Stocks tumble as fallout from Trump tariffs roils markets
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(NEW YORK) — U.S. stocks tumbled in early trading on Thursday as fallout from the Trump administration’s tariffs continued to roil markets.
Stocks recovered some of the losses within hours, however, after Commerce Secretary Howard Lutnick said a one-month delay of tariffs on Mexico and Canada would likely apply to all products compliant with the United States-Mexico-Canada Agreement, or USMCA, a free trade agreement.
Trump negotiated the USMCA during his first term, signing the agreement with Canada and Mexico in 2018.
“That which is part of President Trump’s deal with Canada and Mexico [is] likely to get an exemption from these tariffs,” Lutnick told CNBC on Thursday morning.
The Dow Jones Industrial Average fell about 150 points, or 0.35%, while the S&P 500 fell 0.7%. The tech-heavy Nasdaq dipped 0.9%.
The selloff erased some of the market gains delivered a day earlier after President Donald Trump gave U.S. automakers a one-month reprieve from the tariffs. Duties on a host of other goods remained in place, however.
The U.S. earlier this week slapped 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on imports from China. The fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China last month.
The one-month delay in auto tariffs triggered a rally for shares of U.S. carmakers on Wednesday, but the largest companies in the sector turned down in early trading on Thursday.
Shares of Ford dropped 1.5%, while General Motors fell nearly 3%. Stellantis — the parent company of Chrysler and Jeep — saw its stock price fall 2%.
Tesla, the electric carmaker led by Elon Musk, tumbled 4.5% on Thursday.
The tariffs are expected to pose a challenge for U.S. automakers, many of which depend on a supply chain closely intertwined with Mexico and Canada.
The American Automotive Policy Council, or AAPC, a trade group that represents Ford, General Motors and Stellantis, praised the one-month tariff exemption.
“American Automakers Ford, GM and Stellantis applaud President Trump for recognizing that vehicles and parts that meet the high US and regional USMCA content requirements should be exempt from these tariffs,” AAPC President Matt Blunt told ABC News in a statement.
This is a developing story. Please check back for updates.
(NEW YORK) — A new survey of consumers on Tuesday is expected to show attitudes worsened in April, casting further gloom over the economy as President Donald Trump’s tariffs set off warnings of price increases and a possible recession.
A reading of sour consumer sentiment would mark the fifth consecutive month of decline, leaving the Conference Board gauge at its lowest level since the early months of the COVID-19 pandemic.
Federal Reserve Chair Jerome Powell this month joined a growing set of policymakers and analysts who’ve cautioned about a possible outcome that bodes poorly for consumers: accelerating price increases alongside a sluggish economy.
A slew of companies have already announced plans for price hikes in response to the tariffs, including bargain retailers Temu and Shein.
Meanwhile, recession fears are mounting on Wall Street. Goldman Sachs earlier this month hiked its odds of a recession from 35% to 45%. JPMorgan pegged the probability of a recession this year at 60%.
Trump earlier this month paused so-called “reciprocal tariffs” on most U.S. trade partners, but the White House also raised its cumulative tariffs on Chinese goods to 145%.
An across-the-board 10% tariff applies to nearly all imports, except for semi-conductors, pharmaceuticals and some other items. Those levies come on top of specialized tariffs on steel, aluminum and autos.
Even after the suspension of some tariffs, U.S. consumers face the highest average effective tariff rate since 1909, the Yale Budget Lab found.
In recent days, Trump has voiced mixed messages about the prospect of a de-escalation in the trade war with China.
Trump last week said that tariffs on China would “come down substantially.” Days later, however, Trump urged Boeing to “default China” in response to a Chinese order that airlines reject deliveries of the U.S.-based aerospace company’s planes.
“This is just a small example of what China has done to the USA, for years,” Trump said in a post on social media.
Despite flagging consumer sentiment and ongoing market turmoil, key measures of the economy remain fairly strong.
The unemployment rate stands at a historically low level and job growth remains robust, though it has slowed from previous highs. Meanwhile, inflation cooled in March, putting price increases well below a peak attained in 2022, data showed.
The sturdy data offers little reassurance, some economists previously told ABC News.
Measures of the economy like inflation and hiring are released a month after the data is gathered, and they often reflect slow-moving shifts in business or consumer behavior, the economists said. As a result, such measures can prove outdated, especially when the economy is in flux.
Consumer spending, which accounts for about two-thirds of U.S. economic activity, could weaken if shopper sentiment sours. In theory, a slowdown of spending could hammer some businesses, prompting layoffs that in turn further shrink consumer appetite.
Speaking at the Economic Club of Chicago earlier this month, Powell acknowledged the “solid condition” of the U.S. economy, but he cautioned about signals of a potential slowdown. For instance, Powell noted a “sharp decline in sentiment” among businesses and households.
(WASHINGTON) — President Donald Trump is set to provide tariff relief for carmakers on Tuesday, just weeks after the onset of auto levies triggered warnings of price increases.
An administration official confirmed that the 25% tariff on finished foreign-made cars and parts will remain — but today’s announcement will prevent tariffs from stacking on top of other tariffs he’s imposed, such as duties on steel and aluminum.
Trump’s 25% tariff on foreign auto parts goes into effect on Saturday and automakers will also be reimbursed for those tariffs up to an amount equal to 3.75% of the value of a U.S.-made car for one year. Reimbursement would fall to 2.5% of the car’s value in a second year, and then completely phased out altogether.
Speaking at the White House on Tuesday, Treasury Secretary Scott Bessent touted the tariff adjustment as a means of ensuring carmakers bring manufacturing to the U.S.
“President Trump has had meetings with both domestic and foreign auto producers, and he’s committed to bring back auto production to the US. We want to give the automakers a path to do that quickly, efficiently and create as many jobs as possible,” Bessent said.
Trump is expected to deliver remarks about the policy change in Michigan on Tuesday. Details of the plan were first reported in the Wall Street Journal.
U.S. automakers on Tuesday applauded the easing of tariffs.
“Ford welcomes and appreciates these decisions by President Trump, which will help mitigate the impact of tariffs on automakers, suppliers and consumers,” Ford told ABC News in a statement.
GM also voiced praise for the move. “We’re grateful to President Trump for his support of the U.S. automotive industry and the millions of Americans who depend on us. We believe the President’s leadership is helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy,” the company told ABC News in a statement.
The 25% tariff on imported cars took effect on April 3. It applies to an array of passenger vehicles, including cars, SUVs, minivans, cargo vans and light trucks.
The tariffs will almost certainly raise foreign-made car prices, experts previously told ABC News, since importers typically pass along a share of the tax burden to consumers in the form of extra costs.
The policy change offers automakers a chance to relocate their manufacturing, Commerce Secretary Howard Lutnick told ABC News in a statement.
“This deal is a major victory for the President’s trade policy by rewarding companies who manufacture domestically, while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing,” Lutnick said.
The move aims to give automakers an opportunity to move their supply chains for parts back to the U.S.
“President Trump is building an important partnership with both the domestic automakers and our great American workers,” Lutnick also said in the statement.
(WASHINGTON) — Few of President Donald Trump’s first 100 days in his second term carried more fanfare than April 2, which Trump previewed for weeks under the moniker of “Liberation Day.”
At a Rose Garden ceremony replete with a live band and floor-to-ceiling American flags, Trump announced the nation’s largest set of tariffs in nearly a century.
For decades, Trump claimed, other nations had erected trade barriers to shut U.S. companies out of their markets, all the while enriching themselves through access to American shoppers. As a result, factories had shuttered and workers had suffered, Trump added.
“In the face of unrelenting economic warfare, the United States can no longer continue with a policy of unilateral economic surrender,” Trump said.
The tariff announcement, he added, would forever be remembered as “the day that we began to make America wealthy again.”
Instead, the major stock indexes lost about $3.1 trillion in value the next day, suffering their biggest one-day decline since the onset of the COVID-19 pandemic. Days later, Trump suspended a major swathe of the tariffs, sending the market to one of its largest ever single-day increases.
The policy exemplified Trump’s handling of the economy so far in his second term, some experts said. A norm-breaking decision adjusted soon afterward, leaving behind a cloud of uncertainty for consumers and business alike, while risking an economic slowdown.
It remains to be seen whether the potential pain will be outweighed by future gain, experts said, but the policy swerves may undermine those benefits as firms lack the assurance necessary to make long-term investment and hiring decisions.
“This isn’t how we normally do business. We normally like stability and predictability,” Nancy Qian, a professor of economics at Northwestern University, told ABC News. “The cycle of uncertainty is freaking people out.”
‘Challenged the rules of the global trading system’
Trump’s tariff rollout took Wall Street by surprise, but the president had repeatedly promised to make use of the policy tool during his presidential campaign.
“To me, the most beautiful word in the dictionary is ‘tariff,'” Trump said weeks before the election during an appearance at the Economic Club of Chicago.
As a candidate, Trump proposed tariffs of between 60% and 100% on Chinese goods, as well as across-the-board tariffs of between 10% and 20% on all imported goods.
Tariffs would hinder foreign producers and boost domestic manufacturers, reinvigorating regions left behind as the sector’s jobs moved overseas, Trump said.
In the first 100 days, Trump has taken the policy even further than he pledged, experts said.
Trump slapped 145% tariffs on Chinese goods, as well as a universal tariff of 10% on nearly all imports.
Trump also imposed 25% tariffs on Mexico and Canada, the nation’s neighbors, thought to be among its closest allies. Additional tariffs have hit autos, steel and aluminum. For now, Trump has paused a far-reaching set of so-called “reciprocal tariffs” targeting about 75 countries.
“We face the stark reality of large and persistent U.S. deficits as a result of an unfair trading system,” Treasury Secretary Scott Bessent told an audience at the Institute of International Finance in Washington, D.C. last week. “Intentional policy choices by other countries have hollowed out America’s manufacturing sector and undermined our critical supply chains, putting our national and economic security at risk.”
“President Trump has taken strong action to address these imbalances and the negative impacts they have on Americans,” Bessent added.
Qian, of Northwestern University, said Trump’s policy accurately identifies a challenge facing the U.S. economy, as trade partners erect barriers that make it more difficult for some American companies to sell abroad than it is for their foreign competitors to sell in the U.S.
The on-again, off-again approach to tariffs undermines the policy objective, however, since businesses and investors lack the confidence necessary to build up domestic manufacturing or adjust strategy abroad.
“What manufacturers need is what markets need: stability,” Qian said.
Trump’s tariffs elicited retaliatory measures from some countries, including China. The world’s second-largest economy slapped 125% tariffs on U.S. goods and placed export restrictions on some minerals crucial to domestic electronics and weapons industries.
“Trump’s tariffs challenged the very premise of the rules of the world trading system,” Robert Lawrence, a professor of trade and investment at Harvard University’s Kennedy School of Government, told ABC News. “He has done a lot more than he said he would do.”
Consumer sentiment this month dropped to a level lower than any point during the Great Recession. A slew of Wall Street firms, meanwhile, have raised their odds of a U.S. recession within the next year, forecasting a potential drop-off of consumer spending and business investment.
For its part, the Trump administration has largely refused to rule out the possibility of a recession. Trump has vowed to strike new agreements with many U.S. trade partners, predicting the U.S economy may suffer short-term pain but will ultimately flourish under a more favorable set of international rules.
“We have been ripped off by every country in the world practically. And friend and foe,” Trump told reporters in the Oval Office on April 23. “We’re not doing that anymore.”
The fight against inflation
During the campaign, inflation consistently ranked as a top issue of concern to voters – and a majority of them favored Trump to best handle the problem, surveys showed.
Trump vowed to address the issue, saying he would lower prices on “day one.”
Prices would come down as a result of increased energy output, which would reduce costs for the production and transport of goods and in turn lower prices, Trump said.
Inflation has eased since Trump took office, meaning prices have risen at a slower pace than they had been at the end of the Biden administration. Consumer prices increased 2.4% in March compared to a year earlier, registering a pace slightly higher than the Fed’s target of 2%.
Overall prices have not fallen, however, experts told ABC News. In fact, some prices have climbed significantly. Egg prices are 60% higher than where they stood a year ago. Bird flu has continued to decimate the egg supply, lifting prices.
To be sure, the price of oil has dropped nearly 20% since Trump took office. However, experts attributed the trend to an anticipated drop in demand as investors worry about a global recession, instead of the spike in output promised by Trump.
The current level of inflation may offer false reassurance, experts added, since tariffs are widely expected to raise prices over the coming months.
“We are not yet applying the tariffs to the maximum degree and that of course reduces the impact seen in the data so far,” Felix Tintelnot, a professor of economics at Duke University, told ABC News.
Earlier this month, Federal Reserve Chair Jerome Powell raised the possibility that Trump’s tariffs may cause what economists call “stagflation,” which is when inflation rises and the economy slows.
If the Fed raises interest rates as a means of protecting against tariff-induced inflation under such a scenario, it risks stifling borrowing and slowing the economy further. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential slowdown, it threatens to boost spending and worsen inflation.
A day later, Trump sharply criticized Powell, urging the central bank to lower interest rates and saying Powell’s “termination cannot come soon enough.”
Since Trump took office, he has criticized Powell on multiple occasions, despite a longstanding norm of political independence at the central bank. The Fed is an independent government agency established by Congress.
“It’s a fundamental feature of our economic system that we have an independent Fed,” Lawrence said. “Trump’s threats are deeply concerning.”
In theory, the removal of Powell could undermine the Fed’s capacity to fight inflation, since it may make the central bank more likely to follow Trump’s preference for lower rates, Lawrence said.
Trump appeared to soften previous attacks on the Federal Reserve last week, saying he has “no intention” of firing Powell.
After making those remarks, Trump continued to pressure Powell.
“I would like to see him be a little more active in terms of his idea to lower interest rates,” Trump said. “This is a perfect time to lower interest rates.”
