Trump considers pausing auto tariffs; Inflation concerns rise; Wholesale prices drop

President Donald Trump said he is exploring possible exemptions from his 25% tariffs on the auto industry to give carmakers more time to set up U.S. manufacturing.

“I’m looking at something to help some of the car companies, where they’re switching to parts that were made in Canada, Mexico and other places,” Trump told reporters Monday during a briefing in the Oval Office. “They need a little bit of time because they’re going to make them here.”

The potential relief comes amid warnings by analysts that the tariffs that went into effect April 3 could add thousands of dollars to car prices, causing a large drop in vehicle sales this year.

U.S. automakers could see costs increase by $107.7 billion, with the big three U.S. manufacturers, General Motors, Ford and Stellantis, paying nearly $42 billion, according to a new report by the Center for Automotive Research, an Ann Arbor, Michigan-based industry research group.

Slowing auto sales in the second half of this year could lead to a seasonally adjusted annual rate of 15.4 million U.S. auto sales this year, down from 16 million in 2024, according to a Deutsche Bank analysis reported in the Wall Street Journal. Ford and GM could see a gross cost increase of more than $10 billion, based on a 25% tariff on all imported vehicles and auto parts, according to a note by Deutsche Bank analyst Edison Yu.

A new survey by the Federal Reserve Bank of New York showed that consumers expect inflation to surge and the employment market to soften as tariffs take effect.

Inflation expectations for the year ahead rose 0.5 percentage points to 3.6% in March, the highest level and biggest monthly increase since 2023, according to the New York Fed's latest monthly Survey of Consumer Expectations.

However, in a sign that consumers expect the rise in prices to be short-lived, inflation expectations remained unchanged at 3% over the next three years, and dropped slightly to 2.9% looking out to the next five years, according to the survey.

The probability that the unemployment rate will be higher a year from now surged to 44% in March — the highest reading since April 2020, during the onset of the pandemic — and an increase of 4.6 percentage points from February. The outlook for higher food prices a year from now increased to 5.2%, its highest since May of 2024. Expectations for higher rent a year from now also increased.

U.S. wholesale costs for goods and services dropped for the first time in 17 months in March in another sign of easing inflation ahead of effects of the Trump administration’s tariffs.

The Producer Price Index, a measurement of wholesale inflation in goods and services before they reach consumers, fell 0.4% from February, the first decrease in the index since October 2023, according to Labor Department numbers.

Gasoline prices fell just over 11% in March from the previous month, and egg prices — which have skyrocketed in recent months as a result of bird flu outbreaks — fell more than 21%, according to the report.

The better-than-expected wholesale inflation numbers come as some economists have warned that Trump's trade war, including retaliatory tariffs launched by the United States and China, could drive wholesale and consumer prices up again in coming months.

“This good news will not last very long,” Carl Weinberg, chief economist at High Frequency Economics, wrote in an analysis on Friday, adding that tariffs will boost prices and that those effects "will be visible in April data due for release on May 15."