Economy

NEW YORK (Reuters) – Federal Reserve Chair Jerome Powell said this week inflation could fall if companies curbed their profits – but the biggest U.S. retailers and consumer products makers have reported one key measure of profitability hardly budging in recent years.Gross profit margins, watched closely by investors and measuring profits as a percentage of sales, have remained flat or slightly down at manufacturers and sellers of household basics like toilet paper and cereal.Companies such as Tide maker Procter & Gamble (NYSE:PG) Co and Walmart (NYSE:WMT) Inc have passed through once-in-a-generation levels of price hikes to try to keep this metric of financial health steady as they face sky-high costs.But Powell took aim at Corporate America this week, saying if companies and shareholders took less for themselves, inflation could fall and workers’ wages may continue to rise.Procter & Gamble’s profit margins rose through the pandemic, and then inched lower last year. Walmart’s margins have followed a similar pattern as it tries to keep prices low for consumers, and maintain traffic for its stores.Kroger (NYSE:KR) Co’s margins also rose sharply in the pandemic, as food prices have spiked. P&G, Kroger and Walmart did not immediately return requests for comment. P&G executives said at an industry conference last month that as inflation continues, it becomes harder to increase prices. Executives at Walmart said last month inflation in food and consumables has persisted, with food inflation higher than what they thought it would be.U.S. lawmakers such as Senator Elizabeth Warren and Representative David Cicilline have taken companies to task over price hikes on items shoppers buy every day.The situation is not unique to the United States, with data shared at a recent European Central Bank retreat showing companies there are profiting from high inflation.”Corporate profits and higher margins have been a key driver of inflation and as they start to ease we will see lower prices in real life,” said Rakeen Mabud, chief economist at progressive advocacy group Groundwork Collaborative. “What works going up, works coming down. If we see margins ease, companies bring prices down, we’ll see lower inflation.”Some manufacturers of household goods are easing price hikes. Ketchup maker Kraft Heinz (NASDAQ:KHC) Co, Clorox (NYSE:CLX) Co and PepsiCo Inc have indicated they are pressing pause on further raising prices.Clorox declined to comment, while Kraft Heinz and Pepsico (NASDAQ:PEP) did not immediately return a request for comment.P&G and Stouffer’s frozen meal maker Nestle SA (SIX:NESN) have said they are planning to continue increasing prices, even as shoppers are buying less and trimming their budgets. Nestle did not immediately return a request for comment.Former Federal Reserve Vice Chair Lael Brainard said in the fall that retail margins – a measure of the price chains charge for a product compared to what they paid for it – have risen “significantly more” than wages for the typical store associate. Lowering those margins could help reduce inflation pressures in consumer goods, she said. More

WASHINGTON (Reuters) -U.S. President Joe Biden and European Commission President Ursula von der Leyen are expected to agree on Friday to begin negotiations on ensuring free-trade agreement-like status for the European Union, two sources familiar with the plans said on Wednesday. The leaders are set to meet in Washington on Friday. Reuters reported last week that the United States and EU were working to make European minerals eligible for tax credits under the $430 billion U.S. Inflation Reduction Act (IRA), citing a senior EU official. That law requires rising percentages of battery minerals to come from the United States or a Free Trade Agreement (FTA) partner.A U.S. Treasury spokesperson said the department, which oversees the electric vehicle (EV) tax credits at the heart of the dispute, would evaluate any newly negotiated agreements to ensure they meet the critical minerals requirement of the tax credit during the rulemaking process.”Given the extremely high concentration of Chinese control over critical mineral extraction globally, strengthening our supply chains for critical minerals along with like-minded partners is vital for the growth of the clean energy economy,” the spokesperson said.Working with allies to reduce U.S. reliance on China for critical minerals would aid U.S. energy and economic security, the spokesperson added.Up to $3,750 per vehicle of the available tax credits relate to critical minerals for batteries, taking effect when the U.S. Treasury issues guidance, which is expected later this month.The EU, South Korea, Japan and other U.S. allies have harshly criticized the IRA’s provision requiring EVs to be assembled in North America to qualify for consumer EV tax credits.But the EU in December praised a U.S. Treasury Department decision to allow EVs leased by consumers to qualify for up to $7,500 in commercial clean vehicle tax credits. More

Peanuts have become China best-performing agricultural commodity as dry weather and Beijing’s policies have eaten into supplies, raising traders’ fears that demand from the world’s largest importer of the legume will push up international prices.China suffered a severe drought in key growing areas last year, while the government’s agricultural subsidy programme, which favours soyabeans, has led to a sharp drop in the country’s peanut acreage. Futures contracts traded on the Zhengzhou Commodity Exchange have risen about 10 per cent this year to just under Rmb11,000 ($1,582) a tonne. They are hovering just below a record high touched late last month, making them the country’s best-performing agricultural commodity so far in 2023.The rally in Chinese peanut prices comes as the global market remains tight, with drought having affected many of the main international exporters last year. Weather in Argentina, the leading exporter, has been erratic during the past few months, raising traders’ concerns about lower yields and smaller kernels, while heavy rains in Brazil have hampered harvesting, leading to analyst worries about quality issues, according to Mintec, the commodity data and analysis firm.China is the world’s largest peanut producer, mainly crushing it for oil, but it is also the leading importer of the commodity. This year it is expected to import 1.1mn tonnes of the groundnut, more than quadruple that of the EU, the second-largest market.Since China reopened at the start of the year, it has actively bought up supplies, said traders and analysts. “They are everywhere trying to buy peanuts,” said Martin Masopust, director at Netherlands-based trader Bohemia Nut. “China is the market driver. If they plant less peanuts because they lose acreage to soyabeans, then it will affect the world market.”Masopust said last year’s drought had helped exacerbate domestic supply shortages and was driving Chinese buyers to snap up supply across global markets ranging from Senegal to Sudan.Aidan Wright, senior nuts and dried fruit analyst at Mintec, said: “Chinese buyers have been securing peanut oil out of South America and buying up US farmer stock for crushing.” Analysts at the US Department of Agriculture had warned as early as November that “low prices, combined with unfavourably dry planting conditions in some regions, forced some farmers to forgo planting typically higher margin peanuts for other crops”, but added that “high losses are likely limited to a few regions”.Beijing has yet to announce official production figures for 2022, but Chinese media have begun sounding the alarm in recent months, warning that government subsidies encouraging farmers to raise corn and soyabeans, a rival oilseed, had pushed farmers to abandon peanut planting in pursuit of greater returns from other crops.Last month, the state-run Economic Daily reported that arable land used to cultivate peanuts in China shrank almost 19 per cent in 2022, a record fall, concluding that improvements “clearly remain to be made with regards to policies meant to ensure simultaneous growth in output capacity for cereals, soyabeans and other oils”. Chinese news and data provider Grain News has reported that industry estimates pointed to a fall of more than 23 per cent in China’s peanut production last year.Darin Friedrichs, a commodities analyst at Shanghai-based Sitonia Consulting, said China’s domestic peanut futures market, which launched just two years ago, was “just getting tossed around by government subsidies”. More

American and European officials are trying to reach agreement on the outlines of a limited trade deal that could help resolve a major rift over America’s new climate legislation.WASHINGTON — American and European officials meeting in Washington this week are trying to agree on the outlines of a limited trade deal that would allow European companies to qualify for some of the benefits of the Biden administration’s new climate legislation, in a bid to assuage a major source of tension between the allies.The governments hope to announce their intention to begin negotiations over such an agreement as soon as Friday, when President Biden is set to meet with Ursula von der Leyen, the president of the European Commission, at the White House.American officials have also been carrying out similar conversations with the governments of Japan and the United Kingdom to see if some type of limited new agreement could be struck that would also offer Japanese and British companies certain benefits under the law.At the center of the debate is the Inflation Reduction Act, a $370 billion bill that President Biden signed last year to try to mitigate climate change by transforming U.S. power generation and the car industry. The bill offers generous tax credits to American consumers to purchase new and used electric vehicles, but it imposes tough restrictions on the types of vehicles that can benefit from these rules, in ways that disadvantage foreign carmakers.The law specifies that, to receive a tax credit, cars must be assembled in North America and source the material for their batteries from North America, or from countries with which the United States has a free-trade agreement. Despite close ties, the United States does not have a free-trade agreement with the European Union, Japan or the United Kingdom.The passage of the law has prompted harsh criticism from allies, who say companies in their countries will be penalized. European officials have been particularly outspoken, arguing that the bill comes at a delicate time for a European economy that is already contending with disruptions from the war in Ukraine and skyrocketing energy prices.The dispute has raised the prospect of a subsidy war between the United States and the European Union, and threatened to strain relations at a time when both sides are trying to maintain a united front against Russia.“I don’t think U.S. government officials anticipated this level of pushback and this level of disdain against this massive climate bill,” said Olga Khakova, the deputy director for European energy security at the Atlantic Council’s Global Energy Center. But she said emotions had now subsided a bit. “We are in this mode right now where we want to find a solution.”An electric Volkswagen at a factory in Germany. Despite close ties, the United States and the European Union do not have a free-trade agreement.Jens Schlueter/Agence France-Presse — Getty ImagesThe rift has set off a scramble within the U.S. government to try to scrape together some type of new trade deal that could be signed with allied governments to allow their companies to benefit from some of the law’s tax credits. With such an agreement, for example, a company based in the European Union could help to supply lithium, nickel or other battery materials for electric vehicles made in North America.A Treasury official said that any new trade agreements would be evaluated during a rule-making process to ensure that they comply with the critical mineral requirements in the legislation. The official pointed to Chinese control over critical mineral extraction as a reason for the need to make the supply chains of the United States and like-minded partners strong.A U.S. official said that the administration had been engaged in ongoing consultations with Congress, and that those briefings, and conversations with unions and private industry, would continue in the coming weeks.The Treasury Department, in a white paper published in December, said that the Inflation Reduction Act did not define the term “free trade agreement,” and that the Treasury secretary could identify additional free-trade agreements for the purposes of the critical-minerals requirement going forward.Treasury Secretary Janet L. Yellen said last month that the Biden administration was considering limited trade deals focused on critical minerals as a solution, and she suggested that these could be done without the approval of Congress. She emphasized that the intent of the law was not for the United States to steal jobs from Europe and that the law was meant to be aligned with the administration’s “friend-shoring” agenda..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Ms. Yellen said on the sidelines of the Group of 20 finance ministers meetings in India last month. “We’ve been very clear with Europe that this is not a subsidy war.”With input from the Office of the United States Trade Representative, officials from the Treasury Department have prepared a document spelling out what kind of deal would constitute a “free-trade agreement” for the purposes of the legislation, according to people familiar with the plans.It is not clear how quickly the solution could be completed, however, as the white paper said the Treasury Department and the Internal Revenue Service would seek public comment on “what criteria should be used to identify free-trade agreements for the purposes of the critical-minerals requirement.”In a briefing on Friday, a European official said Europe and the United States could announce by the end of this week a commitment to forge a new limited trade deal, most likely focused on supply chains for critical minerals. Unlike a traditional free-trade agreement, which entails reducing barriers to trade between partners, this agreement would not involve lowering tariffs on either side, and the parties would aim to flesh out the agreement in days or weeks, rather than months, the European official said.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Treasury Secretary Janet L. Yellen said at the Group of 20 meeting last month.Aijaz Rahi/Associated PressThe official added that the agreement would need to be legally binding, and would still involve seeking some type of approval from European Union member states. In the United States, the agreement could come in the form of an executive order from the Biden administration, and without requiring the approval of Congress, the official suggested.One irony is that neither the European Union nor the United States is a major source of the critical minerals needed for electric vehicle batteries. But some officials have suggested that the partnership would form a foundation for a group that could be expanded over time to include countries with larger supplies of lithium, cobalt, nickel and other minerals.While analysts said a new deal with Europe could in practice satisfy the requirements of the law, it would not really resemble a free-trade agreement, as such agreements have come to be understood.Free-trade deals are legal agreements that the World Trade Organization defines as covering “substantially all trade” between countries, including a broad range of goods and, typically, services. They usually take years to negotiate and, in the United States, require the approval of Congress.Scott Lincicome, the director of general economics at the Cato Institute, said that the Biden administration’s authority to strike such trade pacts was questionable but that it was unlikely that anyone would try to mount a legal challenge to them.“Everyone in the room knows that this is not kosher, but there’s not really anything anybody can do about it,” Mr. Lincicome said.Political appetite for striking new free-trade deals has diminished in the United States in recent years, in part because of a perception that such pacts have helped multinational corporations move factories and jobs offshore.Efforts to strike expansive trade deals with Europe and a group of Asian countries during the Obama administration fizzled, in part because of that political opposition. During the Trump administration, the United States signed a series of limited trade deals with South Korea, Japan and China that were carried out through executive orders, not by congressional approval.Edward Alden, a senior fellow at the Council on Foreign Relations, said that the limited deal would mollify the Europeans, and that U.S.-E.U. economic relations were too important “to not allow the Europeans under the tent in some way or another.” But it could escalate complaints from other trading partners, like South Korea, that don’t feel as though their concerns have been taken care of, he said.South Korea already has a comprehensive free-trade agreement with the United States, but it has other criticisms of the climate law, centering on how the current terms exclude electric vehicles made by Hyundai from receiving tax credits. “Once you make accommodations for one, the pressure grows to make accommodations for others,” he said.It remains unclear how Congress will respond. Lawmakers have expressed concerns that the administration is not adhering to the law’s original intent of promoting U.S. manufacturing. Many also disapprove of efforts by the executive branch to bypass congressional authority in approving trade deals.But Democrats may also be sympathetic to the effort to smooth over relations with Europeans, and reluctant to reopen debate over their signature climate legislation. And at least one key lawmaker, Senator Joe Manchin III, Democrat of West Virginia, has said he didn’t realize that the European Union lacked a free-trade agreement with the United States in the first place.Still, the dispute has elicited some criticism that American officials are going to great lengths to mollify Europeans, especially given that the European Union imposes some trade barriers on the United States, like a relatively high tariff on imported U.S. cars.John G. Murphy, the senior vice president for international policy at the U.S. Chamber of Commerce, said it was his group’s view that the Biden administration should fight against various E.U. policies that discriminate against American companies “with the same doggedness European officials have brought to their complaints about the I.R.A.” More

Moscow blames a “special state service” for the explosions that destroyed Nord Stream gas pipelines that link Russia to Europe, Kremlin spokesperson Dmitry Peskov told reporters on Thursday.He said he did not believe a separate pro-Ukrainian group was responsible.“You see the simultaneous release of materials in different countries,” Peskov said. “The Anglo-Saxons are bustling: [the explosion] clearly made their relationship with Germany uncomfortable.”He added: “As for the pro-Ukrainian Doctor Evil: this is really hard to believe. Only a special state service, which are few, could have performed such a complicated task.”He warned that one should not be distracted by secondary hypotheses. “We demand a transparent international investigation Russia has access to.” As for Russia potentially being behind the attack, he said, “only an inflamed brain could come up with the idea that Russia, as one of the main project’s shareholders, would chop off its own leg”. More

The tax reform would generate, by a “conservative” estimate, a 12% increase in gross domestic product over 15 years, an 11% increase in exports and 20% growth in investments, he told federal lawmakers. The proposals currently up for debate in Congress would end a tax on industrialized products and some tariffs and replace them with either a single tax on goods and services or a federal and local tax.Last week, Appy told reporters the government believes the much-expected tax reform will pass in Congress by the end of this year, a delay from its initial target of the first half of the year. More

LONDON (Reuters) – TikTok has announced out a new data security regime, nicknamed “Project Clover”, amid growing pressure from lawmakers on both sides of the Atlantic. The European Parliament, European Commission and the EU Council recently banned TikTok from staff phones due to growing concerns about the company, which is owned by Chinese firm ByteDance, and whether China’s government could harvest users’ data or advance its interests.Meanwhile, the White House has backed legislation granting the administration new powers to ban Chinese-owned video app TikTok and other foreign-based technologies if they pose national security threats.At a news briefing on Wednesday, TikTok said it would begin storing European user data locally this year, with migration continuing into 2024. As part of this move, the company confirmed it would soon open a second data centre in Ireland, and another in the Hamar region of Norway. These data centres will be operated by an undisclosed third party. “We are a pro-compliance company. Tell us what the problems are, and then let’s work together on the solutions. That’s been our approach in the U.S., that’s been our approach everywhere,” said Theo Bertram, VP of government relations and public policy. “Our approach is very much open to governments, regulators, and experts to give us their counsel and advice on how we can do this even more effectively.” The company said it would reduce the transfer of data outside of the region, and reduce employee access to user data internally. TikTok has engaged a similar strategy in the U.S., nicknamed “Project Texas”, in an attempt to placate hostile lawmakers. More

WASHINGTON (Reuters) – U.S. President Joe Biden’s fiscal 2024 budget plan would boost federal funding for childcare and early childhood education by billions of dollars, ensuring free preschool for all of the country’s 4 million 4-year-olds, the White House said on Wednesday.The proposal, which Biden will deliver to Congress on Thursday, revisits several items included in Biden’s 2023 budget proposal that were removed during negotiations with Congress. Prospects for passage could be even harder this year, given Republicans’ slim majority in the House of Representatives.The White House argues that lack of access to affordable childcare is a key factor depressing women’s participation in the workforce. It cited a Boston Consulting Group forecast that U.S. economic output could drop by $290 billion a year beginning in 2030 if the U.S. does not address critical care shortages.One recent poll showed that 55% of households experience difficulty finding childcare, with 21% citing challenges related specifically to cost, the White House said.Administration officials said Biden would continue to push for higher spending on the nation’s “care economy,” but could also take executive action to push forward his agenda, such as last week’s Commerce Department announcement that firms seeking funds from a $52 billion U.S. semiconductor manufacturing and research program will have to share excess profits and explain how they plan to provide affordable childcare.Biden’s budget is also expected to include an expanded child tax credit that he has pushed for years, and other measures that would help working families, administration officials said.Biden’s 2024 proposal includes $22.1 billion for existing early care and education programs, up 10.5% from the 2023 enacted level, including $9 billion for federal block grants.The White House said the higher level of funding – expected to total $400 billion over 10 years – would increase childcare options for 16 million more young children while lowering costs for parents.The proposal also funds a federal-state partnership that would provide high-quality, free preschool, expanding access to all of the country’s 4-year-olds, a dramatic increase from the estimated 1.6 million children now in preschool programs.Last year, Biden had requested funding to pay for universal preschool for 3- and 4-year-olds, but adopted a more targeted approach this year, a White House official said.The 2024 plan would boost funding for Head Start programs by over 9% to $13.1 billion, with more than $500 million dedicated to boost pay for Head Start teachers and staff, the White House said. Higher federal funding for preschool would reach $200 billion over 10 years, it said.The White House is betting that childcare programs, which are very popular with the public, could help boost Biden’s approval ratings. The president is expected to announce his candidacy for the 2024 presidential race this spring. More