to be thousands of dollars a month.

SANDOVAL: Yes. Given the uncertainty about the ongoing war with Iran, what do you think may be the best approach for small businesses such as yours all over the country?

[04:30:00]