President Donald Trump’s aggressive new trade policies—designed to bolster domestic manufacturing—are hitting Ford Motor Company harder than many anticipated. Despite building roughly 80% of the vehicles it sells in the U.S. domestically, Ford is projecting a net $2 billion tariff-related drag on earnings for 2025, up from a prior estimate of $1.5 billion.
Big Three Automakers Earnings Loss – 3D Chart
Big Three to Lose $7 Billion in Earnings
Ford, GM, and Stellantis—the so-called Big Three—now expect a combined $7 billion earnings hit this year
3D column chart showing earnings losses for Big Three automakers: Ford $2 billion, GM $3.5 billion, Stellantis $1.5 billion, totaling $7 billion in losses.
Despite its domestic-heavy production footprint, Ford isn’t insulated. It reported an $800 million tariff hit in Q2, contributing to a net loss of $36 million, and revised its full‑year earnings forecast to $6.5 billion–$7.5 billion, down from previous guidance of $7.0 billion–$8.5 billion.
Made-in-America Isn’t Enough
Even though Ford produces nearly four in five U.S.-sold vehicles locally, much of its parts and materials—like steel, aluminum, and EV components—are sourced internationally. Under the White House’s new trade regime:
Foreign-made vehicle imports face new 25% tariffs, while automakers allied with USMCA countries can benefit from reduced levies as long as supplier sourcing meets content rules.
CEO Jim Farley warned the tariffs could “blow a hole in the U.S. industry” and force difficult choices in product planning and pricing strategy.
Thanks to trade agreements with the EU, Japan, and South Korea, many foreign automakers now pay only 15% tariffs, significantly less than the 25% levied on imports from Canada and Mexico or on non‑compliant parts.
Stellantis CEO Antonio Filosa noted that 8 million of the 16 million vehicles sold annually in the U.S.—made in Mexico or Canada with many U.S. components—now face higher tariffs than fully compliant imports from abroad.
In Q1 2025, Ford’s revenue declined 5% to $40.7 billion but still beat expectations, and net income dropped from $1.3 billion to $471 million.
Offset strategies include:
Transporting compliant vehicles from Mexico through bonded channels to avoid tariffs
Halting exports to China
Implementing internal cost reductions totaling about $1 billion planned for 2025
As of late July, Ford reinstated full‑year guidance, projecting $6.5 billion–$7.5 billion in adjusted EBIT, and affirmed $2 billion in tariff-related costs for the year.
Big Three Carmakers Earnings – Accurate Data
Analysts predict lower earnings at the Big Three carmakers
General Motors
Ford
Stellantis
Bar chart showing Big Three automakers’ net income from 2018 to 2026, with actual data through 2023 and analyst forecasts for 2024-2026.
A recent study estimates the entire auto industry could incur up to $108 billion in tariff costs, with the Big Three alone losing roughly $41.7 billion in 2025. Bernstein analysts forecast up to a 60% decline in free cash flow for the trio, due to rising production costs and shrinking margins.
Consumer pricing will likely rise: average new vehicle prices could increase by 4–8% by year-end, with some models seeing hikes up to $2,000, driven by imported parts tariffs and material cost inflation.
US Car Sales by Assembly Location
On average only half the cars sold in America are made there
US car sales by country of assembly % (US companies starred)
US
Canada/Mexico
Imported
020406080100
Horizontal stacked bar chart showing percentage of US car sales by assembly location for different manufacturers. US companies are marked with asterisks.
Ford’s commitment to “Made in America” now looks paradoxical. The company is suffering disproportionately from a tariff regime meant to favor U.S. businesses—because its deep integration with global parts supplies exposes it to amplified cost burdens. Farley’s characterization of Ford as “the most American company with a $2 billion liability” captures the irony and urgency of the moment.
Unless Washington revises or harmonizes its trade policies—particularly with key neighbors Mexico and Canada—the pain for Ford and its peers could deepen. Meanwhile, international competitors may seize market share just as consumer prices edge upward.
The U.S. labor market stumbled over the summer as job creation slowed sharply and previously reported figures were revised downward, raising fresh concerns about the momentum of the economic recovery amid rising trade tensions and policy uncertainty.
According to the Labor Department’s latest employment report released Friday, nonfarm payrolls increased by just 73,000 in July, a figure well below economist forecasts and the weakest showing since January. Compounding the disappointment, the job numbers for May and June were drastically revised—May’s gain was slashed from 144,000 to 19,000, and June’s from 147,000 to 14,000.
The three-month average gain now stands significantly below the 150,000 threshold, a sign of a cooling labor market. July’s job growth also fell short of the median estimate of 110,000 in a Reuters survey, where forecasts ranged from no change to 176,000 new jobs.
Unemployment Rate Rises as Tariff Uncertainty Bites
The unemployment rate edged back up to 4.2% in July from 4.1% in June, still within the narrow 4.0%–4.2% range prevailing since mid-2024. However, economists warned that the figure masks deeper structural issues, including a shrinking labor force due to immigration curbs and accelerating baby boomer retirements.
“We’re seeing growing anecdotal and survey evidence that employers have tapped the brakes on hiring,” said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets. “There’s policy uncertainty everywhere—tariffs, immigration, education spending, government layoffs—and it’s chilling business planning.”
The July slowdown follows a temporary hiring surge in June, largely attributed to a seasonal spike in state and local education employment. Economists now view that bump as a one-off anomaly that masked the broader slowdown in hiring.
Tariffs and Fed Policy Cast Shadows
The labor market report comes on the heels of a flurry of trade moves from President Donald Trump. On Thursday, the administration imposed steep tariffs on dozens of trading partners, including a 35% duty on many Canadian goods, just ahead of a Friday trade deal deadline. This escalation has stoked inflation fears and increased business uncertainty.
“The tariffs are now starting to bite into both margins and long-term planning,” said Michael Reid, senior U.S. economist at RBC Capital Markets. “Until firms know their cost structure, they’re hesitant to expand.”
Meanwhile, the Federal Reserve left its benchmark rate unchanged at 4.25%–4.50% on Wednesday and signaled a cautious tone on future policy moves. Fed Chair Jerome Powell acknowledged “downside risks” in the labor market but offered no hints of a near-term rate cut.
“The July jobs report is unlikely to shake the Fed out of its ‘wait-and-see’ posture,” said Gregory Daco, chief economist at EY-Parthenon. “But it will add further evidence that the labor market is gradually losing momentum.”
Financial markets, which had been pricing in a potential rate cut in September, have now pushed expectations to October or later, especially with inflation heating up from rising import costs. However, some analysts say the Fed could still be forced to act if upcoming data—including September’s payrolls benchmark revisions—reveal deeper labor market cracks.
“If it’s an ugly downward revision, the Fed will move—there is no question,” said Brian Bethune, an economics professor at Boston College.
The slowdown in job growth also arrives at a politically sensitive moment. With the 2026 midterm campaign season looming, both parties are expected to weaponize the data. Republicans are expected to double down on tariffs and “America First” rhetoric, while Democrats may lean into social safety nets and wage support.
Though not yet a labor recession, the data reflect a marked deceleration in hiring and economic activity. Businesses are navigating uncharted waters—supply chain volatility, tariff unpredictability, and geopolitical tensions—while the Fed remains on pause.
For now, job growth of 100,000 or less may be enough to maintain labor market equilibrium, given tighter immigration flows and demographic headwinds. But that lower “breakeven” threshold is little comfort to workers or businesses hoping for a rebound.
“This is not a collapse,” said Stanley. “But it’s a slowdown with no clear end in sight.”
WASHINGTON – The U.S. central bank held interest rates steady on Wednesday and Federal Reserve Chair Jerome Powell’s comments after the decision undercut confidence that borrowing costs would begin to fall in September, possibly stoking the ire of President Donald Trump who has demanded immediate and steep rate relief.
Powell said the Fed is focused on controlling inflation – not on government borrowing or home mortgage costs that Trump wants lowered – and added that the risk of rising price pressures from the administration’s trade and other policies remains too high for the central bank to begin loosening its “modestly restrictive” grip on the economy until more information is collected.
While there will be two full months of data before the Fed’s September 16-17 meeting, Powell said the central bank was still in the early stages of understanding how Trump’s rewrite of import taxes and other policy changes will unfold in terms of inflation, jobs and economic growth.
“You have to think of this as still quite early days,” Powell said in a press conference after the release of the Fed’s latest policy statement. “There’s quite a lot of data coming in before the next meeting. Will it be dispositive? … It is really hard to say.”
Stock Widget
Those comments, and others that placed the burden on upcoming data to convince policymakers that lower rates were warranted, led investors to reduce the probability of a rate cut in September to less than 50%, after entering this week’s two-day Fed meeting at nearly 70%. Treasury yields rose while the S&P 500 .SPX -0.15% ▼ and Dow Jones Industrial Average .DJI -0.08% ▼ equities indexes closed marginally lower.
Powell “made clear that he thinks the Fed has room to hold the fed funds rate steady for a period of time and wait and see how much tariffs affect inflation,” said Bill Adams, chief economist at Comerica Bank, projecting that the central bank won’t cut rates until its last meeting of the year in December.
“If the unemployment rate holds steady and tariffs push up inflation, it will be hard to justify a rate cut in the next few months.”
The latest policy decision was made by a 9-2 vote, what passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.
Trump has given Powell the pejorative nickname “Too Late” for his refusal to cut rates, but the Fed chief on Wednesday said his hope was to be right on time when the decision is made to lower borrowing costs, neither moving so soon that inflation reemerges, or waiting so long that the job market slides and the unemployment rate rises. Indeed, Powell said the fact that the Fed isn’t discussing rate hikes could be seen as a willingness to overlook some of the expected impact of tariffs.
“If you move too soon, you wind up not getting inflation all the way fixed … That’s inefficient,” Powell told reporters. “If you move too late, you might do unnecessary damage to the labor market … In the end, there should be no doubt that we will do what we need to do to keep inflation controlled. Ideally, we do it efficiently.”
The data since the Fed’s June 17-18 meeting has given policymakers little reason to shift from the “wait-and-see” approach they have taken on interest rates since Trump’s January 20 inauguration raised the possibility that new import tariffs and other policy shifts could put upward pressure on prices.
Inflation is about half a percentage point above the Fed’s 2% target and has shown signs of increasing as prices of some heavily imported goods begin to rise, a process Powell said is expected to continue. As of June, Fed policymakers at the median expected inflation to rise further and end the year at about 3%.
New inflation data for June will be released on Thursday, and a key jobs report for the month of July will follow on Friday, part of the data Powell said policymakers will evaluate as they debate a possible rate cut in September.
Earlier on Wednesday, the U.S. government reported that economic growth rebounded more than expected in the second quarter, but declining imports accounted for the bulk of the improvement and domestic demand rose at its slowest pace in 2-1/2 years.
A line chart showing the benchmark interest rate set by the Federal Open Market Committee
‘THOUGHTFULLY ARGUED’
Along with Powell’s comments, the Fed’s new policy statement also gave little hint that rates were likely to fall soon, particularly with an unemployment rate that has stabilized around 4% as weaker hiring trends are offset by slowing growth in the labor force due to Trump’s immigration policies.
“The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated,” the central bank said after voting to keep its benchmark overnight interest rate steady in the 4.25%-4.50% range for the fifth consecutive meeting.
The two dissents came from Fed Vice Chair for Supervision Michelle Bowman and Governor Christopher Waller, who has been mentioned as a possible nominee to replace Powell when the Fed chief’s term expires next May. Bowman and Waller, both appointed to the board by Trump, “preferred to lower the target range for the federal funds rate by one quarter of a percentage point at this meeting,” the Fed’s policy statement said.
Powell characterized their opposition to the policy decision as part of a debate that was “argued, very thoughtfully … all around the table,” but with a majority of policymakers still reluctant to cut rates without more inflation data in hand.
A bipartisan figure who was appointed to the Fed’s board by former President Barack Obama and later promoted to the top job by Trump, Powell voted to hold rates steady, as did three other governors and the five Fed regional bank presidents who currently hold a vote on the FOMC. The Fed’s regional bank presidents are hired by local boards of directors who oversee the Fed’s 12 regional institutions.
Governor Adriana Kugler was absent and did not vote.
Dissenting members of the FOMC often release statements explaining their vote on the Friday following Fed meetings.
WASHINGTON, D.C. — The Federal Reserve held interest rates steady Wednesday for the fifth consecutive meeting, but signs of growing division within the central bank emerged as two officials dissented in favor of a rate cut, underscoring increasing uncertainty over the path forward amid rising geopolitical tensions and trade policy concerns.
The Federal Open Market Committee (FOMC) maintained its benchmark federal funds rate at a range of 5.25% to 5.50%, the highest level in over two decades. But for the first time in over a year, the vote was not unanimous: Dallas Fed President Lori Logan and Chicago Fed President Austan Goolsbee broke ranks, citing growing risks from weakening consumer demand and escalating tariffs on Chinese and European imports.
“The labor market remains strong and inflation has eased notably,” the Fed said in its statement. “However, the Committee remains highly attentive to inflation risks.” Yet the statement notably softened language about future tightening, opening the door to potential rate cuts if economic conditions deteriorate.
The dual dissents highlight what analysts are calling a “fraying consensus” inside the Fed, as policymakers weigh competing risks: on one hand, stubborn core inflation that has remained above the Fed’s 2% target, and on the other, a slowing economy compounded by new import tariffs that could dampen spending and business investment.
“These are not just marginal disagreements,” said Dana Peterson, chief economist at The Conference Board. “This is a fundamental debate over how much tariffs will drive inflation versus how much they will hurt growth. The balance is tricky.”
In recent weeks, the Biden administration has rolled out a fresh wave of trade penalties on strategic imports from China—particularly in EVs, solar panels, and critical minerals—and hinted at potential levies on select European goods. While designed to bolster domestic industry, the tariffs are expected to raise input costs for manufacturers and consumers.
Data released earlier this month showed that second-quarter GDP grew at a modest annualized rate of 1.2%, a deceleration from the 1.9% seen in Q1. Meanwhile, the Fed’s preferred inflation measure—the core personal consumption expenditures (PCE) index—was flat in June, holding at 2.8% year-over-year.
Although inflation has cooled significantly from its 2022 peak, officials remain divided over whether it has moderated enough to justify rate reductions. “The Fed is walking a tightrope,” said Sarah House, a senior economist at Wells Fargo. “They want to support growth, but they don’t want to repeat the mistakes of the 1970s by cutting too soon.”
Chair Jerome Powell, speaking at a press conference following the decision, emphasized that the Fed remains data-dependent but acknowledged that the case for rate cuts is growing stronger.
“If we see more evidence that inflation is moving sustainably toward 2%, and if labor market conditions continue to evolve gradually, then a policy adjustment would be appropriate,” Powell said. “But we are not there yet.”
Markets React with Caution
Federal Funds Rate Chart
Federal-funds rate target
Note: Chart shows midpoint of target range since 2008.
Line chart showing Federal funds rate target from 2000 to 2025, ranging from 0% to 7%.
Financial markets responded cautiously to the decision. The S&P 500 closed flat, while the yield on the 10-year Treasury note dipped slightly to 4.21%. Futures markets now see a 52% chance of a rate cut at the Fed’s September meeting, up from 38% last week, according to CME FedWatch data.
Investors remain on edge over the policy outlook, with many anticipating at least one rate cut before the end of the year. But the Fed’s internal disagreements signal a more complex road ahead.
“The Fed is no longer speaking with one voice,” said Julia Coronado, a former Fed economist now at MacroPolicy Perspectives. “This is the beginning of a broader debate—not just on rates, but on how the Fed should respond to trade-driven inflation and a more fractured global economy.”
All eyes now turn to the Fed’s Jackson Hole symposium in late August, where Powell is expected to outline the central bank’s evolving approach. Analysts expect the Chair to strike a balanced tone, reaffirming inflation vigilance while acknowledging the shifting economic landscape.
“Powell will try to bring the committee back toward a unified message,” said Coronado. “But that’s harder to do when growth is slowing, inflation is sticky, and trade tensions are rising.”
As the Fed grapples with its next steps, one thing is clear: The era of near-lockstep policymaking may be giving way to a period of internal debate—and a less predictable path ahead for rates, markets, and the U.S. economy.
WASHINGTON, D.C. — The United States will impose a 25% tariff on goods from India, plus an additional import tax because of India’s purchasing of Russian oil, President Donald Trump said Wednesday.
India “is our friend,” Trump said on his Truth Social platform, but its tariffs on U.S. products “are far too high.”
The Republican president added India buys military equipment and oil from Russia, enabling Moscow’s war in Ukraine. As a result, he intends to charge an additional “penalty” starting on Friday as part of the launch of his administration’s revised tariffs on multiple countries.
Trump told reporters on Wednesday the two countries were still in the middle of negotiations on trade despite the tariffs slated to begin in a few days.
“We’re talking to India now,” the president said. “We’ll see what happens.”
The Indian government said Wednesday it’s studying the implications of Trump’s tariffs announcement.
India and the U.S. have been engaged in negotiations on concluding a “fair, balanced and mutually beneficial” bilateral trade agreement over the last few months, and New Delhi remains committed to that objective, India’s Trade Ministry said in a statement.
Trump’s view on tariffs
Trump’s announcement comes after a slew of negotiated trade frameworks with the European Union, Japan, the Philippines and Indonesia — all of which he said would open markets for American goods while enabling the U.S. to raise tax rates on imports. The president views tariff revenues as a way to help offset the budget deficit increases tied to his recent income tax cuts and generate more domestic factory jobs.
While Trump has effectively wielded tariffs as a cudgel to reset the terms of trade, the economic impact is uncertain as most economists expect a slowdown in U.S. growth and greater inflationary pressures as some of the costs of the taxes are passed along to domestic businesses and consumers.
There’s also the possibility of more tariffs coming on trade partners with Russia as well as on pharmaceutical drugs and computer chips.
Kevin Hassett, director of the White House National Economic Council, said Trump and U.S. Trade Representative Jamieson Greer would announce the Russia-related tariff rates on India at a later date.
Tariffs face European pushback
Trump’s approach of putting a 15% tariff on America’s long-standing allies in the EU is also generating pushback, possibly causing European partners as well as Canada to seek alternatives to U.S. leadership on the world stage.
French President Emmanuel Macron said Wednesday in the aftermath of the trade framework that Europe “does not see itself sufficiently” as a global power, saying in a cabinet meeting that negotiations with the U.S. will continue as the agreement gets formalized.
“To be free, you have to be feared,” Macron said. “We have not been feared enough. There is a greater urgency than ever to accelerate the European agenda for sovereignty and competitiveness.”
Seeking a deeper partnership with India
Washington has long sought to develop a deeper partnership with New Delhi, which is seen as a bulwark against China.
Indian Prime Minister Narendra Modi has established a good working relationship with Trump, and the two leaders are likely to further boost cooperation between their countries. When Trump in February met with Modi, the U.S. president said that India would start buying American oil and natural gas.
The new tariffs on India could complicate its goal of doubling bilateral trade with the U.S. to $500 billion by 2030. The two countries have had five rounds of negotiations for a bilateral trade agreement. While U.S. has been seeking greater market access and zero tariff on almost all its exports, India has expressed reservations on throwing open sectors such as agriculture and dairy, which employ a bulk of the country’s population for livelihood, Indian officials said.
The Census Bureau reported that the U.S. ran a $45.8 billion trade imbalance in goods with India last year, meaning it imported more than it exported.
At a population exceeding 1.4 billion people, India is the world’s largest country and a possible geopolitical counterbalance to China. India and Russia have close relations, and New Delhi has not supported Western sanctions on Moscow over its war in Ukraine.
The new tariffs could put India at a disadvantage in the U.S. market relative to Vietnam, Bangladesh and, possibly, China, said Ajay Sahai, director general of the Federation of Indian Export Organisations.
“We are back to square one as Trump hasn’t spelled out what the penalties would be in addition to the tariff,” Sahai said. “The demand for Indian goods is bound to be hit.”
A new economic study released this month by the National Bureau of Economic Research (NBER) has found that California’s landmark $20-an-hour minimum wage law for fast food workers has resulted in the loss of approximately 18,000 jobs in the state’s fast-food sector—representing a 3.2% decline compared to similar employment trends nationwide.
The research, conducted by economists Jeffrey Clemens, Olivia Edwards, and Jonathan Meer, examined employment data before and after the implementation of Assembly Bill 1228 (AB 1228), which was signed into law by Governor Gavin Newsom in April 2024 and took effect on April 1, 2024. Prior to the law, California’s minimum wage for fast food workers stood at $16 per hour.
“Our median estimate translates into a loss of 18,000 jobs in California’s fast-food sector relative to the counterfactual,” the researchers wrote.
Fast-food employment in California fell by 2.3% to 3.9%, depending on the model used.
Nationally, fast-food employment grew by approximately 0.10% during the same period.
Prior to AB 1228’s enactment, California’s fast-food industry was tracking closely with national employment trends.
The authors concluded that the job losses occurred despite overall economic stability in the state and growth in other employment sectors. The wage hike coincided with a period of expansion in the broader U.S. labor market, making the contraction in California’s fast-food sector more striking.
In response to rising labor costs, many franchise owners across California have either reduced staff, cut hours, or turned increasingly toward automation and digital kiosks to offset payroll pressures. Fast food giants like McDonald’s, Wendy’s, and Jack in the Box have begun piloting AI-drive-thru systems and robotic food preparation stations, according to internal industry reports.
Private equity firms and hospitality-focused investment funds are now closely watching regulatory movements in California and beyond, with some advising caution before expanding labor-intensive operations in high-wage jurisdictions.
In the stock market, fast food restaurant chains with a heavy California footprint have experienced mixed performance. While some brands have maintained stability due to menu price adjustments, others have seen narrowing profit margins.
A Q2 earnings report from a California-based Yum! Brands franchisee cited labor costs increasing by 18% year-over-year, with executives forecasting continued pressure through 2026.
Critics of the law say the findings validate long-held concerns about minimum wage mandates in highly competitive, low-margin sectors.
Rachel Greszler, an economic analyst for The Heritage Foundation, wrote in a recent Daily Signal op-ed:
“When it comes to central planning, history keeps the receipts: Wage controls never work… The consequences of this wage hike should be a warning sign—especially for cities like Los Angeles, which recently passed a $30 wage law for airport and hotel workers.”
In a Monday editorial, The Wall Street Journal called the idea that a major wage increase would spur economic growth “magical thinking.” The editorial also criticized New York City mayoral candidates Andrew Cuomo and Zohran Mamdani, both of whom support similarly aggressive wage proposals.
“These guys will never learn because they don’t want to see the world as it really is,” the WSJ board wrote.
Tara Gallegos, Deputy Director of Communications for Governor Newsom, dismissed the study’s conclusions, noting its links to the Hoover Institution, which she claims has a record of publishing “misleading information” on labor issues.
Gallegos pointed to a February 2025 study from UC Berkeley that analyzed employment data from April to December 2024, which found:
Wages increased 8–9% for covered workers.
No negative effects on non-covered workers or overall fast-food employment.
Number of fast-food establishments grew faster in California than elsewhere.
Menu prices increased modestly—by only 1.5% on average, or about $0.06 on a $4 hamburger.
Gallegos also cited an article from the San Francisco Chronicle (Oct. 2024) that said many of the doomsday predictions around AB 1228 “did not materialize.”
The Fast Food Council, created under AB 1228, has the authority to raise the minimum wage annually beginning January 1, 2025. This has raised new questions from both businesses and economists about the long-term viability of California’s fast-food sector under escalating labor costs.
Labor unions, including the Service Employees International Union (SEIU), maintain that the $20 wage has lifted thousands of workers out of poverty and boosted local economies via increased consumer spending.
Meanwhile, employers, especially small-business franchisees, warn that without offsetting subsidies, tax breaks, or exemptions, continued hikes may further drive automation and business closures.
As cities like Los Angeles move toward even higher minimums ($30 by 2028), California appears poised to remain the national battleground in the debate over wage policy and economic trade-offs.
Allies of President Donald Trump are pressing for an investigation into the ongoing restoration of the Federal Reserve’s headquarters, costs for which have ballooned to $2.5 billion.
Any evidence of mismanagement or fraud, as White House officials have suggested, could prove a useful pretext for removing Fed Chair Jerome Powell, whose resistance to cutting interest rates this year has angered the president.
But the price tag has less to do with “ostentatious” features than the challenges of building — particularly underground — in what was once a swamp near the Tidal Basin along the Potomac River.
Foundation work for the Fed expansion was so difficult that contractors responsible for the job received a 2025 award for “excellence in the face of adversity” from the Washington Building Congress, a building trades association.
The Washington Monument behind construction on the Federal Reserve Board East Building, formerly known as the US Public Health Service building. (Al Drago/Bloomberg)
The ongoing renovation and expansion of the historic 1937 building that houses the Fed, plus an adjacent 1931 federal building, has faced setbacks, with costs for the long-overdue rehab climbing more than 30% since 2023.
Officials from the Trump administration blame wasteful spending for the cost overruns. In a July 10 letter to Powell, Office of Management and Budget Director Russell Vought described the project as an “ostentatious overhaul” featuring “rooftop terrace gardens,” “VIP dining rooms and elevators” and other luxury amenities. Federal Housing Finance Agency Director Bill Pulte, a frequent Powell critic, said he’s confident Congress will open an investigation.
Powell has defended the renovation work as transparent. He responded to Vought’s claims in a letter on July 17, explaining that the gardens are merely green roofs, for example, and the elevator is being extended to accommodate disabled users.
The project was always going to be tricky, with initial cost estimates pinned at $1.9 billion. Construction on the Marriner S. Eccles Federal Reserve Board Building and the adjacent Federal Reserve East Building involves adding new office space, removing asbestos and lead and replacing antiquated mechanical systems. Neither the Eccles Building — an austere edifice designed by Paul Cret and dedicated by Franklin D. Roosevelt — nor the East Building has ever been fully renovated since they were built nearly a century ago.
A worker at the reconstruction site of Federal Reserve headquarters in Washington, where estimated costs have gone from $1.9 billion to $2.5 billion. (Samuel Corum/Bloomberg)
Some of the bigger cost factors for the Fed are largely invisible. The price of structural steel exploded in 2021, just before construction began. Any building project in Washington’s so-called monumental core is covered by a bevy of design oversight boards, which can, and did, slow down the work. And the renovation of structures built during the New Deal has to account for federal security standards adopted after the Sept. 11, 2001, terrorist attacks.
The most challenging parts of the renovation, however, are underground.
Parts of the job call for deep excavation. Expanding the Fed’s campus involves converting a parking garage underneath the Eccles Building into additional office space. A five-story addition on the north side of the Fed’s East Building also boasts four extra floors below grade — a common trick in Washington, where heights are capped and historic vistas are protected. Below the south lawn of the East Building, a 318-space parking garage is being added. According to an FAQ put out by the Fed, the water table was higher underground than builders had predicted.
Building a new basement below an existing structure is a huge undertaking. Berkel and Company Contractors, a specialty foundation contractor, had to physically lower the slab on which the building stands, supporting the structure while excavating the ground beneath it. The company declined to comment, but a video posted on YouTube explains that Berkel built a bracing system above the slab in order to demolish it and lower the basement level more than 20 feet. The work required 1,000 micropiles — deep foundation steel elements used in ground conditions that don’t allow for traditional piles.
The Federal Reserve Board Building, designed by Paul Philippe Cret, in Washington circa 1935. (Keystone View Company/FPG/Getty Images)
Excavating underneath historic structures is expensive work. A proposal to shore up the Smithsonian Institution’s 19th-century Castle against seismic rumbling with an expansion below ground totaled $2 billion before the plans were shelved. Building along the National Mall is tough as well. Much of the land didn’t exist a century ago.
As landscape architect Phia Sennett wrote on the website of the National Trust for Historic Preservation, the Tidal Basin and surrounding area were filled from sediment dredged from the Potomac River and built over a series of creeks. To complete the Smithsonian’s National Museum of African American History and Culture — more than 60% of which is below grade on the National Mall — architects had to design an enormous “bathtub” to keep the water table out.
Construction costs for that building, which opened in 2016, reached $540 million, 50% more than an initial estimate. The price tag for the National September 11 Memorial and Museum, another project with daunting underground requirements and multiple stakeholders, rose to $1 billion before construction was halted in 2011. Its final costs were reported at $700 million.
In testimony before Congress in June, Powell acknowledged the project was a daunting one.
“No one in office wants to do a major renovation of a historic building during their term in office,” he said. “We decided to take it on because, honestly, when I was the administrative governor, before I became chair, I came to understand how badly the Eccles Building really needed a serious renovation. It never had one. It was not really safe and it was not waterproof.”
An artist’s rendering of the completed Federal Reserve buildings is shown on barriers along Constitution Avenue in Washington. (Al Drago/Bloomberg)
The Fed renovation is being performed by Fortus, a joint venture between the Dutch design consultancy Arcadis and the Washington, DC–based architecture firm Quinn Evans. Arcadis specializes in engineering and resilience, including water infrastructure. Quinn Evans has led complex restoration jobs, among them Michigan Central Station in Detroit and the National Academy of Sciences headquarters. Both firms referred a reporter from Bloomberg to the Fed, which didn’t respond to a request for comment.
Design plans for the Eccles Building changed significantly since they were first introduced. During the first Trump administration, architects at the request of the Fed proposed using more glass, but Trump appointees to the US Commission of Fine Arts asked for more white marble to align with a proposed mandate from the president requiring all new federal buildings to be classical in style. The demand to use more marble was first reported by the Associated Press.
During a 2021 review by the National Capital Planning Commission, a General Services Administration official said that the Fed had withstood a “tumultuous” oversight process.
“They’ve been really put through their paces,” Mina Wright, founding director of the GSA’s Office of Planning and Design Quality, said at the time. “They’ve had some hostile criticism at one point that was unjustified.”
Former Douglas Elliman CEO Dottie Herman and Stew Leonard’s President and CEO Stew Leonard Jr. speak with Fox News Digital about their opposition to NYC mayoral candidate Zohran Mamdani’s policies. (Fox Business)
NEW YORK CITY — As Democratic Socialist Zohran Mamdani surges to the front of New York City’s mayoral race following his historic primary victory, prominent figures in business and real estate are sounding the alarm, warning that his radical proposals could cripple the city’s economy and chase away its wealth base.
From government-run grocery stores to punitive housing regulations and higher taxes on corporations and the wealthy, Mamdani’s progressive platform is drawing fierce criticism from two of New York’s most recognizable business leaders: Stew Leonard Jr., CEO of the regional grocery empire Stew Leonard’s, and Dottie Herman, Vice Chair of Douglas Elliman and one of Forbes’ wealthiest self-made women in real estate.
“You’re in a street fight if you get into the food business,” said Leonard in an interview with Fox News Digital. “You gotta be in there with sharp prices, fresher product, friendlier people… Can the government do that? I don’t know.”
Leonard, who operates eight food stores and eight wine and spirit outlets across the Tri-State area, questioned the feasibility of Mamdani’s city-run supermarket proposal, which aims to sell food at wholesale prices. The idea is part of a broader vision that includes a citywide rent freeze, construction of 200,000 affordable units over ten years, and tighter enforcement on “bad landlords.”
“It’s seven days a week. Weekends are the busiest. If you’re paying $200 to $300 per square foot along Second Avenue, you need serious volume to make it work,” Leonard added. “Margins in food are razor-thin. Everyone eats, yes, but it’s still one of the toughest industries in the country.”
For Dottie Herman, the implications go beyond groceries—she sees Mamdani’s economic approach as an existential threat to the city’s future.
“I never talk about politics, but I am talking now because I really don’t want to see New York destroyed,” Herman said. “I believe with every breath of me, that if he gets in, we will be in a socialized country.”
Citing rising fear among developers and property investors, Herman shared that some clients are already reconsidering multimillion-dollar deals out of concern for punitive taxes and hostile business conditions.
“I’ve had people call me asking if they should cancel contracts on development sites in New York City,” she said. “People are scared. You’re going to discourage anyone from investing in rental property, and values will fall. That’s what happens when you tell people, ‘We’ll just take it from the rich.’”
Mamdani, who currently represents Astoria and Long Island City in the State Assembly, gained national attention after winning more votes in the primary than any candidate in the city’s history. His campaign site outlines a platform that includes raising the corporate tax rate to 11.5% and implementing a 2% flat tax on the city’s wealthiest residents—moves that would require state legislative approval and signoff from Gov. Kathy Hochul, who has expressed concern about affordability and capital flight.
Mamdani’s platform also pushes for public control of grocery access, rent freezes, and an aggressive reworking of landlord-tenant laws—all in the name of housing and food equity.
While progressive circles and some younger millionaires have cheered his vision, established business figures worry his policies will bring economic instability, capital outflow, and unintended market disruption.
“The key to this business is freshness,” Leonard added. “Are you going to eliminate dyes, hormones, sugar, and antibiotics from your entire government inventory? That’s what I’ve done. But that drives up costs.”
With New York’s real estate market already facing tight inventory and slowing sales volumes, Herman warned that Mamdani’s proposed crackdown on landlords and tax hikes could lead to a broader investment freeze.
“If people can’t make money here, what business will come to New York?” she asked. “America is about the ability to grow and succeed, no matter where you start. That dream dies if the rules become punish-the-successful.”
Herman also revealed that a number of business owners are organizing political fundraisers to counter Mamdani’s momentum, signaling growing concern in the city’s economic elite.
The crowded mayoral race now pits Mamdani against rivals like former Governor Andrew Cuomo and incumbent Mayor Eric Adams, raising speculation about whether the two centrist contenders might team up to create a unified front against the socialist frontrunner.
“I think one of them has to step aside for the other,” Herman said. “Because if not, the vote splits, and we hand this city to someone who doesn’t understand how it actually runs.”
Leonard, for his part, said that Mamdani’s victory would make him rethink expanding in New York City.
“I’d struggle to open five new stores here right now,” he said. “It’s a real challenge—and this would only make it harder.”
Despite the controversy, Mamdani’s campaign did not respond to a request for comment.
In a dramatic revelation that underscores both a massive failure of data security and an extraordinary effort at damage control, the UK government has confirmed that up to 7,000 Afghan nationals are being secretly relocated to the United Kingdom following a catastrophic data breach at the Ministry of Defence (MoD). The breach, which exposed the personal details of nearly 20,000 individuals, occurred in early 2022 but was only acknowledged this week—more than three years after the incident.
The details came to light after a British high court judge lifted a super injunction that had, until now, prevented media coverage of the blunder. The injunction had been sought by the UK government in a bid to suppress details of what is being described as one of the most severe security lapses in modern British military history.
The Breach and Its Fallout
The data breach, traced back to the mishandling of an email in February 2022, exposed sensitive information—names, contact details, and other identifying data—of 18,714 Afghans who had applied for relocation under the UK’s Afghan Relocations and Assistance Policy (ARAP). These individuals had supported or worked with British forces during the UK’s two-decade-long presence in Afghanistan from 2001 until the Taliban’s return to power in 2021.
Afghan co-workers and their families board a plane during the Kabul airlift in August 2021. (South Korean Defense Ministry/ZUMA Press Wire/Shutterstock)
At least some individuals named on the compromised list are believed to have been killed in the years since the breach, although it remains unclear whether their deaths were directly linked to the exposure of their identities. The Taliban regime is known to target individuals associated with foreign forces, branding them traitors.
The MoD only discovered the breach in August 2023, under then-Prime Minister Rishi Sunak. A super injunction was imposed in September 2023, silencing public and media discussion of the crisis while the government scrambled to relocate thousands of affected individuals—at enormous expense and under complete secrecy.
People gathered desperately near evacuation control checkpoints during the crisis. (AP)
Legal, Financial, and Political Fallout
In a statement to Parliament on Tuesday, Defence Secretary John Healey offered a “sincere apology” for the breach and acknowledged concerns over the lack of transparency. He emphasized the difficulty of navigating national security and humanitarian obligations, stating:
“No government wishes to withhold information from the British public or Parliament in this manner. But the safety of innocent people was at stake.”
According to government figures, the initial cost of relocating the nearly 7,000 Afghans will be around £850 million. However, an internal MoD document from February suggested the total cost could climb to £7 billion once long-term support, housing, integration, and litigation costs are factored in. The MoD now dismisses that projection as outdated, but legal experts say the true cost may ultimately surpass current expectations—especially if victims succeed in pursuing compensation claims.
The evacuation at Kabul airport was chaotic. (AP)
Barings Law, a legal firm representing around 1,000 of the affected individuals, has accused the government of “deliberately concealing the truth.” Adnan Malik, head of data protection at the firm, called the incident “an incredibly serious data breach.”
“It involved the loss of personal and identifying information about Afghan nationals who have helped British forces defeat terrorism. Our clients live in fear of reprisal and expect substantial financial compensation,” Malik stated.
The firm is preparing legal action to seek damages for its clients, and said that financial settlements—while insufficient to undo the trauma—could help survivors rebuild their lives.
Government Review and Public Transparency
An internal review by Paul Rimmer, a retired civil servant, concluded earlier this year that the risk to individuals may be “minimal,” stating that the exposure was unlikely to substantially change any person’s threat level given the existing volume of leaked data in Afghanistan. It added that merely appearing on the breached dataset would not likely be grounds for Taliban targeting.
That assessment played a key role in the court’s decision to lift the super injunction earlier this week.
Still, critics argue that the government’s prolonged secrecy undermined public trust. Labour leader Sir Keir Starmer, whose government inherited the scandal after the 2024 general election, pledged full transparency going forward and said his administration would “do right by those put at risk.”
The scandal adds to a string of recent criticisms aimed at the MoD’s handling of sensitive data. In September 2021, another breach revealed the email addresses and identities of 265 Afghans to each other in a mass email sent to a distribution list, prompting the UK’s Information Commissioner to fine the MoD £350,000 in December 2023, calling the lapse “egregious” and “potentially life-threatening.”
Market and Economic Implications
From a public finance and market standpoint, the unfolding situation presents significant fiscal challenges for the UK government. While the initial £850 million for the emergency relocation will be covered through defence and foreign aid budgets, economists warn that:
Litigation costs and compensation settlements could push spending well into the billions, adding pressure to the UK’s already-stretched post-COVID public spending framework.
The need to house and support thousands of refugees will place further strain on the UK’s social and housing infrastructure, potentially stoking political tensions around immigration.
Private security and legal firms, meanwhile, may benefit from increased government contracting and legal settlements, marking an unintended boom for sectors linked to risk management and litigation.
The situation may also impact the UK’s diplomatic credibility, particularly among NATO allies and within the broader scope of Western withdrawal from Afghanistan.
Human Dimension
While the numbers are staggering, the human cost remains at the center of the scandal. Many of the relocated Afghans—interpreters, aid workers, and former support staff—had risked their lives to assist British troops in their mission to combat terrorism. Now, many are arriving in the UK traumatized, displaced, and unsure of their future.
One source involved in the relocation effort said:
“They deserve better than being treated like a secret. These people stood by us. The least we can do is stand by them.”
Related Market Note: Investors tracking UK public sector expenditures are closely watching developments tied to defence and humanitarian allocations. Legal and security contractors such as Serco, G4S, and law firms in the public interest sector may see modest short-term growth opportunities due to litigation and relocation logistics tied to this crisis.
In a sharp escalation of trade tensions, President Donald Trump has announced a 35% tariff on select Canadian imports, effective August 1, tightening pressure on Canada over issues ranging from fentanyl trafficking to retaliatory trade measures. Crucially, goods compliant with the United States–Mexico–Canada Agreement (USMCA) are exempted—at least for now.
Trump’s move targets products he claims are part of Canada’s inadequate response to the fentanyl crisis flooding into the U.S. He also cites longstanding Canadian barriers, particularly in dairy and agricultural sectors—some carrying “400%” duties as he alleged, hurting U.S. producers.
In a letter to Canadian Prime Minister Mark Carney shared publicly on Truth Social, Trump warned that tariff rates could rise further or be adjusted downward depending on Ottawa’s actions. He also pledged to penalize any “transshipment” efforts intended to avoid the new levies.
U.S. officials clarified that the 35% tariff applies only to non-USMCA-compliant goods, preserving preferential treatment for those that adhere to the trilateral agreement. This means most automotive parts and other USMCA-certified items remain tariff-free—but non-compliant sectors such as certain foods, potash, and energy may face the full burden.
The distinction provides Canada’s businesses with a temporary buffer, but uncertainty looms—particularly around goods whose compliance status is under review.
Financial markets responded swiftly: U.S. stock futures and Treasury yields slipped on worries over trade escalation. The Canadian dollar also dropped to a two-week low, reflecting investor anxiety .
Canadian exporters in non-USMCA sectors are bracing for disruption. Ottawa is considering retaliatory measures and invoking rule-based solutions under WTO frameworks and NAFTA-era mechanisms. Prime Minister Carney has indicated ongoing efforts to mitigate both the fentanyl flow and tariff fallout before the July 21 economic and security pact deadline.
The tariff threats form part of a broader U.S. strategy: Trump has issued similar warnings to over 20 countries, with proposals ranging from 15%–20% tariffs, including a temporary 50% levy on Brazilian goods. Several countries are now scrambling to negotiate carve-outs or exemptions to avoid steep duties.
The prevailing argument in Washington: these trade measures are aimed at correcting “unsustainable trade imbalances” that pose economic and national security risks .
“Carving out USMCA-compliant goods softens the blow but leaves too much uncertainty,” notes Alicia Fernandez, trade economist at NorthStar Insights. “We’re likely headed toward tit-for-tat tariffs and escalating legal dispute.”
Trump’s 35% tariff threat on Canadian goods—while sparing USMCA-compliant items—signifies a targeted yet volatile escalation in the U.S.–Canada trade relationship. With critical deadlines approaching and retaliatory steps underway, this confrontation may reshape North American trade policy well beyond August.
