(NEW YORK) — Americans’ household debt — including credit cards, mortgages, auto loans and student loans — is at a new all-time high $18.04 trillion, according to a report released Thursday by the Federal Reserve Bank of New York.
Overall debt grew by $93 billion in the last three months of 2024 — and about half of that increase was new credit card debt.
Americans’ total credit card balances now stand at a record-high $1.21 trillion.
On a call with reporters Thursday, New York Federal Reserve researchers said credit card debt typically goes up at the end of the year when consumers do their holiday shopping. Researchers said they expect balances will decline at the start of this year as shoppers start to pay down that debt.
High interest rates are another factor behind elevated credit card debt levels, the researchers said. They added that income levels have been going up as debt is increasing, a positive sign for the health of the economy.
Delinquencies — reflecting missed payments on credit card bills — also ticked up in the fourth quarter.
The report highlighted higher delinquency rates for auto loans, too. Americans hold nearly $1.7 trillion in auto loan debt.
New York Federal Reserve researchers said higher new and used car prices in the wake of the pandemic are a key reason why some Americans are behind on their auto payments.
“While mortgage delinquency rates are similar to pre-pandemic levels, auto loan delinquency transition rates remain elevated,” said Wilbert van der Klaauw, economic research adviser at the New York Federal Reserve. “High auto loan delinquency rates are broad-based across credit scores and income levels.”
(NEW YORK) — While Elon Musk has vaulted into a powerful role overhauling government agencies and upending Washington, the world’s richest person has suffered a $106 billion drop in wealth due to steep decline in shares of his Tesla electric car company.
Tesla’s stock price has plummeted 30% from its all-time high in December, including a 21% selloff since Inauguration Day. The losses have sent Musk’s net worth tumbling from a peak of $486 billion on Dec. 17 to its current level of about $380 billion, according to Bloomberg.
The stock woes have divided current and former Tesla shareholders. Critics of Musk fault his new role and polarizing reputation, blaming recent reports showing lackluster sales in some regions on his foray into politics. They say Musk must step away from the Trump administration for the company to thrive. Supporters, on the other hand, say Musk’s role in the White House has little to do with the selloff, noting that Tesla shares remain higher than where they stood on Election Day. Instead, some say, the company is suffering growing pains as it weathers stiff competition in electric vehicles and pursues new ventures like self-driving taxis.
“I don’t have a problem if Elon wants to save a bunch of money for America. I say, ‘Where’s the good part in this for Tesla'” Ross Gerber, a prominent Tesla investor, told ABC News, referring to cost-cutting efforts undertaken by Musk’s Department of Government Efficiency. Tesla representatives did not respond to ABC News’ request for comment.
Despite disagreement over the effect of Musk’s government role, both current and former Tesla shareholders who spoke to ABC News broadly acknowledged the company’s recent business hiccups.
Tesla sold fewer cars in 2024 than it did the year prior, marking the company’s first year-over-year sales decline in more than a decade, earnings released in January showed. As rivals have challenged Tesla’s dominance over the electric vehicle market, the company has promised a future revenue stream from autonomous taxis, also known as robotaxis.
Musk announced in late January that the company would roll out its robotaxi test program in Austin, Texas, in June. But within days, China-based competitor BYD unveiled advances in self-driving technology, which the company said was set to be included in models costing as little as $9,600. Gary Black, managing partner of The Future Fund, which manages $100 million in assets, including Tesla shares, said the recent selloff of Tesla is primarily the result of investor jitters about whether the company can dominate self-driving technology the way it did electric vehicles.
“Over time, you will see Teslas and other cars self-drive. But Tesla is not going to be the only one,” Black told ABC News’ Elizabeth Schulze.
The stock also faced downward pressure this week when a Musk-led group of investors offered to buy OpenAI for $97.4 billion, making possible a scenario in which Musk would sell some of his Tesla shares to finance the deal, Black said. Black said that, in his opinion, the downturn has nothing to do with Musk’s government role.
“It’s always good to know the president of the United States — to be able to pick up your phone and say, you know, ‘I need this favor, that favor,'” Black said.
A jump in Tesla shares after Trump’s victory suggests many investors viewed the relationship that way. The stock price soared about 85% over a six-week period following Election Day.
But some investors lay the blame for the downturn squarely at Musk’s feet.
Nell Minow, Vice Chair of ValueEdge Advisors and a longtime critic of Musk, said Musk has been “absent” from the company.
“I think that he is a huge drag on the stock right now,” Minow told Schulze. “No question, he’s a problem.”
“Elon Musk is to the Tesla brand what the Green Giant is to corn,” Minow said. “He has made himself the brand and that is always very risky.” Minow, who said she donated nearly all of her Tesla shares to charity last year, also criticized the Tesla board for what she said was a failure to hold Musk to account, or update shareholders and the public about a leadership plan while Musk runs DOGE.
“We don’t know what the board is thinking. They have not spoken out in any way,” Minow said. “They have not made a filing with the SEC about what the impact of this side hustle is, and the employees and the shareholders need some kind of certainty.”
New York City Comptroller Brad Lander echoed concerns about the board’s ability to rein in Musk. Lander, who oversees $1.25 billion in Tesla stock through the city’s five pension systems, said the lack of oversight was a “long-standing problem.”
“Independent governance is designed to provide a voice for shareholders at the table,” Lander, who is running for New York City mayor and has publicly sparred with Musk, said in a statement to ABC News. “When companies are controlled by a set of directors with either family or aligned interests, they lose this.”
For his part, Musk has looked to hype up Tesla’s prospects, saying on an earnings call last month that he believes there is an opportunity for it to be “the most valuable company in the world.”
During the call, AllianceBernstein Research analyst Daniel Roska questioned Musk on how Tesla plans to meet its ambitious projections given its high valuation.
Musk emphasized Tesla’s focus on real-world AI, claiming the company is making significant strides.
“We’re working on perfecting real-world AI and making rapid progress week over week, if not month over month,” Musk said. “I go where the problem is, essentially … I focus where the challenges are the greatest.”
Some Tesla shareholders remain bullish on the company despite its short-term drop. Angel investor Larry Goldberg, known as “Tesla Larry,” posted on X that he supports Musk’s political efforts, even if they impact the company’s stock price.
“If the Trump administration (and DOGE) does not fix the deficit, my Tesla shares — and everyone’s US stocks and bonds will be worthless,” Goldberg wrote.
(NEW YORK) — While Elon Musk has vaulted into a powerful role overhauling government agencies and upending Washington, the world’s richest person has suffered a $106 billion drop in wealth due to steep decline in shares of his Tesla electric car company.
Tesla’s stock price has plummeted 30% from its all-time high in December, including a 21% selloff since Inauguration Day. The losses have sent Musk’s net worth tumbling from a peak of $486 billion on Dec. 17 to its current level of about $380 billion, according to Bloomberg.
The stock woes have divided current and former Tesla shareholders. Critics of Musk fault his new role and polarizing reputation, blaming recent reports showing lackluster sales in some regions on his foray into politics. They say Musk must step away from the Trump administration for the company to thrive.
Supporters, on the other hand, say Musk’s role in the White House has little to do with the selloff, noting that Tesla shares remain higher than where they stood on Election Day. Instead, some say, the company is suffering growing pains as it weathers stiff competition in electric vehicles and pursues new ventures like self-driving taxis.
“I don’t have a problem if Elon wants to save a bunch of money for America. I say, ‘Where’s the good part in this for Tesla'” Ross Gerber, a prominent Tesla investor, told ABC News, referring to cost-cutting efforts undertaken by Musk’s Department of Government Efficiency.
Tesla representatives did not respond to ABC News’ request for comment.
Despite disagreement over the effect of Musk’s government role, both current and former Tesla shareholders who spoke to ABC News broadly acknowledged the company’s recent business hiccups.
Tesla sold fewer cars in 2024 than it did the year prior, marking the company’s first year-over-year sales decline in more than a decade, earnings released in January showed.
As rivals have challenged Tesla’s dominance over the electric vehicle market, the company has promised a future revenue stream from autonomous taxis, also known as robotaxis.
Musk announced in late January that the company would roll out its robotaxi test program in Austin, Texas, in June. But within days, China-based competitor BYD unveiled advances in self-driving technology, which the company said was set to be included in models costing as little as $9,600.
Gary Black, managing partner of The Future Fund, which manages $100 million in assets, including Tesla shares, said the recent selloff of Tesla is primarily the result of investor jitters about whether the company can dominate self-driving technology the way it did electric vehicles.
“Over time, you will see Teslas and other cars self-drive. But Tesla is not going to be the only one,” Black told ABC News’ Elizabeth Schulze.
The stock also faced downward pressure this week when a Musk-led group of investors offered to buy OpenAI for $97.4 billion, making possible a scenario in which Musk would sell some of his Tesla shares to finance the deal, Black said.
Black said that, in his opinion, the downturn has nothing to do with Musk’s government role.
“It’s always good to know the president of the United States — to be able to pick up your phone and say, you know, ‘I need this favor, that favor,'” Black said.
A jump in Tesla shares after Trump’s victory suggests many investors viewed the relationship that way. The stock price soared about 85% over a six-week period following Election Day.
But some investors lay the blame for the downturn squarely at Musk’s feet.
Nell Minow, Vice Chair of ValueEdge Advisors and a longtime critic of Musk, said Musk has been “absent” from the company.
“I think that he is a huge drag on the stock right now,” Minow told Schulze. “No question, he’s a problem.”
“Elon Musk is to the Tesla brand what the Green Giant is to corn,” Minow said. “He has made himself the brand and that is always very risky.”
Minow, who said she donated nearly all of her Tesla shares to charity last year, also criticized the Tesla board for what she said was a failure to hold Musk to account, or update shareholders and the public about a leadership plan while Musk runs DOGE.
“We don’t know what the board is thinking. They have not spoken out in any way,” Minow said. “They have not made a filing with the SEC about what the impact of this side hustle is, and the employees and the shareholders need some kind of certainty.”
New York City Comptroller Brad Lander echoed concerns about the board’s ability to reign in Musk. Lander, who oversees $1.25 billion in Tesla stock through the city’s five pension systems, said the lack of oversight was a “long-standing problem.”
“Independent governance is designed to provide a voice for shareholders at the table,” Lander, who is running for New York City mayor and has publicly sparred with Musk, said in a statement to ABC News. “When companies are controlled by a set of directors with either family or aligned interests, they lose this.”
For his part, Musk has looked to hype up Tesla’s prospects, saying on an earnings call last month that he believes there is an opportunity for it to be “the most valuable company in the world.”
During the call, AllianceBernstein Research analyst Daniel Roska questioned Musk on how Tesla plans to meet its ambitious projections given its high valuation.
Musk emphasized Tesla’s focus on real-world AI, claiming the company is making significant strides.
“We’re working on perfecting real-world AI and making rapid progress week over week, if not month over month,” Musk said. “I go where the problem is, essentially … I focus where the challenges are the greatest.”
Some Tesla shareholders remain bullish on the company despite its short-term drop. Angel investor Larry Goldberg, known as “Tesla Larry,” posted on X that he supports Musk’s political efforts, even if they impact the company’s stock price.
“If the Trump administration (and DOGE) does not fix the deficit, my Tesla shares — and everyone’s US stocks and bonds will be worthless,” Goldberg wrote.
(NEW YORK) — Consumer prices rose 3% in January compared to a year ago, ticking up from the previous month and posing an obstacle for Trump administration tariff policies that many economists expect to raise some prices, government data on Wednesday showed. The inflation reading came in higher than economists had predicted.
The fresh data extends a bout of resurgent inflation that stretches back to last year. Two weeks ago, the Federal Reserve opted to hold interest rates steady in part out of concern regarding the stubborn price increases.
Egg prices, a closely watched symbol of rising costs, soared 53% in January compared to a year ago. An avian flu has decimated the egg supply, lifting prices higher.
Beef prices climbed 5% and bacon prices jumped 6% in January compared to a year ago, data showed. By contrast, prices dropped over that same period for bread, rice and tomatoes.
Core inflation — a measure that strips out volatile food and energy prices — increased 3.3% over the year ending in December, ticking lower than the previous month, the data showed. That gauge also sped up from the previous month.
Inflation has slowed dramatically from a peak in June 2022, but price increases remain a percentage point higher than the Fed’s target rate.
Since Trump took office on Jan. 20, he has announced a series of tariffs, which economists say could push prices higher. Tariffs on steel and aluminum announced by Trump this week could raise prices for a set of products that includes refrigerators, beer and automobiles, experts previously told ABC News.
In a post on Truth Social on Wednesday morning, Trump appeared to fault former President Joe Biden for the uptick in inflation, writing: “BIDEN INFLATION UP!”
Biden served during more than half of the month of January, leaving office on Jan. 20. Trump, however, said during the presidential campaign earlier this year that he would bring down prices “starting on day one.”
This is a developing story. Please check back for updates.
(NEW YORK) — An Elon Musk ally hired to overhaul the U.S. Department of Treasury has a lengthy record of undertaking hardline reforms in the private sector that demoralized staff and made them fear for their jobs, according to interviews with several former employees at his tech firm.
Tom Krause, the CEO of Silicon Valley-based Cloud Software Group, oversaw layoffs at his company in each of the last three years while instituting a return-to-office mandate, rigid performance ratings, and a request that weekly updates be sent from workers directly to Krause, the former employees told ABC News — echoing the sort of reforms that Musk’s new Department of Government Efficiency has begun undertaking within government agencies.
One former Cloud Software Group employee said she hid her pregnancy for fear it could make her a target of layoffs. An ex-manager said they dreaded filing performance reviews of subordinates, knowing some workers may fall victim to the next cycle of cuts. Another former employee said they avoided expressing unease in company emails or in the messaging app Slack out of concern that it could jeopardize their job.
“They’re taking business practices popular in boardrooms and on golf clubs, and they’re taking them into government,” Kathleen Roan, a former senior content designer at Cloud Software Group who retired in 2024, told ABC News.
Krause in recent days has vaulted into a key position at the Treasury Department, overseeing its $5 trillion payment system, which sends funds to tens of millions of Americans for programs like Medicare and Social Security, the agency’s website says.
In a press release, the agency said Krause brings decades of experience “managing balance sheets” to the agency’s effort to “maximize payment integrity.”
Neither Krause nor Cloud Software Group responded to a request for comment from ABC News.
A ‘hatchet man’
Several former employees ABC spoke with praised Krause as a savvy business leader, and one said they enjoyed their tenure at the company. But most of them requested that they not be identified due to concerns about reprisals.
“There was a whittling away of the things that made you feel like you were a valued employee and then finally ‘Oh, now we’re going to start eliminating jobs,'” Roan said of her time at the company under Krause. “They saw people as expendable.”
Cloud Software Group company was established in 2022 through the acquisition of enterprise software firm Citrix in a private equity-backed $16.5 billion deal, followed by a merger with TIBCO Software.
Krause, who had previously served as president of software at Palo Alto-based Broadcom, was named CEO of the new firm.
Within months, in January 2023, the company cut 15% of its workforce.
“The feeling was that he was there to cut expenses down and be a hatchet man, similar to what’s happening now in the government,” a former human resources employee said. “Everyone was on edge.”
Some of the cost-cutting measures at Cloud Software Group under Krause were first reported by The American Prospect.
Within months of Krause’s arrival, the company also requested that employees return to the office, multiple former employees said.
At the same time, the company closed some offices in an effort to reduce overhead costs, multiple former employees told ABC News. The closures left some workers without an office nearby, making them exempt from the return-to-office requirement, a former employee said.
On Inauguration Day, Trump signed an executive order calling on federal agency heads to mandate in-office work. Musk backed that policy in an op-ed he co-authored in the Wall Street Journal, predicting that mandatory return to work “would result in a wave of voluntary terminations that we welcome.”
‘A much higher level of business discipline’
Employees at Cloud Software Group lost some perks, too.
David Morgan, a former client support provider at Cloud Software Group, said the firm ended his quarterly bonuses, which amounted to $16,000 each year. Workers also stopped receiving “thank you” days, an extra allotment of paid time off, Morgan said.
“Everything we were told would be benefits at the time of hiring was slowly removed,” Morgan said. An Air Force veteran with a disability, Morgan said he received one day of notice before he lost his job as part of a round of layoffs in January 2024, after having been assured that his position had been safe over the months prior.
In a post on LinkedIn that month, Krause said the company had improved but still required personnel changes.
“Our focus on adding value for our long-standing customers while driving a much higher level of business discipline and accountability is bearing fruit — with customer retention and financial results for our first fiscal year as Cloud Software Group coming in ahead of plan,” Krause said.
“But change often means difficult decisions,” he wrote. “While we have a number of areas of the business where our plans involve additional hiring to support our goals, they also mean a pragmatic look at those places where we simply need fewer or different resources.”
In a direct message to Krause over LinkedIn days later, Morgan wrote, “It’s challenging to reconcile my dedication and commitment to the company with the feeling of being let go in a way that seemed to lack empathy.” It does not appear that Krause responded, according to a screenshot of the conversation reviewed by ABC News.
Another policy shift under Krause brought the implementation of employee-performance ratings on a scale of one to three, multiple former employees said.
The ratings took a toll on one former manager, who said the company required them to label at least one subordinate as a low performer. “I had to give one person a low score, even if I thought they didn’t really deserve a low score,” they said. “It was miserable.”
Rating systems have reportedly been deployed as part of the Trump administration’s recent push to cut staff. Senior staff across the Department of Health and Human Services were told to rank thousands of employees in probationary periods, with as much as 40% to be deemed non-mission critical, the Washington Post reported.
‘It’s very alarming’
Daniel Keum, a professor of management at Columbia University Business School, said the apparent overlap between cost-cutting initiatives at Cloud Software Group and some federal agencies exemplifies the Trump administration’s use of tactics borrowed from the private sector.
“In tech, there’s a mentality that you have to break things to make them a lot better,” Keum told ABC News. “When transposed into federal agencies, that mentality becomes very dicey.”
Nearly all former employees who spoke to ABC News expressed shock or concern about the role at the Treasury taken up by Krause, though one expressed indifference and another voiced support.
“It’s very alarming,” said Roan, the former Cloud Software Group design architect.
“He should absolutely not have anything to do with the U.S. Treasury Department,” said Morgan.
In contrast, a former account executive at the company applauded the choice of Krause for the Treasury role, citing his financial acumen.
“I don’t think you can find a better person to swim in the weeds [and] sit in the edifice of the Treasury Department,” the person said.
In January, Cloud Software Group conducted another round of layoffs. That same month, Krause sent an email to all employees asking them to voluntarily send him a message at the end of each week “telling me what you accomplished,” according to a copy of the email reviewed by ABC News.
The approach draws on best practices from “two great entrepreneurs and CEOs that lead the most valuable companies in the world,” Krause wrote, naming Musk and Nvidia CEO Jensen Huang.
In a separate email in recent days, Krause told employees that he plans to continue in his role at the company during his time at the Treasury, according to a copy of the email reviewed by ABC News that was first reported by CRN.
“I am honored to serve our country,” Krause wrote. “Let me be clear — as CEO of Cloud Software Group, I am committed to our company and to you, our employees.”
(NEW YORK) — Quiksilver, Billabong, and Volcom, known for their surf and skate products, are closing stores in the United States.
The parent company of the brick-and-mortar stores, Liberated Brands, filed voluntary Chapter 11 bankruptcy on Sunday, which will result in over 100 retail locations across the country being shuttered, according to a filing.
The company attributes its financial difficulties to several factors, including inflation demands as well as a significant change in consumer spending habits.
ABC News has reached out to Liberated Brands for comment but has not yet received a response.
“The Liberated team has worked tirelessly over the last year to propel these iconic brands forward, but a volatile global economy, consumer spending changes amid a rising cost of living, and inflationary pressures have all taken a heavy toll,” Liberated Brands said in a statement, according to Financier Worldwide.
The statement continued, “Despite this difficult change, we are encouraged that many of our talented associates have found new opportunities with other license holders that will carry these great brands into the future.”
The brands themselves are expected to continue under new management, the company said in a statement.
The announcement of these store closings follows other huge department stores such as Macy’s, Kohl’s and more that are also closing their doors at locations throughout the U.S.
In January, Macy’s announced the closure of 66 Macy’s non-go-forward store locations. Macy’s said it intended to close almost 150 underproductive stores in total over a three-year period.
These closures are a part of the Bold New Chapter strategy, which was announced in February 2024, with the goal of returning “the company to sustainable, profitable sales growth,” the company said.
Kohl’s also announced last month that it would be shuttering 27 underperforming stores and all would occur by April.
“As we continue to build on our long-term growth strategy, it is important that we also take difficult but necessary actions to support the health and future of our business for our customers and our teams,” said Tom Kingsbury, Kohl’s chief executive officer, in a statement.
(WASHINGTON) — Housing prices are soaring twice as fast as overall inflation. The average rate on a 30-year mortgage topped 7% in January for the first time since last spring. Observers as disparate as J.P. Morgan and the left-leaning nonprofit Center for American Progress have declared a “housing affordability crisis.”
The cost crunch could last longer or even worsen, however, as a result of potential tariffs on Mexico and Canada, experts told ABC News.
The Trump administration threatened to impose 25% tariffs on Mexico and Canada, but the U.S. reached an agreement with each of those countries on Monday to pause the tariffs for one month.
Such duties would likely raise expenses for imported home-building materials, hiking construction costs and increasing home prices, some experts said. Meanwhile, they added, potential price increases for a range of goods across the economy could pressure the Fed to raise interest rates, which in turn would push mortgage rates even higher.
“There are a lot of questions about how we can deal with the housing affordability crisis — these tariffs would do the exact opposite,” Gregg Colburn, a real estate professor at the University of Washington, told ABC News.
In a series of social media posts over recent days, President Donald Trump said the tariffs target Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the United States. In a Truth Social post on Sunday, Trump urged the three countries to address his concerns, while acknowledging the tariffs may cause some financial hardship within the U.S.
“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID,” Trump wrote.
The Trump administration did not immediately respond to ABC News’ request for comment.
Roughly 30% of softwood lumber used in the U.S. is made up of imports, which arrive primarily from Canada. Another component of home construction, wallboard, originates mostly in Mexico, according to tracking site Global Gypsum.
Experts said they expect the prices of soft lumber and wallboard to rise if tariffs on Mexico and Canada take effect, since importers typically pass along a share of the cost of those higher taxes to buyers.
In turn, the added homebuilding costs could push up home prices, putting some of the cost burden onto homebuyers, the experts said.
“It will increase home prices by a noticeable amount,” Ken Johnson, a real estate economist at the University of Mississippi, told ABC News.
Home prices surged about 24% over a nearly two-year period beginning at the outset of the pandemic in December 2019, the fastest rate on record, researchers at the National Bureau of Economic Research found.
Price hikes have slowed since then, however. Home prices rose about 4.5% in 2024, Goldman Sachs said.
“Prices have stopped rising at these incredible rates,” Johnson said, but he warned they could pick up again after tariffs. “People will feel it,” he added.
Tariffs may also impact another source of housing cost woes: high mortgage rates.
The average rate for a 30-year fixed mortgage stands at 6.95%, Freddie Mac data last week showed. That figure has ticked up over recent months, despite a series of interest rate cuts at the Federal Reserve.
Last week, Fed Chair Jerome Powell left interest rates unchanged, saying further rate cuts may slow over the course of 2025.
Duties on Mexico and Canada could further delay interest rate cuts or even trigger rate hikes, since the Fed may move to fight a potential burst of inflation, some experts said.
“If costs are going up, the Fed will do what it’s mandated to do,” Marc Norman, associate dean at the New York University School of Professional Studies and Schack Institute of Real Estate, told ABC News.
The Fed’s benchmark interest rate helps set the level of mortgage rates, which closely track the yield on a 10-year Treasury bond, or the amount paid to a bondholder annually.
If the Fed raises rates in order to control tariff-induced inflation, mortgages could very well rise, some experts said.
“The worry is the Fed might respond to potential inflation growth by either not lowering their rates or by raising their rates, which could lead to higher mortgage rates,” Johnson said.
But the tariffs may not worsen affordability challenges much, Norman said, in part because they would arrive at a moment when challenges already abound, including insufficient housing supply and high construction costs.
(WASHINGTON) — Autoworkers, farmers and alcohol distillers are among a set of U.S. workers who risk losing their jobs as a result of potential tariffs on Canada, China and Mexico, experts told ABC News.
The U.S. president was expected to sign executive orders on Tuesday putting in place the 25% tariffs on goods from Mexico and Canada and 10% tariffs on those from China, according to the White House.
Trump announced on Monday that the proposed tariffs on most goods from Canada and all products from Mexico would be paused for one month, putting the policies on schedule to take effect in early March. The postponements came following conversations Trump had with Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau. Trump said Monday afternoon he plans to talk to China in the next day or two about tariffs on that country.
Some U.S. shoppers and economists have raised alarm about the potential for tariff-driven price increases, since importers typically pass along a share of the cost of the higher taxes to consumers.
A lesser-known effect of the potential tariffs, however, could arise as some retailers struggle to sell imported goods at competitive prices while manufacturers reckon with higher costs of raw materials such as car parts and lumber, experts said. Sales could wobble, they added, leading directly to job cuts.
Potential retaliatory tariffs slapped on U.S. exports could prove another cause of layoffs, the experts said, since U.S. firms dependent on selling products overseas risk weakened performance.
“It’s like Trump took a grenade and threw it into the economy, and he walked away to see what happens,” Rob Handfield, professor of operations and supply chain management at North Carolina State University, told ABC News.
The Trump administration did not immediately respond to ABC News’ request for comment.
In a series of social media posts over the weekend, Trump said the tariffs target Canada, Mexico and China for hosting the manufacture and transport of illicit drugs that end up in the United States. In a Truth Social post on Sunday, Trump urged the three countries to address his concerns, while acknowledging the tariffs may cause some financial hardship within the U.S.
“WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID,” Trump wrote.
In recent days, some trade associations and labor unions voiced warnings about tariff-related job losses.
Jay Timmons, president and CEO of the National Association of Manufacturers, said small- and medium-sized firms in the sector employing millions of Americans risk “significant disruptions” as a result of potentially high energy prices and costly supply chain workarounds.
“Manufacturers will bear the brunt of these tariffs,” Timmons said, adding that the policies would put “American jobs at risk.”
Distilled Spirits Council, a trade association representing alcohol makers across North America, cautioned that tariffs would harm business in all three countries. “Maintaining fair and reciprocal duty-free access for all distilled spirits is crucial for supporting jobs and shared growth,” the group said.
The risks for U.S. workers are perhaps best demonstrated by the auto industry, which employs about 4 million people, experts said.
U.S. automakers hold deep ties to Canada and Mexico, since products often snake back and forth between the countries before a car reaches full assembly, Christopher Conlon, a professor of economics at New York University who studies trade, told ABC News.
Mexico and Canada make up the top two U.S. trading partners for both finished motor vehicles and car parts, according to a Cato Institute analysis of data from the U.S. International Trade Commission.
“The supply chains involve shipping parts back and forth over the border five times, six times, seven times. If every time a part crosses the Canadian border it gets taxed at 25%, that will add up really quickly,” Conlon said, noting the added costs could hike car prices by as much as $10,000 and, in turn, weaken sales.
“The companies will have to scale back production, and that will mean fewer shifts,” Conlon added.
The production slowdown may lead to job cuts at companies indirectly impacted by the tariffs, such as car dealerships and auto-part sellers, experts said. More than 550,000 workers at car dealerships representing international brands risk losing their jobs if the industry falters due to the tariffs, the American International Automobile Dealers Association told ABC News in a statement.
To be sure, employment may grow in some domestic industries protected by the tariffs, such as the steel and energy sectors, some experts said. Even those businesses, however, may contend with challenges if the tariffs limit consumer demand, they added.
Potential job gains in some sectors would not outweigh the losses in others, Jason Miller, a professor of supply chain management at Michigan State University, told ABC News.
“It’s very difficult to see a net positive of this in terms of employment for the U.S.,” Miller said.
(NEW YORK) — The stock market fell on Monday after President Donald Trump slapped tariffs on Canada, Mexico and China, eliciting threats of retaliation and setting the stage for a trade war.
The Dow Jones Industrial Average slid about 550 points, or 1.25%, in early trading on Monday. The S&P 500 dropped 1.5%, and the tech-heavy Nasdaq plummeted 2%.
Traders demonstrated their jitters with a selloff of U.S. auto companies, which hold deep ties to suppliers in Canada and Mexico. Shares of General Motors plummeted 6%, while Ford saw its stock price plunge 4%.
The market rout extended worldwide. Japan’s Nikkei index fell 2.5% on Monday, and the pan-European STOXX 600 dropped about 1%.
On Saturday, Trump imposed 25% tariffs on products from Mexico and Canada, as well as 10% tariffs on goods from China. The tariffs are set to take effect on Tuesday, the White House said.
Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum both responded within hours of the announcement, vowing to retaliate.
Trudeau said Canada will implement 25% tariffs on $155 billion worth of U.S. goods, while Sheinbaum said she has instructed officials in her government to implement what she called Plan B, “which includes tariff and non-tariff measures in defense of Mexico’s interests.”
The tariffs imposed by the White House could raise prices for an array of products ranging from avocados to tequila to gasoline, experts previously told ABC News. The price impact remains unclear, however, since businesses within the supply chain could opt to take on some or all of the tax burden, they said.
Potential retaliatory tariffs issued by Canada and Mexico would make it more difficult for U.S. exporters to compete in those markets, raising the possibility of weaker sales.
This is a developing story. Please check back for updates.
(WASHINGTON) — Tariffs on goods from Mexico and Canada that are set to take effect could hike the price of a gallon of gasoline for some drivers by as much as 70 cents and send grocery bills climbing, experts told ABC News.
The Trump administration this week reiterated plans to slap 25% tariffs on all products from Canada and Mexico on Feb. 1. Those countries make up two of the three largest U.S. trading partners, government data shows.
Tariffs of this magnitude would likely increase prices paid by U.S. shoppers, since importers typically pass along a share of the cost of those higher taxes to consumers, experts said. The policy could raise prices for an array of products ranging from tomatoes to tequila to auto parts.
“The scary thing is the list of products is very, very long,” said Jason Miller, a professor of supply-chain management at Michigan State University.
The price impact remains unclear, however, since businesses within the supply chain could opt to take on some or all of the tax burden, some experts added, noting the tariffs may not take effect at all since Trump has previously used them as a source of leverage in international negotiations.
In response to ABC News’ request for comment, a White House spokesperson touted Trump’s previous economic policies, including tariffs.
“In his first administration, President Trump instituted an America First economic agenda of tariffs, tax cuts, deregulation, and an unleashing of American energy that resulted in historic job, wage, and investment growth with no inflation. In his second administration, President Trump will again use tariffs to level the playing field and usher in a new era of growth and prosperity for American industry and workers,” White House spokesperson Kush Desai told ABC News.
Here’s what to know about which products could see price increases as result of the tariffs, according to experts:
Gas
Mexico and Canada account for 70% of U.S. crude oil imports, which make up a key input for the nation’s gasoline supply, according to the U.S. Energy Information Administration, a government agency.
Those imports come primarily from Canada, which sends crude oil to U.S. refineries built specifically to process the crude and redistribute it as car-ready gasoline, Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry, told ABC News.
Gasoline that originates as Canadian crude reaches customers in the upper Midwest as well as some along the East and West coasts, Fitzgerald said. For those drivers, he added, prices could rise between 40 and 70 cents per gallon of gasoline.
“You could definitely be looking at 50 cent-a-gallon increases in a lot of parts of the country,” Fitzgerald added, noting that the effects would be limited to the regions that rely on imported crude.
The tariff-related price increase may combine with a seasonal price hike set to take effect within weeks, since demand for gas typically grows as travel picks up in the warmer spring weather, experts said.
That seasonal price impact could add another 30 cents per gallon, putting the total increase in gasoline prices at $1 per gallon if the tariffs remain in place at the onset of spring, Fitzgerald said.
Tomatoes and Avocados
The U.S. imported $38.5 billion in agricultural goods from Mexico in 2023, making it the top recipient of such products, U.S Department of Agriculture data showed. Those imports include more than $3 billion worth of fresh fruits and vegetables.
Mexican imports account for a large share of some fruits and vegetables routinely eaten by Americans.
Roughly 90% of avocados eaten in the U.S. last year originated in Mexico, USDA data showed. Other products with a high concentration of Mexican imports include tomatoes, cucumbers, bell peppers, jalapenos, limes and mangos, Miller said.
It would be difficult for the U.S. to replace those goods with domestic production or an alternative supplier, making it likely that prices would rise significantly if the tariffs take effect, he added.
“You’d certainly expect to see an impact on prices,” Miller said.
The U.S. also imports large quantities of beer, tequila and other alcoholic beverages from Mexico, experts said. In 2022, the U.S. imported about $26 billion worth of alcoholic drinks from Mexico, according to the USDA.
“Don’t forget all that beer we import from Mexico,” Miller said.
Cars and auto parts
Carmakers and consumers depend on the auto industry’s deep ties to Canada and Mexico, making tariffs a threat to prices, experts said.
Mexico and Canada make up the top two U.S. trading partners for both finished motor vehicles and car parts, according to a Cato Institute analysis of data from the U.S. International Trade Commission.
In 2023, Canada and Mexico accounted for nearly $120 billion worth of U.S. motor vehicle imports, which totaled about 47% of all such vehicles imported that year. Canada and Mexico made up nearly the same share of auto parts imports that year, the Cato Institute analysis showed.
“The operations of auto companies on both sides of the border will be hugely affected by these tariffs,” Robert Lawrence, a professor of trade and investment at Harvard University’s Kennedy School of Government, told ABC News.
