Fed Chair Powell sounds alarm on tariffs, sending stocks lower
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(WASHINGTON) — Federal Reserve Chair Jerome Powell said Wednesday that he expects President Donald Trump’s tariffs policy to cause higher inflation and slower economic growth, complicating potential central bank efforts to ease the fallout.
“The level of the tariff increases announced so far is significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth,” Powell told the audience at the Economic Club of Chicago.
Powell’s remarks immediately sent stocks lower as investors digested the top central banker’s concern about the tariffs.
Within minutes, the Dow Jones Industrial Average fell 690 points, or 1.7%, more than tripling losses suffered over the course of the day before Powell’s comments. At the close of trading, the Dow dropped 1.7%.
The S&P 500 dropped 2.2% at market close, while the tech-heavy Nasdaq plunged 3%. Both indexes deepened losses suffered earlier in the day.
Stocks had fallen in early trading on Wednesday after chipmaker Nvidia disclosed it was recording a $5.5 billion charge in accordance with a new Trump administration restriction on exports to China.
Wednesday’s address marked Powell’s first public remarks since Trump last week paused his so-called “reciprocal tariffs” on most countries for 90 days. Stocks soared minutes after Trump’s announcement, recovering much of the losses suffered in the aftermath of the “Liberation Day” tariffs start a week earlier. It amounted to one of the most volatile weeks in the history of Wall Street.
“Markets are struggling with a lot of uncertainty and that means volatility,” Powell said on Wednesday. Still, he added, the volatility reflected the significance of the policy changes, rather than abnormal behavior in the markets.
“They’re functioning just about as you’d expect them to function,” Powell said.
At the same time Trump paused some tariffs last week, he also increased tariffs on China, bringing levies on Chinese goods to a cumulative level of 145%. In response, China hiked tariffs on U.S. goods to 125%, escalating a trade war between the world’s two largest economies.
Powell said earlier this month that he expected Trump’s tariff policy would hike prices and slow economic growth, while noting that key indicators “still show a solid economy.”
Policy changes implemented by the White House have contributed to a “highly uncertain outlook,” Powell said.
Last month, the Fed opted to hold interest rates steady, even as the central bank said it expected higher inflation and slower economic growth than it had forecast in December. The Fed will announce its next interest-rate decision on May 7.
Powell on Wednesday indicated that the Fed may approach interest rates with restraint as policymakers observe the economic effects of Trump’s tariffs.
“The U.S. economy is still in a solid position,” Powell said. “For the time being, we are well positioned to wait for greater clarity before considering any adjustments to our policy stance.”
(WASHINGTON) — This week’s inflation report will offer a first look at how President Donald Trump’s “Liberation Day” tariff announcement has impacted pricing across the United States.
Trump’s tariff escalation, announced April 2, set off fears among economists and consumers about a possible burst of inflation, since importers typically pass along a share of such taxes in the form of price hikes.
Government data, which will be published Tuesday, is expected to show that pricing has defied such worries – at least for now.
Economists expect prices to have increased 2.3% over the year ending in April, which would mark a slight cooldown from the prior month.
However, many analysts anticipate a rekindling of inflation over the coming months as retailers begin to replenish inventory with goods imported after the tariffs took effect.
Even so, a rollback of some levies since “Liberation Day” may reduce the impact on inflation.
Trump paused a large swath of so-called “reciprocal tariffs” within days of the announcement.
On Monday, Trump temporarily slashed tariffs on China from 145% to 30%.
Levies on China will remain at the reduced rate for 90 days while the two sides negotiate a wider trade agreement, a joint U.S.-China statement said on Monday. China also agreed to temporarily cut its tariffs on U.S. goods from 125% to 10%.
The rollback of levies on Chinese goods is expected to reduce the average cost of tariffs per household this year from $4,900 to $2,800, the Yale Budget Lab found.
Still, the U.S. continues to impose an array of levies that have been issued since Trump took office.
An across-the-board 10% tariff applies to imports from nearly all countries. Additional tariffs have hit auto parts, as well as steel and aluminum. Duties remain for some goods from Mexico and Canada.
Speaking last week before the rollback of tariffs on China, Federal Reserve Chair Jerome Powell said the economy remains in “solid shape” but warned Trump’s tariff policy could cause higher inflation and an economic slowdown.
“If the large increase in tariffs that have been announced are sustained, they’re likely to generate a rise in inflation and a slowdown of economic growth,” Powell said.
“All of these policies are evolving, however, and their effects on the economy remain highly uncertain,” he added.
Inflation levels are nowhere near 2022’s peak of more than 9% — though it remains slightly higher than the Federal Reserve’s target rate of 2%.
The Fed last week opted to leave interest rates unchanged, keeping borrowing costs elevated as policymakers await the impact of tariffs.
Central bankers will announce their next interest rate decision on June 18. Investors peg an 88% chance of the Fed maintaining interest rates at current levels, according to the CME FedWatch Tool, a measure of market sentiment.
(NEW YORK) — U.S. stocks climbed on Friday, shrugging off new Chinese tariffs on American goods that intensified a trade war between the two largest economies in the world.
The Dow Jones Industrial Average jumped 440 points, or 1.1%, while the S&P 500 surged 1.4%. The tech-heavy Nasdaq increased 1.6%.
Meanwhile, a selloff of 10-year Treasuries sent yields climbing to 4.46%. That figure neared a recent high attained hours before President Donald Trump announced on Wednesday a 90-day delay of so-called “reciprocal tariffs” for most U.S. trade partners.
A University of Michigan survey of shopper sentiment on Friday showed consumer attitudes fell more than expected in April, dropping to a level lower than any recorded during the Great Recession.
The market turmoil Friday morning came after China issued a 125% U.S. tariff, though Beijing said it would not increase tariffs further. The move came in response to a 145% tariff on Chinese goods announced by Trump earlier this week.
Larry Fink, the CEO of financial firm BlackRock, which manages about $11.5 trillion in assets, warned that the U.S. economy is poised for a downturn.
“I think we’re very close, if not in, a recession now,” Fink told CNBC.
In a social media post on Friday, Trump signaled confidence.
“We are doing really well on our TARIFF POLICY. Very exciting for America, and the World!!! It is moving along quickly,” Trump said on Truth Social.
U.S. markets closed Thursday with notable losses, a reversal from the enthusiasm unleashed by Trump’s Wednesday decision to pause some tariffs.
Several Asian stock markets slid back into the red on Friday morning, reversing gains made on Thursday amid continued uncertainty as to whether nations would be able to secure deals with Trump to avoid long-term tariffs — and as China announced new retaliatory tariffs on American goods.
Tokyo’s Nikkei 225 index slipped 3.8% and Japan’s broader TOPIX index fell 3.5%. In South Korea, the KOSPI dropped nearly 1% and Australia’s S&P/ASX 200 dipped 0.95%.
In China, markets fluctuated as investors responded to the White House clarifying that the level of tariffs on Chinese goods is now 145% — not 125% as previously believed.
Hong Kong’s Hang Seng index rose 2%, Shanghai’s Composite Index rose 0.6% and Shenzen’s Component Index rose 1.2%, with investors buoyed by Beijing’s announcement of stimulus measures to bolster the economy against the escalating American tariffs.
Other prominent Asia indices in the green on Friday included Taiwan’s Taiex index up 2.7% and India’s NIFTY 50 up 1.9%.
European markets appeared hesitant upon opening and slipped after China announced it would increase tariffs on U.S. goods from 84% to 125% from Saturday.
On Thursday, Trump again hinted at the resumption of his sweeping tariffs.
“If we can’t make the deal we want to make or we have to make or that’s, you know, good for both parties — it’s got to be good for both parties — then we go back to where we were,” Trump said.
When asked if he would extend the 90-day pause, the president responded, “We’ll have to see what happens at the time.”
Buying a Tesla has become a bit more complicated in the past year.
The company’s Model Y and Model 3 continue to be the best-selling electric vehicles in the U.S., accounting for more than 40% of all EVs sold last year, according to Cox Automotive data. But Tesla’s stronghold on the EV market is slipping.
The U.S. electric automaker has seen its popularity dip in recent months, with insiders attributing the decline to more competition and Elon Musk’s political views.
Reports of Tesla owners selling their vehicles, violent demonstrations at Tesla showrooms and anti-Musk rallies across the globe have convinced some consumers to search for an alternative. The good news is that legacy automakers and electric startups are quickly answering that demand, unveiling new models that offer performance, styling and impressive range.
If you’re searching for an EV, here are some suggestions that could meet your driving needs.
Model 3
Jason Cammisa, host of Hagerty’s “ICON” series, said motorists have “legitimate” concerns about Tesla: “Buying one is making a political statement,” he told ABC News. But the Model 3 is also “the best consumer product in the world,” he argued.
“It’s the best car in the world, period, full stop, not up for discussion,” he said. “You won’t find a better car on planet earth, not at that price and combination of attributes.”
He added, “The thing about Tesla is that is spans so many different price points and socioeconomic situations … you have value shoppers looking at Model 3s as well as billionaires.”
Cammisa, however, has plenty of praise for several Model 3 competitors, including the Hyundai Ioniq 5 ($42,400), the Kia EV6 ($42,900) and Genesis GV60 ($52,350).
“The Hyundai products tend to hit all the marks well — the packaging is good and the UX (user experience) works well enough,” he noted. “The Ioniq 5 N is the enthusiast choice — it has drift modes and you get Lamborghini levels of performance in that car.”
Cammisa said he reviews and ranks EVs on factors that may not have been top priorities for motorists in the past.
“The biggest differentiators in the market now are not things like powertrains and suspension tuning. The consumer experience is the real differentiator now,” he said.
Patrick George, editor-in-chief of InsideEVs, said he’s heard from many Tesla owners who are ready “to move on” from their cars.
“They’re done with Tesla because of Elon,” he told ABC News. “Getting rid of Teslas are a real thing.”
He and his staff have compiled a list of non-Teslas to chose from, which includes the EV6 and Ford Mustang Mach-E.
George noted that the BMW i4 and i5 were superb replacements: “I was massively impressed with how those drive,” he said.
Model Y
Jared Rosenholtz, editor at large for CarBuzz, has two favorite Model Y replacements: the Chevy Equinox ($33,600) and Porsche Macan Electric ($77,295).
“The Equinox EV is a fantastic little vehicle with a nice interior and more than 300 miles of range,” he told ABC News. “With incentives, the price will come in under $30,000.”
The pricier Macan EV “drives just as well as the gas version,” according to Rosenholtz, who is also a fan of the Audi Q6 e-tron ($63,800), which is similar in size and power.
Camissa, too, was impressed with the Macan, saying it had “the best stereo I ever heard in a car.”
“The Macan EV is the total package,” he said.
Rosenholtz also recommended the new Volvo EX30 ($46,195), a smallish yet mighty crossover that packs 422 hp and sprints from 0-60 mph in 3.4 seconds.
“The EX30 is super adorable and the quickest Volvo ever made,” he said.
Model S
Cammisa, Rosenholtz and George all agreed that the Lucid Air, a handsome electric sedan that can travel at least 420 miles on a single charge, was without question a top competitor to the S, or any sedan on the market.
“It has unbelievably fast charging and drives amazing,” said Rosenholtz. “And you can get a Lucid for $10,000 less than the cheapest Model S.”
The Air, which is available in four trims, has a starting price of $69,900. Owners can “fill up” their Air with 200 miles of charge in about 12 minutes if they opt for the Wunderbox battery charger, according to the company.
Cammisa raved about the Air Sapphire ($250,000), which is priced like a Bentley and performs like a supercar: 0-60 mph in 1.89 seconds.
“It’s the best-handling sedan ever made in the history of the world,” he said. “The Lucid Gravity is even better — if you want a minivan looking SUV. Dynamically that thing is unbelievable and the packaging is unbelievable. I send people to Lucids all the time.”
In addition to the Lucid Air, George listed the Porsche Taycan ($100,300) and Hyundai Ioniq 6 ($37,850) as two great options, depending on one’s budget.
“The Ioniq 6 is outstanding on range,” he pointed out. “The Taycan is the OG Model S competitor — it’s more like a sports car with really fast charging.”
Model X
Americans love their big, three-row SUVs and plenty of Model X challengers have hit the market in recent months. George said Tesla owners are increasingly turning to startup Rivian, which makes the fashionable R1S ute ($75,900).
“We’ve seen a lot of Model X owners move to Rivian. It’s the closest to Tesla in so many areas — software updates, range and performance,” George said. “Everyone who has gotten a Rivian has so far adored it. It’s one of my favorite trucks.”
Added Cammisa: “The R1S is the EV that Range Rover owners want.”
Cammisa still prefers the Lucid Gravity ($79,900), which is available to order now on the Lucid site.
“It does have the proportions of a minivan but the engineers have crafted the perfect commuter vehicle,” he said. “This thing has everything you need but the question will be: is this what people want?”
George also pointed to the Polestar 3 ($67,500), a sleek and haute SUV that can be configured in all-wheel drive or rear-wheel drive. The 3’s long range dual motor model makes 489 horsepower and 620 lb.-ft. of torque and its dual chamber active air suspension improves the handling and ride quality by adapting to sensor input 500 times a second.
“The Polestar 3 is very Tesla-esque,” said George. “It’s got great tech, outstanding performance and great styling.”
Honda’s Prologue ($47,400), the company’s first electric SUV, has already been a hit with consumers since it launched last year. The interior is spacious, the optional panoramic roof adds brightness to the cabin and designers included high-quality materials and large buttons and knobs. Honda has partnered with General Motors on battery development and technology, so there are many similarities with the Chevy Blazer EV.
“The Prologue is a great gateway to EVs,” said George, who noted how “normal” the Prologue drove compared to more aggressive regenerative braking systems. Plus, “it has buttons if you don’t want a car that’s all screens and minimalist.”
