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Mexico, Canada tariffs could add $6,000 to the cost of a car, by one estimate

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In an aerial view, Chevrolet cars and trucks are on display at Novato Chevrolet on Jan. 28, 2025 in Novato, California.

Justin Sullivan | Getty Images

Americans shopping for cars may need to fork over thousands more if President Donald Trump’s proposed tariffs go into effect, according to data from investment bank Benchmark Co.

Analyst Cody Acree estimated that the average sticker price would rise about $5,790, based on the impact of the currently paused 25% levies on cars and components from Mexico and Canada. That would raise the cost of an average new car above $54,500, or nearly 12% higher than in 2024.

“We believe the Auto sector is the most exposed to the risks of increased tariffs,” Acree wrote in a note to clients, “given its sheer size of trade dollars, the complexity of the intertwined supply and manufacturing channel that has been cultivated over decades, and the sheer number of our companies that participate in support of this key consumer industry.”

Trump slapped 25% tariffs on Canada and Mexico at the start of February, briefly rocking markets, but later suspended the duties for one month after reaching tentative agreements with Prime Minister Justin Trudeau and President Claudia Sheinbaum.

Now, consumers and investors alike wonder what form tariffs will take, or if they’ll go into effect at all. Benchmark calculated what 25% levies would mean for the average American’s buying power on a popular big-ticket purchase.

Benchmark’s estimated higher costs for a car is based on more than 22% of finished automobiles sold in the U.S. coming from Mexico and Canada last year. On top of that, the firm said about 40% of parts used in vehicles also come to America from its North American partners.

That amounts to more than $200 billion worth of exports to America last year. Specifically, Acree found that Mexico supplied $95 billion in completed cars to the U.S., in addition to $68 billion in parts in 2024. Canada provided more than $36 billion worth of finished cars and nearly $16 billion in components.

During an industry event this week, Ford Motor CEO Jim Farley said Trump’s proposed tariffs on Canada and Mexico, combined with 25% fees on steel and aluminum imports, have created headaches.

“President Trump has talked a lot about making our U.S. auto industry stronger, bringing more production here, more innovation in the U.S., and if his administration can achieve that, it would be one of … the most signature accomplishments,” Farley said during a Wolfe Research investment conference. “So far what we’re seeing is a lot of cost, and a lot of chaos.”

— CNBC’s Michael Wayland contributed to this report.

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Why the president must not be lexicographer-in-chief

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Who decides what legal terms mean? If it is Donald Trump, God help America

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Economics

Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

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Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

Inflation barely budged in April as tariffs President Donald Trump implemented in the early part of the month had yet to show up in consumer prices, the Commerce Department reported Friday.

The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%. The monthly reading was in line with the Dow Jones consensus forecast while the annual level was 0.1 percentage point lower.

Excluding food and energy, the core reading that tends to get even greater focus from Fed policymakers showed readings of 0.1% and 2.5%, against respective estimates of 0.1% and 2.6%.

Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, in line with the consensus but slower than the 0.7% rate in March. A more cautious consumer mood also was reflected in the personal savings rate, which jumped to 4.9%, up from 0.6 percentage point in March to the highest level in nearly a year.

Personal income surged 0.8%, a slight increase from the prior month but well ahead of the forecast for 0.3%.

Markets showed little reaction to the news, with stock futures continuing to point lower and Treasury yields mixed.

People shop at a grocery store in Brooklyn on May 13, 2025 in New York City.

Spencer Platt | Getty Images

Trump has been pushing the Fed to lower its key interest rate as inflation has continued to gravitate back to the central bank’s 2% target. However, policymakers have been hesitant to move as they await the longer-term impacts of the president’s trade policy.

On Thursday, Trump and Fed Chair Jerome Powell held their first face-to-face meeting since the president started his second term. However, a Fed statement indicated the future path of monetary policy was not discussed and stressed that decisions would be made free of political considerations.

Trump slapped across-the-board 10% duties on all U.S. imports, part of an effort to even out a trading landscape in which the U.S. ran a record $140.5 billion deficit in March. In addition to the general tariffs, Trump launched selective reciprocal tariffs much higher than the 10% general charge.

Since then, though, Trump has backed off the more severe tariffs in favor of a 90-day negotiating period with the affected countries. Earlier this week, an international court struck down the tariffs, saying Trump exceeded his authority and didn’t prove that national security was threatened by the trade issues.

Then in the latest installment of the drama, an appeals court allowed a White House effort for a temporary stay of the order from the U.S. Court of International Trade.

Economists worry that tariffs could spark another round of inflation, though the historical record shows that their impact is often minimal.

At their policy meeting earlier this month, Fed officials also expressed worry about potential tariff inflation, particularly at a time when concerns are rising about the labor market. Higher prices and slower economic growth can yield stagflation, a phenomenon the U.S. hasn’t seen since the early 1980s.

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German inflation May 2025

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19 May 2025, Berlin: Apricots are sold at a greengrocer for 7.98 euros per kilogram. Grapes and papaya are also on offer.

Photo by Jens Kalaene/picture alliance via Getty Images

Germany’s annual inflation hit 2.1% in May approaching the European Central Bank’s 2% target but coming in slightly hotter than analyst estimates, preliminary data from statistics office Destatis showed Friday.

The print compares with a 2.2% reading in April and with a Reuters projection of 2%.

The print is harmonized across the euro zone for comparability.

So-called core inflation, which strips out more volatile food and energy prices, dipped slightly from April’s 2.8% to 2.9% in May. The closely watched services print meanwhile eased sharply, coming in at 3.4% compared to 3.9% in the previous month.

Energy prices fell markedly for the second month in a row, tumbling by 4.6% in May.

Germany’s consumer price index has been closing in on the European Central Bank’s 2% target over recent months, in a positive signal amid ongoing uncertainty about the economic outlook for Europe’s largest economy.

Domestic and global issues have mired expectations for Germany’s financial future.

One the one hand, U.S. President Donald Trump’s tariffs could damage economic growth, given Germany’s status as an export-reliant country, though the potential impact of such duties on inflation remains unclear. But frequent policy shifts and developments have been muddying the picture.

On the other hand, Germany’s newly minted government is starting to get to work and has made the economy a top priority. Questions linger about when and to what extent the new Berlin administration’s policy plans might be realized.

The ECB is set to make its next interest rate decision on June 5, with traders last pricing in an over 96% chance of a quarter point interest rate reduction, according to LSEG data. Back in April, the central bank had cut its deposit facility rate by 25 basis points to 2.25%.

This is a breaking news story, please check back for updates.

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