(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.
(NEW YORK) — President-elect Donald Trump sharply criticized the rising price of groceries throughout his campaign, even delivering an address outside his New Jersey home in August alongside a table covered with cereal boxes, coffee grounds and ketchup.
A wave of consumer discontent appears to have helped lift him back into the Oval Office, but Trump now faces the task of how to ease voters’ frustration.
Food inflation soared to a peak of more than 10% in 2022, but price increases have slowed to about 2%, U.S. Bureau of Labor Statistics data shows.
Still, the yearslong bout of rapid inflation has sent food prices soaring more than 25% since President Joe Biden took office.
Typically, prices do not fall across the board unless the economy slows or even tips into recession, which would reduce consumer demand but also impose economic hardship, some economists told ABC News.
Still, Trump could enact policies that may slow the rise of grocery prices, or even lower the cost of some household staples, economists added.
“Prices on different items absolutely could come down,” Michael Faulkender, a professor of finance at the University of Maryland’s Robert H. Smith School of Business, told ABC News.
In response to ABC News’ request for comment, the Trump transition team said in a statement that Trump intends to fulfill the commitments he made during the campaign. But the transition team did not specifically address the issue of grocery prices.
“The American people re-elected President Trump by a resounding margin giving him a mandate to implement the promises he made on the campaign trail. He will deliver.” Karoline Leavitt, a spokesperson for the transition team, told ABC News.
Increase oil production
On the campaign trail, Trump often responded to concern about prices with a three-word mantra: “Drill, baby, drill.”
Trump, who has downplayed human-caused climate change, vowed to bolster the oil and gas industry by easing regulation and expanding output.
In theory, increased oil production could lower food prices since gas makes up a key source of costs throughout the supply chain, whether a firm is growing crops or transporting them to a seller, economists said.
“Energy is a big input cost for food,” David Andolfatto, an economist at the University of Miami, told ABC News. “That should put downward pressure on food prices.”
While such a move could prove beneficial, increased oil output under President Joe Biden coincided with the surge of inflation in recent years. Since oil is sold on a global market, a surge in domestic production may not lower prices for U.S. consumers as much as some may expect.
The U.S. set a record for crude oil production in 2023, averaging 12.9 million barrels per day, according to the U.S. Energy Information Administration, a federal agency.
A further uptick in oil production risks accelerating the nation’s carbon emissions and worsening the impact of climate change, which would carry costs down the road, Luis Cabral, a professor of economics at New York University, told ABC News.
“We can’t simply look at the benefits,” Cabral said, acknowledging the potential for lower food prices. “There are also important costs in terms of emissions and climate change.”
Bolster antitrust enforcement
To address high food prices, the Trump administration could crack down on market concentration, a term economists use to describe the dominance of a given industry by a handful of firms, some experts said.
They pointed to the market power of large corporations as a cause of rapid price increases, saying companies use their outsized role in the market to raise prices without fear of a competitor offering a comparable product at a more affordable price.
“Whenever there are fewer players in an industry, prices tend to be higher,” Cabral said. “Supermarkets aren’t an exception.”
Grocery store profit margins surged in 2021 and rose even higher two years later, even after price increases had begun to cool, a Federal Trade Commission study in March showed.
In February, the Federal Trade Commission sued to block the merger of supermarket chains Kroger and Albertsons, which would amount to the largest supermarket merger in U.S. history. The proceedings are ongoing, and will likely stretch into the Trump administration.
Some economists cast doubt over the potential benefits of antitrust, saying the recent bout of inflation coincided with an uptick in production costs during the pandemic. “It’s hard to argue that it’s therefore some kind of profiteering,” Faulkender said.
Price-gouging ban
During the campaign, Vice President Kamala Harris proposed a federal ban on price gouging for food and groceries.
The plan could resemble price-gouging bans in place in 37 states, which prohibit a sudden spike in prices for scarce goods, the Harris campaign said. Those bans prohibit companies from exploiting a sudden imbalance between supply and demand by significantly hiking prices.
While Trump may be reluctant to adopt a policy put forward by his proponent, he could advance a price-gouging ban as a means of preventing acute price increases for specific goods.
For instance, egg prices have skyrocketed 30% over the year ending in October, U.S. Bureau of Statistics data on Wednesday showed. The spike owed primarily to an avian flu outbreak that has decimated supply. Last year, egg prices climbed more than 60% in response to a similar avian flu outbreak.
Economists who spoke to ABC News differed on the effectiveness of a potential price-gouging ban.
Some economists dismissed the policy as a flawed solution, since state-level bans usually get triggered only in the case of emergencies and, even then, often lack clarity about the type of company behavior that constitutes price-gouging.
“I don’t think a federal price-gouging ban would help at all,” Cabral said.
Andolfatto, of the University of Miami, said a price-gouging ban could lower food prices if it barred rapid price increases under some circumstances. However, those benefits may be outweighed by the downside, since such a ban could override the market signal delivered by prices, which help direct the distribution of goods to places where they are in short supply.
“These types of interventions have unintended consequences,” Andolfatto said.
(NEW YORK) — Bitcoin vaulted to a record high on Thursday, surging more than 3% in early trading and hurtling toward investors’ long-sought milestone of $100,000.
The price of bitcoin briefly exceeded $98,000 for the first time on Thursday morning, before retreating to about $97,600.
The value of the world’s most popular cryptocurrency has soared 31% since the reelection of former President Donald Trump, who is widely viewed as friendly toward digital currency.
By comparison, the S&P 500 has climbed 2.4% since Election Day, while the tech-heavy Nasdaq has increased 2.6%.
The run-up of bitcoin extended to other parts of the crypto industry. Ether, the second-largest cryptocurrency, jumped 8% in early trading on Thursday. Lesser-known litecoin rose nearly 6%, and dogecoin ticked up more than 2%.
On the campaign trail, Trump vowed to bolster the cryptocurrency sector and ease regulations enforced by the Biden administration. Trump also promised to establish the federal government’s first National Strategic Bitcoin Reserve.
Trump said he would replace Securities and Exchange Commission Chair Gary Gensler, whom many crypto proponents dislike for what they perceive as a robust approach to crypto regulation.
In July, Trump told the audience at a cryptocurrency conference in Nashville, Tennessee, that he wanted to turn the U.S. into the “crypto capital of the planet.”
“I’m calling it the ‘election dividend,'” James Butterfill, head of research at digital asset management firm CoinShares, told ABC News. “We went from being worried about a Democrat getting elected to what we’ve got: a Republican clean sweep.”
The recent rise follows a period of stellar returns that stretches back to last year. The price of bitcoin has soared more than 150% since November 2023. Over that period, the S&P 500 has climbed about 30%.
Those gains have been propelled, in part, by U.S. approval in January of bitcoin ETFs, or exchange-traded funds. Bitcoin ETFs allow investors to buy into an asset that tracks the price movement of bitcoin, while avoiding the inconvenience and risk of purchasing the crypto coin itself.
Options trading for bitcoin ETFs
On Tuesday, options on BlackRock’s popular iShares Bitcoin Trust ETF (IBIT) were made available for trading on the Nasdaq. The options, which provide a new avenue for bitcoin investors, allow individuals to commit to buy or sell the ETF at a given price by a specific date. While such investments typically come with additional risk, they can also make large payouts.
The price of IBIT jumped 3.1% on Thursday.
The newly available options may account for some of the rise in the price of bitcoin over recent days, Bryan Armour, the director of passive strategies research at financial firm Morningstar, told ABC News.
“The options add volatility on top of volatility, which has interested some of the crypto investors,” Armour said.
The crypto industry entered this year bruised after a series of high-profile collapses and company scandals.
FTX, a multibillion-dollar cryptocurrency exchange co-founded by Sam Bankman-Fried, collapsed in November 2022. The implosion set off a 17-month legal saga that resulted in the conviction of Bankman-Fried for fraud. In April, Bankman-Fried was sentenced to 25 years in prison.
The surge of bitcoin since Election Day may continue for the foreseeable future, since past periods of momentum have been shown to propel the cryptocurrency, Armour said. But crypto investments remain highly volatile, he added, recommending that the asset make up no more than 5% of a person’s portfolio.
“It’s notoriously difficult to provide a value for bitcoin’s price,” Armour said. “It can go up; it can go down.”
“I would continue to keep any allocation small,” Armour added.
(WASHINGTON) — President Joe Biden on Friday announced a decision to block the $14 billion acquisition of U.S. Steel by Japan-based Nippon Steel, saying domestically produced steel is essential to U.S. national security.
“Without domestic steel production and domestic steel workers, our nation is less strong and less secure,” Biden said in a statement.
The move marks the latest effort on the part of the Biden administration to protect U.S. markets from foreign-owned firms.
Biden has preserved many of the tariffs imposed by former President Donald Trump, and he enacted a law that would ban China-based social media platform TikTok later this month if the company doesn’t find a new parent company. The Supreme Court is set to hear arguments this month in a legal challenge brought by TikTok.
The decision comes weeks after a federal committee declined to issue a recommendation on the merger, leaving Biden an opportunity to block the deal.
The Committee on Foreign Investment in the United States, tasked with the potential acquisition, shared concerns about the national security risks posed by the loss of the country’s second-largest steel producer.
In response to the committee’s decision, Nippon Steel alleged the White House had “impermissible undue influence” on the review. Nippon Steel has previously threatened to challenge the White House decision in court.
The fate of U.S. Steel – a storied 120-year-old firm based in Pittsburgh, Pennsylvania – became a lightning rod during the 2024 election season.
This is a developing story. Please check back for updates.
