US stocks drop amid fresh tariffs on Canada, recession fears
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(NEW YORK) — U.S. stocks dropped on Tuesday, extending losses suffered a day earlier amid a fresh round of tariffs on Canada and concern about a possible recession.
The Dow Jones Industrial Average tumbled about 515 points, or 1.2%, while the S&P 500 fell 0.8%. The tech-heavy Nasdaq ticked down 0.4%.
The Tuesday selloff extended a days-long market decline touched off by U.S. tariffs imposed last week on Canada, Mexico and China, some of which were delayed.
President Donald Trump on Tuesday announced retaliatory measures on Canada after they slapped a 25% tariff on electricity sent to the U.S., saying that he is imposing an additional 25% tariff on steel and aluminum, bringing those tariffs to 50%.
The move escalated a global trade war that intensified a day earlier, when China slapped retaliatory tariffs on the U.S., deepening trade tensions between the world’s two largest economies.
On Monday, the tech-heavy Nasdaq plummeted 4%, recording its worst day of trading since 2022. The Dow Jones Industrial Average and S&P 500 each dropped more than 2% on Monday.
The market drawdown on Monday extended losses last week. The S&P 500 recorded its worst week since September.
When asked about a potential recession in an interview broadcast on Sunday, Trump said tariffs imposed in recent days could bring about a “period of transition.”
“I hate to predict things like that,” Trump told Fox News in an interview recorded on Thursday. “It takes a little time, but I think it should be great for us.”
In response to a question later on Sunday about his reluctance to rule out a recession, Trump said: “I tell you what, of course you hesitate. Who knows?”
The Bureau of Labor Statistics is expected Tuesday morning to release a report on how many jobs are open in the economy, which could provide another clue about the strength of economy amid the new recession concerns. An inflation report is expected Wednesday.
This is a developing story. Please check back for updates.
(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.
(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.
(NEW YORK) — U.S. stock futures traded slightly higher on Tuesday, following Monday’s major selloff as markets digested President Donald Trump’s comments that there would be a “period of transition” as the economy adjusted to a global trade war.
Dow futures traded up 156 points, or about 0.36%.
The Dow Jones Industrial Average closed down about 2% on Monday, while the S&P 500 declined 2.7%. The tech-heavy Nasdaq plummeted 4%, which amounted to more than $1 trillion in losses, according to Bloomberg.
Asian stocks, which opened sharply lower on Tuesday, following the U.S. selloff, recovered some ground. And European stocks were trading mixed.
The Bureau of Labor Statistics is expected Tuesday morning to release a report on how many jobs are open in the economy, which could provide another clue about the strength of economy amid the new recession concerns. An inflation report is expected Wednesday.
The main driver of the recent declines appears to be America’s trade war, with investors watching the administration’s latest plans on trade and tariffs. The selloff coincided with retaliatory tariffs against the U.S. following levies last week on Canada, Mexico and China, some of which were delayed.
This is a developing story. Please check back for updates.
