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Monday May 12, 2025
(NEW YORK) -- U.S. stocks soared at the open of trading on Monday, just hours after the U.S. and China announced an agreement to slash tariffs for 90 days as the worldâs two largest economies negotiate a wider trade deal.
The Dow Jones Industrial Average climbed 1,005 points, or 2.4%, while the S&P 500 jumped 2.7%. The tech-heavy Nasdaq increased 3.8%.
Best Buy, an electronics retailer that previously warned of tariff-induced price hikes, saw shares surge more than 10%.
Tesla, the electric carmaker led by White House advisor Elon Musk, jumped more than 5%.
The U.S. agreed to cut tariffs on Chinese goods from 145% to 30%, while China committed to reduce tariffs on U.S. products from 125% to 10%.
The previous set of sky-high tariffs had threatened a surge in prices and a possible U.S. recession, experts told ABC News.
The move marks the latest rollback of far-reaching tariffs initiated by President Trump during a Rose Garden ceremony on April 2 that the president dubbed "Liberation Day."
Days after the announcement, Trump suspended so-called "reciprocal tariffs" on dozens of countries.
"Increasingly, itâs as if the last 6 weeks have been a bad dream and never actually happened," Deutsche Bank told clients on Monday in a memo shared with ABC News.
The U.S.-China accord came two days after an hours-long discussion between U.S. and Chinese officials in Geneva, Switzerland on Saturday.
Jonathan Pingle, chief U.S. economist at Swiss investment bank UBS, on Monday estimated the reduction in U.S. levies on China would bring average U.S. tariffs down from 24% to 14%.
In a statement to ABC News, Pingle described the agreement between the U.S. and China as a "cooling off."
This is a developing story. Please check back for updates.
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(NEW YORK) -- A carousel ride and 12 flavors of fudge await shoppers at LARK Toys, a family-owned toy shop outside Minneapolis, Minnesota.
The glee on offer belies the stress behind the counter as President Donald Trump's 145% tariffs on China, which are set to trigger price increases and product shortages within a matter of a few months, co-owner Kathy Gray told ABC News.
The store imports four out of every five of its products from China, Gray said. A flurry of orders helped amass inventory before the tariffs, Gray added, but the shop lacks the funds and storage space to build up a major stockpile.
"It's threatening," Gray said. "This administration isn't operating with the best intentions of small businesses and regular folks."
LARK Toys is hardly the only small business that said it's under strain as a result of Trump's tariff policy.
Such concern is well-founded, analysts told ABC News, since small businesses typically lack the financial buffer, supply-chain flexibility and political influence of their larger counterparts.
Small businesses make up 99.9% of all U.S. firms, and account for more than two-fifths of the nation's gross domestic product, according to the U.S. Small Business Administration.
"Many small businesses are quite vulnerable and exposed to changes in trade policy," Ebehi Iyoha, a professor of business administration at Harvard University, who co-authored the study of small business sentiment, told ABC News.
The Trump administration has touted its achievements in support of small business, citing a cooldown of inflation and robust job growth.
"President Trump has restored optimism and opportunity for our job creators with a pro-growth economic agenda that has already slashed inflation, driven job creation, and delivered record investment," Kelly Loeffler, Administrator of the Small Business Administration, said in a statement late last month.
Trump last month paused a far-reaching set of so-called "reciprocal tariffs" targeting about 75 countries. At the same time, however, Trump hiked tariffs on China. Additional levies have hit autos, steel and aluminum.
U.S. importers face an average effective tariff rate of 25.2%, the highest since 1909, the Yale Budget Lab found last month.
The rapid shift in trade policy poses an acute risk for small businesses in part because they usually lack a large rainy-day fund, Jane Liu, a professor of economics at the University of Nebraska, Omaha, told ABC News.
A typical small business holds enough cash reserves to last 27 days, a JPMorgan Chase Institute study found in 2020.
"The larger firms have a better cushion," Liu said.
Small businesses also often face more pressure to raise prices for consumers, which can put them at a disadvantage with large competitors, some analysts said.
Tariffs raise prices for consumers if importers fail to swallow the tax burden by eating into their profits or requesting that a supplier sell the product at a lower rate in order to offset a share of the cost.
Small firms typically retain less capacity to eat profits or make price requests of suppliers, putting them at greater risk of losing out on shoppers due to tariff-related price hikes, Iyoha said.
"If you have a lot of bargaining power with suppliers, you can essentially say, 'If you don't eat some of these tariff costs and lower prices, I won't buy from you,'" Iyoha said. "If you had to guess who has more bargaining power with suppliers, I'm sure you'd guess large businesses."
In some cases, the Trump administration has granted relief from some tariffs.
Last month, the White House announced an exemption from China tariffs for a range of electronic devices. Days later, Trump said he had "helped" Apple CEO Tim Cook. Trump issued a one-month delay of auto tariffs after pressure from the Big 3 U.S. automakers: Ford, General Motors and Stellantis.
Small businesses typically lack the political influence of their larger counterparts, analysts said.
"Most small businesses don't have the money or access to the best, most savvy folks able to do this," Iyoha said.
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(WASHINGTON) -- President Donald Trump on Friday voiced a willingness to ease tariffs on China, saying on social media it "seems right" to slash levies from 145% to 80%.
The announcement arrives a day before Treasury Secretary Scott Bessent is set to begin trade negotiations with Chinese officials at a meeting in Geneva, Switzerland.
The potential tariff reduction floated by Trump may avert a virtual standstill of trade between the world's two largest economies, but the move would not substantially ease expected price increases for goods such as clothes, sneakers and toys, analysts told ABC News.
Product shortages would also remain a possibility at the lower tariff rate, they added.
"A tariff of 80% would still have a dramatic effect," Christian vom Lehn, an economics professor at Brigham Young University, told ABC News. "It would mean a significant impact for consumers."
Trump last month sharply increased tariffs on China, prompting China to retaliate with 125% tariffs on U.S. goods. The tit-for-tat measures set off a trade war with the third-largest U.S. trade partner, which accounted for nearly $440 billion worth of imports last year.
The tariffs elicited warnings from a slew of companies about the risk of price increases for U.S shoppers.
Toy giant Mattel warned in an earnings report this week of plans to shift some of its supply chain outside China, adding that when necessary it would take "pricing action in its U.S. business." The move follows similar messages from electronics chain Best Buy as well as Chinese e-commerce retailers Shein and Temu.
Chinese shipments to the U.S. have dropped significantly, falling 21% in April compared to a year earlier, data from China's General Administration of Customs on Friday showed.
Risks for consumers would continue to linger for two key reasons, analysts said: An 80% tariff would still amount to a punishing tax on imports, while uncertainty about the chance of another policy shift would make it difficult for companies to take full advantage of the lower rate.
Tariffs raise prices for consumers if importers fail to swallow the tax burden by eating into their profits or requesting a supplier sell the product at a lower rate in order to offset a share of the cost.
Under the current 145% tariff on Chinese goods, suppliers and importers face immense pressure as they try to bear some of the tax cost out of concern that higher prices would hurt sales, experts told ABC News. Due to the sky-high tariff, however, many sellers have little choice but to hike prices or risk losses, they added.
Those dynamics would remain in place at an 80% tariff rate, since it would still far exceed many companies' capacity to offset the added cost with lower profits, ??Jason Miller, a professor of supply chain management at Michigan State University.
"An 80% tariff really doesn't change things too much," Miller said.
Trump's announcement of a potential reduction of the tariff on China came two days after Trump ruled out any such lowering of the tariff level before negotiations.
The developments followed a weeks-long back and forth during which the two sides disputed whether they had already started discussing the tariffs.
The general sense of uncertainty would remain even after U.S. tariffs were to reach 80%, making it difficult for businesses to adapt their supply chains in a manner that would substantially ease costs and, in turn, offer relief for consumers, some analysts said.
"Even at a lower tariff, companies would have to be wondering whether this might go up again or or possibly come down again," David Andolfatto, an economist at the University of Miami, told ABC News.
If companies could trust the possible 80% tariff level as a long-term policy stance, they may choose to reroute supply chains outside China or even initiate plans for some domestic production, Andolfatto said.
But each trade policy announcement put forward by Trump appears subject to change, Andolfatto said, noting several modifications already undertaken by Trump.
"If anything changes, the Trump administration can unilaterally react and come back to the negotiating table," Andolfatto added.
For his part, Bessent has referred to the White House approach as a negotiating tactic, describing the policy changes as "strategic uncertainty."
Testifying before a House subcommittee this week, Bessent said the Trump administration had commenced negotiations with 17 of the top 18 U.S. trade partners, excluding China. Those countries account for the vast majority of U.S. foreign trade, Bessent said.
Trump unveiled the framework for a trade agreement with the United Kingdom on Thursday, marking the first such accord with any nation since the White House suspended some of its far-reaching "Liberation Day" tariffs last month.
"Every country wants to be making deals," Trump said in the Oval Office on Thursday, noting the upcoming talks between Bessent and Chinese officials.
"That will be very interesting," Trump said.
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Mortgage rates have dropped over the early months of 2025, offering homebuyers an opportunity for some borrowing relief if they move ahead with the big-ticket purchase.
The housing market remains sluggish and wider economic uncertainty looms, however. President Donald Trump's tariffs threaten to upend global trade and tip the U.S. into a downturn, experts said. Federal Reserve Chair Jerome Powell warned on Wednesday of a possible resurgence of inflation, which could trigger higher interest rates.
The mixed signals pose a quandary for homebuyers: Is it the right time to get into the market?
Lower mortgage rates ease the financial pain for prospective homebuyers, presenting an incentive at a moment when it appears unclear whether borrowing costs will drop any further, some analysts told ABC News.
A tight housing market and a cloudy economic outlook may give homebuyers pause, however, as they weigh the large expense with financial conditions in flux, analysts added.
"It's still a tough environment to find a house," Lu Liu, a professor at the Wharton School at the University of Pennsylvania, told ABC News. "On the other hand, it's unclear whether that environment will get any better."
The average interest rate on a 30-year fixed mortgage stands at 6.76%, marking a decline from 7.04% in January, FreddieMac data shows. The current level of mortgage rates is roughly a percentage point lower than a recent peak attained in the fall of 2023.
Each percentage point decrease in a mortgage rate can save thousands or tens of thousands in additional cost each year, depending on the price of the house, according to Rocket Mortgage.
"Mortgage rates have seen substantial decline," Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors, told ABC News. "It's a measurable difference."
Mortgage rates closely track the yield on a 10-year Treasury bond, or the amount paid to a bondholder annually. Bond yields are shaped in part by expectations of inflation, some experts said.
Since bonds pay a given investor a fixed amount each year, the specter of inflation risks devaluing the asset and in turn makes bonds less attractive. If inflation were to rise, those annual returns would get cut down as price increases erode the purchasing power of the fixed payout.
Bond yields rise as bond prices fall. When a selloff hits and demand for bonds dries up, it sends bond prices lower. In turn, bond yields move higher.
The Fed has cautioned about a possible tariff-induced rise of inflation, which could trigger higher bond yields and, in turn, increased mortgage rates. But a simultaneous slowdown of the economy may complicate potential rate hikes, since high interest rates could worsen a downturn.
"There's a risk of upward pressure on inflation, which could drive up yields," Liu said. "Maybe there's a wait-and-see about a possible economic slowdown, which could lower rates."
"It's very hard to predict," Liu added.
Homebuyers face another challenge: A slow housing market.
Existing home sales dropped nearly 6% in March compared to the previous month, National Association of Realtors data showed.
The housing market is suffering from a phenomenon known as the "lock in" effect, some experts said.
While mortgage rates have fallen, they remain well above the rates enjoyed by most current homeowners, who may be reluctant to put their homes on the market and risk a much higher rate on their next mortgage.
In turn, the market could continue to suffer from a lack of supply, making options limited and prices sticky.
An influx of new homes has eased some of the supply crunch, but construction of new homes remains well short of demand, Lautz said.
"There's inventory coming in but it doesn't mean the inventory-supply crisis is over," Lautz added. "We know we need a lot more inventory in the U.S."
Despite these complications, homebuyers may still find it worthwhile to enter the market, some experts said.
Limited supply of homes increases the likelihood that a given purchase will retain or increase its value, offsetting the costs and easing some of the risk, Ken Johnson, a real estate economist at the University of Mississippi.
"Prices should be stable or rise," Johnson said. "You almost certainly won't see a crash because we're woefully short on roofs to live under in the U.S."
In the event mortgage rates fall even further, homebuyers retain the option of refinancing at the reduced interest rate, Johnson added.
"As some say, 'You get engaged to the mortgage rate and married to the refinance,'" Johnson said. "People may be looking now because they need to get into a home."
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(FRANKFORT, KY) -- Kentucky's bourbon industry faces potential devastation as President Donald Trump's latest tariff dispute with Canada threatens to halt $43 million in annual whiskey exports. During Tuesday's Oval Office meeting with Canadian Prime Minister Mark Carney, Trump maintained his hard stance on tariffs, declaring that Canada would need to make significant concessions to see any relief.
The dispute is part of a broader trade conflict that has particularly impacted American spirits, with Canadian retaliatory tariffs targeting bourbon producers.
Rep. Morgan McGarvey (D-KY), chair of the Congressional Bourbon Caucus, expressed concern about the meeting's outcomes in an interview with ABC News.
"With Kentucky, Canada is our largest trading partner," McGarvey said. "We're going to lose tens of millions of dollars in bourbon sales in Ontario province alone, not to mention the whole country, because of what Trump's policies are doing."
The congressman highlighted how the administration's shifting tariff policies are affecting Kentucky's distilleries. When asked about conditions for ending the tariffs, Trump indicated there were none, a stance McGarvey found particularly troubling.
"If you're using tariffs as a negotiating tactic, but then you say there's nothing you can do to get rid of it, that's going to be problematic," McGarvey noted.
McGarvey criticized the administration's approach to trade policy, highlighting the chaos it has created for local businesses.
"There was one week I was working with the bourbon companies in my district where, quite literally, on Monday, the tariffs were on. On Tuesday, they were off. On Wednesday, they were on. On Thursday, they were off again," he explained.
The impact extends beyond just sales figures. Kentucky's bourbon industry supports over 22,500 jobs and contributes $9 billion annually to the state's economy. The ongoing trade dispute threatens this economic engine, with some distilleries already reporting decreased international orders and considering production cutbacks.
Beyond trade concerns, McGarvey also addressed proposed cuts to Medicare and Medicaid that could impact Kentucky residents.
"The Republican budget that Donald Trump has been pushing will cut Medicaid, 46% of the kids in Kentucky have health insurance through Medicaid," he said, emphasizing that Kentucky receives more federal Medicaid dollars than its entire state budget.
The congressman, who serves on the Veterans Affairs Committee, also expressed strong opposition to recently announced VA staffing cuts.
"Cutting 80,000 people from the VA workforce is not going to help our veterans access their benefits," McGarvey stated. "We made them a promise, both a legal and a moral obligation, that we would take care of them after their service."
As negotiations continue with Canada, uncertainty remains about whether a deal can be reached before the 90-day pause expires. McGarvey and his colleagues continue to push for what he calls "serious, certain strategic trade policies that are beneficial to American workers and consumers."
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(WASHINGTON) -- The Federal Reserve held interest rates steady on Wednesday, just weeks after President Donald Trump intensified calls for lower borrowing costs and voiced eagerness about the potential "termination" of Fed Chair Jerome Powell.
In recent days, Trump has dialed back his attacks on Powell, saying he will not fire Powell before the end of the top central banker's term next year. Trump has reiterated his displeasure with the level of interest rates, however, urging the central bank to lower them.
Speaking at a press conference in Washington, D.C., on Wednesday, 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 Wednesday.
"All of these policies are evolving, however, and their effects on the economy remain highly uncertain," Powell added.
When asked about Trump's call for lower rates, Powell shrugged off criticism from the president.
"It doesnât affect our doing our job at all," Powell said. "Weâre always going to consider only the economic data, the outlook, the balance of risks â and thatâs it."
The move marked the Fed's second consecutive decision to maintain the current level of interest rates, repeating an approach taken in January. Before that, the Fed had cut rates at three consecutive meetings.
"For now, it does seem like a fairly clear decision for us to wait and see," Powell said.
"Risks of higher unemployment and higher inflation have risen," the FOMC said in a statement.
Last month, Powell raised the possibility that Trump's tariffs may cause what economists call "stagflation," which is when inflation rises and the economy slows.
If the Fed raises interest rates as a means of protecting against tariff-induced inflation under such a scenario, it risks stifling borrowing and slowing the economy further. On the other hand, if the Fed lowers rates to stimulate the economy in the face of a potential slowdown, it threatens to boost spending and worsen inflation.
Still, Powell pointed to solid economic performance as a reason to take a patient approach as policymakers await the impact of tariffs.
"For the time being, we are well-positioned to wait for greater clarity," Powell told an audience at the Economic Club of Chicago.
Powell noted the possibility of a shift in economic conditions, saying, "Life moves pretty fast."
The rate decision arrives days after fresh data showed robust job growth in April.
Despite flagging consumer sentiment and market turmoil, the labor market has provided a bright spot since Trump took office. Meanwhile, inflation cooled in March, the most recent month for which data is available.
Even so, recession fears are mounting on Wall Street as Trump's tariffs threaten to upend global trade. Goldman Sachs earlier this month hiked its odds of a recession from 35% to 45%. JPMorgan pegged the probability of a recession this year at 60%.
A government report last week showed the U.S. economy shrank over the first three months of 2025, much of which took place as Trump's flurry of tariff proposals stoked uncertainty among businesses and consumers.
U.S. gross domestic product, or GDP, declined at a 0.3% annualized rate over three months ending in March, according to government data released on Wednesday. The figure marked a sharp dropoff from 2.4% annualized growth over the final three months of 2024.
The rate decision on Wednesday also marks the first adjustment of borrowing costs since Trump's closely watched "Liberation Day" tariff announcement on April 2, which triggered the biggest single-day stock market drop since the COVID-19 pandemic.
Days later, Trump suspended a major swathe of the tariffs, sending the market to one of its largest ever single-day increases. A simultaneous escalation of tariffs on Chinese goods kept the effective tariff rate at its highest level in more than a century, the Yale Budget Lab found.
The White House is seeking to strike trade agreements with dozens of U.S. trade partners before the 90-day suspension of so-called "reciprocal tariffs" expires in July.
"As we gain a better understanding of the policy changes, we will have a better sense of the implications for the economy," Powell said last month.
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(WASHINGTON) -- President Donald Trump late Sunday proposed a 100% tariff on foreign-made films, saying the policy would counteract financial incentives that have drawn Hollywood productions overseas.
"WE WANT MOVIES MADE IN AMERICA, AGAIN!" Trump said in a post on social media.
Movie studios have increasingly moved production abroad in recent years as a means of cutting costs, industry analysts told ABC News, but it remains unclear how adding a tariff would succeed in boosting domestic production.
Instead, it could send costs soaring, the analysts said. It could also reduce the number of Hollywood films produced each year and potentially increase ticket prices, they explained.
"Essentially what Trump is trying to do is make it untenable for U.S. movie studios to produce movies abroad -- and the whole idea is that will stimulate production in the U.S.," said S. Mark Young, an accounting professor at the University of Southern California's Marshall School of Business who studies the movie industry.
"But it would cost more money for film production in the U.S.," Young added. "Where's that going to come from?"
Here's what Trump's proposed tariff on foreign-made films could mean for Hollywood and moviegoers:
Why are U.S. studios filming some movies overseas?
The rise of streaming services over the past decade fostered a surge in demand for scripted television and movies, as well as a spike in spending among studios, London-based consulting firm Olsberg SPI found last year.
In 2022, 599 scripted series aired in the U.S., registering more than double the 288 scripted series aired in 2012, Olsberg SPI said, noting that growth ebbed in the aftermath of the COVID-19 pandemic but the overall production rate still surpasses what it was a decade ago.
Alongside that growth, the provision of production incentives worldwide surged nearly 40% over the past seven years, Olsberg SPI said, as nations vied for about $250 billion in global content spending.
But the incentives drawing production away from Hollywood aren't all originating overseas; a slew of states have also boosted financial incentives to compete with moviemaking mainstays California and New York.
Financial incentives abroad have caused some productions to shift overseas, but they're hardly the only reason, Jennifer Porst, a professor of film and media at Emory University told ABC News.
COVID-19 lockdowns sent studios seeking alternative locations, as did widespread labor strikes in 2023 and the increasingly global audience with streaming subscriptions, Porst said.
"There are a whole range of reasons for why production comes and goes," Porst added. "Part of that is due to financial incentives."
What is Trump's proposed tariff on foreign-made films?
In a social media post on Sunday, Trump sharply criticized the production of Hollywood films overseas, claiming the trend had "devastated" parts of the U.S.
Trump claimed without evidence that the use of financial incentives abroad amounted to a "national security threat," saying that -- in his view -- such productions involve "messaging and propaganda."
Trump ordered the United States Trade Representative to begin the process of implementing a 100% tariff on foreign-made films.
In a statement on Monday, the White House said the policy hadn't been finalized.
"Although no final decisions on foreign film tariffs have been made, the Administration is exploring all options to deliver on President Trump's directive to safeguard our country's national and economic security while Making Hollywood Great Again," White House deputy press secretary Kush Desai told ABC News.
The proposal of a tariff on an intangible product like films poses a challenge for policymakers, since the U.S. cannot impose a direct tax on a film as it would a durable good, Tejaswini Ganti, a professor of anthropology at New York University who studies global film, told ABC News.
"If it's a tax on people going abroad to shoot, what is the tax on? Is it going to be, 'Here's the final budget and we'll add a tax on it'?" Ganti said. "What is the thing being taxed?"
Ganti also questioned the notion of a national security risk posed by Hollywood productions made abroad.
"If a Hollywood film is shot, say, in the United Kingdom, I don't understand how that is a national security threat," Ganti said. "It's still an American story, just shot somewhere else."
What could Trump's proposed tariffs mean for Hollywood and moviegoers?
It remains unclear whether Trump's tariff proposal would bolster domestic movie production, analysts said. Instead, the policy may force movie studios to choose between the tax burden associated with foreign-made films or the elevated cost of U.S. production, resulting in more expensive projects, fewer overall films and even less domestic output, they said.
"President Trump figured out the fastest way to dramatically reduce the number of films produced each year in America," Rich Greenfield, a media and technology analyst at LightShed Partners, said in a post on X.
Greenfield followed with multiple rocket ship emojis to indicate the anticipated rise in costs if the tariff plan moved forward.
"It would be a disaster," Young said, noting the likely added cost burden of a potential 100% tariff. "You can't wave a magic wand and expect more money to appear."
In an effort to weather added costs, the film industry may become more reliant on big-budget franchise films, leaving less opportunity for midsize or small-budget movies, Young added.
The extra tax burden could even hit the pockets of U.S. moviegoers, Ganti said.
"Could it lead to higher ticket prices? Sure," Ganti added.
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(NEW YORK) -- Think your giant sport-utility vehicle is cooler than the middling station wagon? Think again.
German automaker BMW recently entered the U.S. "super wagon" category with its high performance M5 Touring, a ludicrously fast family hauler (starting price $121,500) that can smoke a two-seater sports car on a racetrack -- again and again. This is the wagon you wish your parents drove.
The wagon's turbocharged 4.4-liter V8 packs 717 horsepower and BMW claims a 0 to 60 mph sprint in 3.5 seconds. Bonus: the M5 Touring is a plug-in hybrid and gets about 25 miles of pure electric range, allowing owners to cruise through town (almost) unnoticed.
"We're seeing lots of customer demand for the M5 Touring ... customers don't want to sacrifice utility and performance," Juliana Ochs, a manager of business development for BMW Luxury Class and M, told ABC News. "The Touring is the new kid on the block. There was a strong ask for it here in the U.S. and we listened to our customers."
The M5 Touring, which has been on sale in Europe, is just starting to arrive at U.S. dealerships. Few enthusiasts have ever seen one in person.
"People are definitely calling in about the M5 Touring," Jordan Bray, a sales adviser at BMW of Latham, New York, told ABC News. "There's a cult following when it comes to wagons -- not just BMW, but all manufacturers. We're super excited to see it."
Bray said interested buyers may have trouble getting access to one.
"I don't know how many dealers want to give up allocations for that car," he said.
Tyson Jominy, vice president of data and analytics at J.D. Power, said wagons, like the forgotten minivan, have been unfairly maligned by U.S. motorists.
"There are excellent minivans out there and excellent wagons," he told ABC News. "They both have a stigma that is long out of date in my opinion. Wagons are a sleeper agent -- you can probably get away with a lot of stuff that may be frowned upon by your local police."
Jominy noted that the market for premium, six-figure wagons like the M5 Touring and Audi RS6 Avant caters to a very niche customer -- one who may also have a Ferrari parked in the garage.
"A 'super wagon' is fan service to your most loyal owners," he said. "Your most loyal owners know about your global portfolio and the forbidden fruit that exists out there. And one of the secrets in the auto industry is that wagon buyers spend real money. Premium luxury wagon buyers typically get zero incentives."
Plus, there are many other reasons to own a wagon, Jominy argued.
"They will drive better because they're lower to the ground and keep their center of gravity," he noted. "They're better handling vehicles and drivers should get better fuel economy than an SUV."
When Audi introduced enthusiasts to its RS6 Avant in 2019 (starting price $126,600), the wait time to get one was two to three years, according to Mark Dahnke, an Audi spokesperson. The automaker sells about 1,000 units in the U.S. and interest is still strong -- including with families.
Like the M5 Touring, the RS6 Avant's performance credentials match or exceed sports cars that cost hundreds of thousands of dollars more: 621 hp, 627 lb.-ft. of torque, 0-60 mph in 3.3 seconds. And unlike low-slung, compact sports cars, the menacing RS6 doubles as a stylish people mover that can go just about anywhere and perform capably on dirt trails and and slippery roads.
"It is a very special car for which its buyers receive applause from every fellow enthusiast," Dahnke told ABC News. "Everyone from Bugatti to R8 owners applaud your decision to buy an RS6 Avant Performance."
Mercedes-Benz recently said the 2026 E53 Hybrid wagon heads to U.S. dealers later this year. The company's last high-performance wagon, the E63 S, immediately won over wealthy enthusiasts' hearts and wallets. Mercedes is expecting a similar reaction to this model, which makes 577 hp from a turbocharged 3.0-liter inline-six and an electric motor.
"As a performance plug-in hybrid, it combines the best of both worlds: exhilarating driving dynamics and performance with the efficiency of all-electric driving for daily commutes," a Mercedes spokesperson told ABC News. "The wagon also benefits from the numerous advancements introduced with this new generation E-Class, including all-new electronic architecture, third-generation MBUX infotainment, greater connectivity and expanded comfort features."
The U.S. wagon market has been shrinking, however. Volvo recently ended production of its well-liked V60 Polestar Engineered plug-in wagon. The new Subaru Outback, which was unveiled at the New York International Auto Show in April, looks more like, well, an SUV.
But Tony Quiroga, editor-in-chief of Car and Driver, said the options available for this niche segment are "pretty cool."
"I think the RS6 Avant sort of proved that there is a market and BMW wants to tap into that," he told ABC News. "The M5 Touring is a halo car ... it's for the enthusiasts who maybe are disappointed that BMW built so many SUVs. A wagon works just as well as an SUV in so many cases. And it's more fun to drive."
Patrick Lalewicz, a product manager at BMW, acknowledged that BMW owners can get a thrill from other M vehicles on the market, like the M5 Sedan and X5M SUV. The M5 Touring, however, grabs all the attention.
"New and young customers coming into the brand with the M5 Touring," he told ABC News. "They car is so rare and sought after. Customers want something special."
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(NEW YORK) -- President Donald Trump's administration is set to begin collecting defaulted student loan payments next week -- which could harm the credit scores of millions of borrowers.
Roughly 5 million borrowers will have their university and college loans sent for collections beginning May 5, the Department of Education said last month.
When that happens, the borrowers' credit scores could be impacted, since ratings agencies are often alerted when collections ensue, experts told ABC News.
Hereâs what to know about the collections and what it could mean for borrowers' credit scores:
Why are the credit scores of some student loan borrowers at risk?
Student loan borrowers are considered delinquent if they fail to make a loan payment for 90 days. When late payment stretches on for a total of 270 days, then the borrower falls into default. When a federal student loan enters default, the government can send it for collections, garnishing wages or even taking money from Social Security payments or tax refunds.
The risk to borrowersâ credit scores dates back to policy decisions made when former President Joe Biden's administration resumed federal student loan payments after a period of relief that had been enacted during the COVID-19 pandemic.
When the Biden administration lifted the pause in the fall of 2023, the White House set in motion a 12-month moratorium. The administration did not count late payments toward delinquency. That moratorium ended in October -- meaning borrowers could be considered delinquent if they didn't make payments for more than 90 days, returning to the way the process worked pre-pandemic.
More than 9 million student loan borrowers will face âsignificant dropsâ in their credit score when delinquencies resume over the first half of 2025, the New York Federal Reserve found in March.
âThese credit score effects show up with delinquencies â thatâs when the credit score takes the hit,â Judith Scott-Clayton, a professor of economics and education at Teachers College, Columbia University, told ABC News.
Similarly, the Biden administration in 2023 initiated a one-year moratorium during which it would not report loan defaults to credit bureaus. That pause expired on Jan. 1.
Now, the Trump administration is set to begin collections on defaulted loans, causing further potential damage to credit scores, some experts told ABC News.
âThe longer you remain delinquent, that will compound,â Kate Wood, a writer and spokesperson at NerdWallet, told ABC News.
How much do late college loan payments hurt a borrowerâs credit score?
Late payments on a college loan can significantly hurt a borrowerâs credit score, studies show.
The New York Federal Reserve found student loan delinquency causes a borrower with a credit score of 760 points or higher to lose 171 points on average, according to a study of loan data between 2016 and 2019.
Subprime borrowers with credit scores at or below 620 lose on average 87 points in the event of a student loan delinquency, the study said.
âThe consequences are worse for those starting out with good credit scores,â Scott-Clayton said.
VantageScore, a credit-scoring system, said in February that late college loan payments can result in a credit score loss of up to 129 points. Student loan borrowers who make payments on time could see credit score increases of up to 8 points, VantageScore said.
What does a damaged credit score mean for borrowersâ finances?
Borrowers with lowered credit scores will face greater difficulty making big-ticket purchases like homes, cars or even refrigerators for which they may need to take out a loan, experts told ABC News.
When consumers with reduced credit scores seek a loan, they face higher interest rates as banks determine that the borrower risks an inability to repay.
âWeâre talking about a chunk of the population who wonât be able to buy a car because they wonât be able to get access to a car loan or it will be prohibitively expensive,â Kirabo Jackson, a professor of education and social policy at Northwestern University, told ABC News.
A lower credit score can even jeopardize an individualâs job prospects, since some employers check an applicantâs credit, Jackson said.
Some states restrict an employerâs ability to check an applicantâs credit, including California.
The damage to borrowerâs credit scores may cause a hiccup in the overall economy, since some individuals may forgo big purchases, Jackson said.
"Itâs not a huge effect for the economy but it certainly wonât be helpful," Jackson said. "And when you talk about the impact for the individuals, it will be quite considerable."
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(NEW YORK) -- Hiring slowed but remained robust in April following President Donald Trump's "Liberation Day" tariff announcement early last month, fresh data on Friday showed. The reading exceeded economists' expectations.
The U.S. added 177,000 jobs in April, according to data from the U.S. Bureau of Labor Statistics. That figure marked solid growth but a slowdown from 228,000 jobs added in the previous month. The unemployment rate stood unchanged at 4.2%, a historically low figure.
In a post on social media, President Donald Trump applauded the jobs data and touted his tariff policy.
"Weâre only in a TRANSITION STAGE, just getting started!!!" Trump said.
Trump called on the Federal Reserve to lower interest rates, criticizing the central bank weeks after saying he would welcome the "termination" of Fed Chair Jerome Powell.
The move marked the latest example of Trump exerting pressure on the Fed, despite a longstanding norm of political independence at the central bank. Last month, Powell pointed to solid economic performance as reason to take a patient approach as policymakers await the impact of tariffs.
The closely watched tariff announcement on April 2 triggered the biggest single-day stock market drop since the COVID-19 pandemic.
Days later, Trump suspended a major swathe of the tariffs, sending the market to one of its largest ever single-day increases. A simultaneous escalation of tariffs on Chinese goods kept the effective tariff rate at its highest level in more than a century, the Yale Budget Lab found.
The jobs data arrives days after a government report showed the U.S. economy shrank over the first three months of 2025, much of which took place as Trump's flurry of tariff proposals stoked uncertainty among businesses and consumers.
U.S. gross domestic product, or GDP, declined at a 0.3% annualized rate over three months ending in March, according to government data released on Wednesday. The figure marked a sharp dropoff from 2.4% annualized growth over the final three months of 2024.
Despite flagging consumer sentiment and market turmoil, the labor market has provided a bright spot since Trump took office. The U.S. has added a robust average of 170,000 jobs each month this year, while the unemployment rate has remained low.
Meanwhile, inflation cooled in March, putting price increases well below a peak attained in 2022, data showed.
Still, recession fears are mounting on Wall Street as Trump's tariffs threaten to upend global trade. Goldman Sachs earlier this month hiked its odds of a recession from 35% to 45%. JPMorgan pegged the probability of a recession this year at 60%.
Speaking at the Economic Club of Chicago earlier this month, Fed Chair Jerome Powell acknowledged the "solid condition" of the U.S. economy, but he cautioned about signals of a potential slowdown.
"Life moves pretty fast," Powell said.
For its part, the Trump administration has largely refused to rule out the possibility of a recession. Trump has vowed to strike new agreements with many U.S. trade partners, predicting the U.S economy may suffer short-term pain but will ultimately flourish under a more favorable set of international rules.
"We have been ripped off by every country in the world practically. And friend and foe," Trump told reporters in the Oval Office last month. "We're not doing that anymore."
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(WASHINGTON) -- Government data to be released on Wednesday is expected to show a sharp economic slowdown over the initial months of President Donald Trumpâs second term as a flurry of tariff proposals stoked uncertainty among businesses and consumers, analysts told ABC News.
The measure of gross domestic product, or GDP, will likely be lowered by a surge of imports as firms stockpiled inventory to avoid far-reaching tariffs, though the trend did not reflect economic weakness, analysts said.
The governmentâs GDP formula subtracts imports from exports in an effort to exclude foreign production from the calculation of total goods and services.
The report will detail GDP over the first three months of 2025, offering the first look at a top gauge of economic health since Trump took office.
The data covers a period before the so-called Liberation Day tariffs went into effect in early April.
Analysts widely expect a steep decline in economic performance at the outset of this year, though they disagree over the severity of the slowdown.
Some analysts believe the data will show the U.S. economy tipped into a contraction over the most recent quarter, which would likely intensify warnings on Wall Street about a possible recession.
Bank of America Global Research and BNP Paribas both expect the economy to have grown at an annualized rate of 0.4% over a three-month stretch at the start of 2025, which would mark a sharp decline from a rate of 2.4% at the end of last year.
S&P Global Ratings expects the data to show the economy contracted at an annualized rate of 0.3% at the outset of this year. A forecast from the Federal Reserve Bank of Atlanta, which excludes gold imports, shows the economy shrank at a 1.5% annualized rate.
âWe anticipate a marked slowdown in the U.S. economy during the first quarter, driven by increasing policy uncertainty surrounding trade, tariffs, and immigration,â S&P Global Ratings said in a note to clients.
The data may be skewed by a flood of imports as companies sought to circumvent tariffs, S&P Global Ratings said. The GDP measure deducts imports to exclude foreign-made goods and services, so a one-time import surge could blur the finding.
âThe first-quarter GDP reading may not provide an accurate reflection of underlying economic conditions because it's significantly influenced by the frontloading of imports,â S&P Global Ratings said.
Many observers define a recession through the shorthand metric of two consecutive quarters of decline in a nationâs inflation-adjusted GDP. The National Bureau of Economic Research, a research organization tasked with formally identifying a recession, uses a more complicated definition that draws on a range of indicators.
Despite flagging consumer sentiment and ongoing market turmoil, some key measures of the economy remain fairly strong.
The unemployment rate stands at a historically low level and job growth remains robust, though it has slowed from previous highs. Meanwhile, inflation cooled in March, putting price increases well below a peak attained in 2022, data showed.
The sturdy data offers at best partial reassurance, some economists previously told ABC News.
Measures of the economy like inflation and hiring are released one month after the data is gathered, and they often reflect slow-moving shifts in business or consumer behavior, the economists said. As a result, such measures can prove outdated, especially when the economy is in flux.
Speaking at the Economic Club of Chicago earlier this month, Fed Chair Jerome Powell acknowledged the âsolid conditionâ of the U.S. economy, but he cautioned about signals of a potential slowdown.
âLife moves pretty fast,â Powell said.
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(WASHINGTON) -- President Donald Trump is set to provide tariff relief for carmakers on Tuesday, just weeks after the onset of auto levies triggered warnings of price increases.
An administration official confirmed that the 25% tariff on finished foreign-made cars and parts will remain -- but today's announcement will prevent tariffs from stacking on top of other tariffs he's imposed, such as duties on steel and aluminum.
Trump's 25% tariff on foreign auto parts goes into effect on Saturday and automakers will also be reimbursed for those tariffs up to an amount equal to 3.75% of the value of a U.S.-made car for one year. Reimbursement would fall to 2.5% of the car's value in a second year, and then completely phased out altogether.
Speaking at the White House on Tuesday, Treasury Secretary Scott Bessent touted the tariff adjustment as a means of ensuring carmakers bring manufacturing to the U.S.
"President Trump has had meetings with both domestic and foreign auto producers, and he's committed to bring back auto production to the US. We want to give the automakers a path to do that quickly, efficiently and create as many jobs as possible," Bessent said.
Trump is expected to deliver remarks about the policy change in Michigan on Tuesday. Details of the plan were first reported in the Wall Street Journal.
U.S. automakers on Tuesday applauded the easing of tariffs.
"Ford welcomes and appreciates these decisions by President Trump, which will help mitigate the impact of tariffs on automakers, suppliers and consumers," Ford told ABC News in a statement.
GM also voiced praise for the move. "We're grateful to President Trump for his support of the U.S. automotive industry and the millions of Americans who depend on us. We believe the President's leadership is helping level the playing field for companies like GM and allowing us to invest even more in the U.S. economy," the company told ABC News in a statement.
The 25% tariff on imported cars took effect on April 3. It applies to an array of passenger vehicles, including cars, SUVs, minivans, cargo vans and light trucks.
The tariffs will almost certainly raise foreign-made car prices, experts previously told ABC News, since importers typically pass along a share of the tax burden to consumers in the form of extra costs.
The policy change offers automakers a chance to relocate their manufacturing, Commerce Secretary Howard Lutnick told ABC News in a statement.
"This deal is a major victory for the President's trade policy by rewarding companies who manufacture domestically, while providing runway to manufacturers who have expressed their commitment to invest in America and expand their domestic manufacturing," Lutnick said.
The move aims to give automakers an opportunity to move their supply chains for parts back to the U.S.
"President Trump is building an important partnership with both the domestic automakers and our great American workers," Lutnick also said in the statement.
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(WASHINGTON) -- A marketing email distributed this month by Trump Coins, a commemorative coin venture launched last year by President Donald Trump, attributes the soaring value of gold and other metals in recent weeks to the president's "return to the spotlight."
"President Trump's bold stance on tariffs, American industry, and economic protection is pushing investors out of risky fiat and back into safe-haven metals," the marketing email reads. "Confidence in strong U.S. leadership is driving real demand."
But some experts assert that the sudden surge in gold reflects not "strong U.S. leadership" or "Trump's ongoing momentum," as Trump Coins frames it -- but instead a consequence of financial uncertainty inspired by Trump's erratic economic policies, including his commitment to impose widespread tariffs on nearly all U.S. trading partners.
The premise that rising gold prices evince a thriving U.S. economy runs "completely contrary to reality," said Paolo Pasquariello, a finance professor at the Ross School of Business at the University of Michigan.
Experts who ABC News spoke with said that the value of gold often rises in times of economic turmoil, particularly during trade wars or anticipated inflation.
"The fact that gold prices are going up right now sends as strong a message of displeasure with President Trump's economic policies as I can think of," Pasquariello said.
In the weeks since Trump's self-styled "Liberation Day" -- when he announced a sweeping set of tariffs -- gold has notched several record highs. This week, the price of gold surpassed $3,500 per ounce for the first time.
Meanwhile, markets have tumbled in recent weeks, and the International Monetary Fund warned Tuesday that "escalating trade tensions" have dimmed "both short-term and long-term growth prospects."
On April 16, when Trump Coins sent the marketing email lauding "another new record" for gold, it said the reason "isn't just economic -- it's political."
"Trump's return to the spotlight is reigniting belief in real value and asset-based security," the email said. "Central banks are stockpiling, buyers are doubling down, and Trump's ongoing momentum keeps pushing metals forward."
But experts said that skyrocketing gold prices have often been linked to periods of instability -- offering the 2008 financial crisis and, more recently, Russia's invasion of Ukraine as examples.
Despite its volatility, gold is "the quintessential safe-haven asset" in times of economic uncertainty, said Campbell Harvey, a professor of finance at Duke University's Fuqua School.
Another explanation cited by experts for the precipitous rise in gold is that Trump's policies have shaken confidence in some of the top alternative safe-haven assets: the U.S. dollar and U.S. Treasury bonds. Depreciation in the value of the U.S. dollar and volatility in Treasury yields have made gold more attractive as investors look for a safe haven, experts said.
Trump Coins frames itself as "the only medallions authorized and endorsed/designed by President Trump himself." The commemorative coins, which include gold and silver busts of Trump, emerged during the 2024 presidential campaign as one of several merchandising ventures Trump profited from -- a list that also included watches, sneakers, bibles and guitars.
After his 2024 triumph, Trump unveiled a one-ounce "Victory Gold Medallion" -- with the president's face and signature pressed in solid gold -- for $3,645.47, a thousand-dollar upcharge compared to the price of an ounce of gold at the time. The "Victory Gold Medallion" now retails for more than $4,628, an increase of nearly $1,000 since late November and more than $1,300 higher than the current market price of an ounce of gold.
Details about the terms of Trump's agreements with the merchandise company that sells his coins, JBCZ Group LLC, are not public. But experts said Trump has likely profited handsomely from this venture in light of gold's precipitous rise.
As an investment strategy, experts say that other forms of gold may perform better in the long-run than Trump-branded coins.
"If you want to invest in gold, it's best to actually use an ETF," said Harvey, referring to a security that allows investors to invest in an underlying asset without purchasing that asset. In contrast, solid gold bars -- or Trump Coins -- are more difficult to sell, Harvey explained, and "that means when you sell, you sell it at a discount."
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