Stocks slide on the eve of Trump’s tariff announcement

(NEW YORK) — U.S. stocks ticked higher on Thursday in the first trading since President Donald Trump announced 25% auto tariffs.

The tariffs have escalated a global trade war and prompted forecasts of higher car prices.

The Dow Jones Industrial Average climbed 20 points, or 0.05%, while the S&P 500 increased 0.25% on Thursday morning. The tech-heavy Nasdaq jumped 0.25%.

Shares of major U.S. automakers dropped in early trading. General Motors dropped more than 6%, while Ford fell nearly 2%. Stellantis — the parent company of Jeep and Chrysler — declined 1%.

Tesla, the electric carmaker led by Trump-advisor Elon Musk, bucked the trend. Shares of Tesla climbed 5.5% in early trading on Thursday.

The 25% tariffs will be applied to imported passenger vehicles, including cars, SUVs, minivans, cargo vans and light trucks, according to a White House fact sheet released after Trump’s Oval Office remarks on Wednesday. The tariffs will take effect on April 3.

The tariffs will also be applied to key imported auto parts, including engines, powertrain parts and electrical components.

The auto tariffs are set to target a sector that employs more than a million U.S. workers and relies on a supply chain intricately intertwined with Mexico and Canada. Tariffs placed on the auto industry risk raising car prices for U.S. consumers, experts previously told ABC News.

Ferrari may raise U.S. prices as much as 10% in response to the tariffs, the company said in a statement on Thursday. Dan Ives, a managing director of equity research at the investment firm Wedbush, predicted general tariff-related price increases of between $5,000 and $10,000 per vehicle.

Canadian Prime Minister Mark Carney on Wednesday called the measure “a direct attack on our workers.” The Canadian government plans to review its trade options, Carney said.

European Commission President Ursula von der Leyen on Wednesday expressed “regret” about the decision to impose auto tariffs. “We will now assess this announcement, together with other measures the US is envisaging in the next days,” von der Leyen said in a statement.

Early Thursday morning, Trump warned of retaliatory tariffs if officials in Canada and Europe move forward with countermeasures.

“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both in order to protect the best friend that each of those two countries has ever had!” Trump said in a post on Truth Social.

This is a developing story. Please check back for updates.

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(NEW YORK) — President Donald Trump criticized Canada on Wednesday for what he described as failure to take the steps necessary for the United States to withdraw tariffs imposed a day earlier.

Trump said he held a call with Canadian Prime Minister Justin Trudeau on Wednesday during which the two leaders discussed a path to U.S. withdrawal of the tariffs, Trump said, noting such an outcome would require sufficient action by Canada to address drug trafficking.

A week ago, Trump alleged that illicit drugs such as fentanyl had continued to enter the U.S. through Mexico and Canada despite agreements reached last month to address the issue.

In a post on Truth Social on Wednesday, Trump said, “nothing has convinced me” that the flow of fentanyl into the U.S. had stopped.

“[Trudeau] said that it’s gotten better, but I said, ‘That’s not good enough.’ The call ended in a ‘somewhat’ friendly manner!” Trump said.

Since September, nearly all fentanyl seized by the U.S. came through the Southern border with Mexico, according to the U.S. Customs and Border Patrol, or CBP, a federal agency. Less than 1% of fentanyl was seized at the Northern border with Canada, CBP found.

Canadian Prime Minister Justin Trudeau sharply criticized the tariffs on Tuesday, calling them a “dumb” policy that does not “make sense.”

The reason for the tariffs is based on a false allegation about Canada as a major source of drugs entering the U.S., Trudeau added.

Persistent tensions between the U.S. and Canada emerged after China issued a warning on Tuesday night that it stands ready for any “type of war” with the United States in the aftermath of tariffs imposed by the Trump administration.

The U.S. 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.

A spokesperson for the Chinese foreign ministry said the tariffs would not lead to a resolution of U.S. concerns about fentanyl originating in China.

“If the U.S. truly wants to solve the fentanyl issue, then the right thing to do is to consult with China on the basis of equality, mutual respect and mutual benefit to address each other’s concerns,” Chinese spokesperson Lin Jian said at a press conference late Tuesday.

“If the U.S. has other agenda in mind and if war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end,” the spokesperson added.

The comments came soon after the Trump administration imposed 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.

Within minutes of the new U.S. tariffs taking effect, China unveiled on Tuesday its initial response by placing additional 10% to 15% tariffs on imported U.S. goods, like chicken, wheat, soybeans and beef.

“The retaliatory tariffs that China is imposing is very specific and directly targeted at American farmers, who are mostly in red states and mostly voted for Trump,” Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Center for China Analysis, told ABC News.

“So China is trying to create pain where it matters for Trump, and it’s hoping to get Trump to the negotiating table and offer relief for this group of Trump supporters,” Thomas added.

The recent duties will be placed on top of similar tariffs imposed by China during the first Trump administration’s trade war in 2018. Some of those tariffs are already at 25%, though Beijing issued some waivers as a result of the 2020 “phase one” trade deal.

The new Chinese tariffs are set to come into effect for goods shipped out March 10.

In a series of social media posts last month, Trump said he would place tariffs on Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the U.S.

During an address to a joint session of Congress on Tuesday night, Trump also sharply criticized tariffs imposed by the Chinese government on U.S. goods.

“President Trump continues to demonstrate his commitment to ensuring U.S. trade policy serves the national interest,” the White House said in a statement on Tuesday.

Commerce Secretary Howard Lutnick said on Tuesday afternoon that Trump may soon offer Canada and Mexico a pathway to relief from tariffs placed on some goods covered by North America’s free trade agreement.

Lutnick did not mention a potential compromise with China.

ABC News’ Selina Wang, Kevin Shalvey, Karson Yiu and Ellie Kaufman contributed to this report.

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(WASHINGTON) — Federal Reserve Chair Jerome Powell stepped to the podium in August with a sunny forecast that defied the snow-capped mountains inscribed on curtains behind him.

The central bank planned to begin cutting rates, Powell announced, reversing a yearslong battle against pandemic-era inflation. “The time has come,” Powell told the audience at a conference in Jackson Hole, Wyoming, touting a steady cooldown of price increases.

Months later, economic uncertainty looms large, complicating the Fed’s approach while clouding the outlook for inflation and interest rates, some experts told ABC News.

President Donald Trump’s tariffs have roiled markets, stoked recession concerns and heightened worries about inflation. In short order, Trump has paused or reversed some tariffs, casting doubt over his plans and adding to the uncertainty, the experts added.

Policymakers, business leaders and everyday borrowers will turn their attention to the Fed on Wednesday for its latest interest rate decision, the first such move since days after Trump took office.

“The Fed is in a tough position,” Wendy Edelberg, director of the Hamilton Project and senior fellow in economic studies at the left-leaning Brookings Institution, told ABC News.

“We have all of the potential negative effects of tariffs, but we also have extraordinary uncertainty,” Edelberg added.

The Trump administration earlier this month slapped 25% tariffs on goods from Mexico and Canada, though the White House soon imposed a one-month delay for some tariffs. A fresh round of duties on Chinese goods doubled an initial set of tariffs placed on China a month prior.

Tariffs imposed on steel and aluminum last week triggered retaliatory tariffs from Canada and the European Union, adding to countermeasures already initiated by China.

By some key measures, the economy remains in solid shape. A recent jobs report showed solid hiring last month and a historically low unemployment rate. Inflation stands well below a peak attained in 2022, though price increases register nearly a percentage point higher than the Fed’s goal of 2%.

However, experts said, tariffs may threaten both parts of the Fed’s mission: controlling inflation and maximizing employment.

Economists widely expect tariffs to increase inflation, since exporters typically pass along a share of the tax to consumers in the form of price hikes.

Consumers expect the inflation rate to rise from 2.8% to 4.9% over the next year, according to University of Michigan survey results released last week. The measure marked a significant jump in year-ahead inflation expectations compared to findings in February.

“There will be a price impact,” Yeva Nersisyan, a professor of economics at Franklin & Marshall College, told ABC News.

Tariffs could also threaten economic growth and employment since duties slapped on imports risk increasing input costs for domestic businesses that rely on raw materials from abroad, some experts told ABC News. Retaliatory tariffs may crimp exporting businesses since the taxes make U.S.-made products less competitive in foreign markets, they added.

Goldman Sachs earlier this month hiked its odds of a recession over the next year from 15% to 20%. Moody’s Analytics pegged the chances of a recession at 35%.

“There’s a risk that the economy does roll over and fall into a recession,” William English, a professor of finance and former economist at the Federal Reserve, told ABC News.

“The Fed probably sees an upside risk to inflation and a downside risk to employment,” English added. “They’ll have to balance those as they consider the path of policy.”

For its part, the Trump administration has largely declined to rule out the possibility of a recession. Speaking at the White House last week, Trump said a “little disturbance” may prove necessary to rejuvenate domestic production and reestablish well-paying manufacturing jobs.

The thorny economic outlook presents potential difficulty for the Fed, experts said.

If the central raises rates as a means of protecting against possible tariff-induced inflation, the Fed risks stifling borrowing and slowing the economy. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential recession, it threatens to boost spending and drive up inflation.

“If we were in an environment where inflation were to rise and rise consistently at the same time growth is slowing and unemployment is rising, that’s a real challenge for the Fed,” Claudia Sahm, chief economist at New Century Advisors and a former Fed official, told ABC News.

For now, the main quandary before the Fed stems from the wide range of possible outcomes, the experts said. Uncertainty, they said, will likely prompt the central bank to await further clarity.

Investors overwhelmingly expect the central bank to leave rates unchanged on Wednesday, according to the CME FedWatch Tool, a measure of market sentiment.

“For now, the Fed probably sees waiting as the best approach,” Nersisyan said.

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