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    Russian Conflict in Ukraine is Reshaping the Climate Debate

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    Energy security has gained prominence while the conflict in Ukraine raises concerns over the possible interruption in the supply of oil and natural gas.It was only three months ago that world leaders met at the Glasgow climate summit and made ambitious pledges to reduce fossil fuel use. The perils of a warming planet are no less calamitous now, but the debate about the critically important transition to renewable energy has taken a back seat to energy security as Russia — Europe’s largest energy supplier — threatens to start a major confrontation with the West over Ukraine while oil prices are climbing toward $100 a barrel.For more than a decade, policy discussions in Europe and beyond about cutting back on gas, oil and coal emphasized safety and the environment, at the expense of financial and economic considerations, said Lucia van Geuns, a strategic energy adviser at the Hague Center for Strategic Studies. Now, it’s the reverse.“Gas prices became very high, and all of a sudden security of supply and price became the main subject of public debate,” she said.The renewed emphasis on energy independence and national security may encourage policymakers to backslide on efforts to decrease the use of fossil fuels that pump deadly greenhouse gases into the atmosphere.Already, skyrocketing prices have spurred additional production and consumption of fuels that contribute to global warming. Coal imports to the European Union in January rose more than 56 percent from the previous year.In Britain, the Coal Authority gave a mine in Wales permission last month to increase output by 40 million tons over the next two decades. In Australia, there are plans to open or expand more coking coal mines. And China, which has traditionally made energy security a priority, has further stepped up its coal production and approved three new billion-dollar coal mines this week.“Get your rig count up,” Jennifer Granholm, the U.S. energy secretary, said in December, urging American oil producers to raise their output. Shale companies in Oklahoma, Colorado and other states are looking to resurrect drilling that had ceased because there is suddenly money to be made. And this month, Exxon Mobil announced plans to increase spending on new oil wells and other projects.A coal-fired power station in Gelsenkirchen, Germany, in January.Martin Meissner/Associated PressIan Goldin, a professor of globalization and development at the University of Oxford, warned that high energy prices could lead to more exploration of traditional fossil fuels. “Governments will want to deprioritize renewables and sustainables, which would be exactly the wrong response,” he said.Europe’s transition to sustainable energy has always been an intricate calculus, requiring it to back away from the dirtiest fossil fuel like coal, while still working with gas and oil producers to power homes, cars and factories until better alternatives are available.For Germany, dependency on Russian gas has been an integral part of its environmental blueprint for many years. Plans for the first direct pipeline between the two countries, Nord Stream 1, started in 1997. A leader in the push to reduce carbon emissions, Berlin has moved to shutter coal mines and nuclear power plants, after the 2011 disaster at the Fukushima nuclear plant in Japan. The idea was that Russian gas would supply the needed fuel during the yearslong transition to cleaner energy sources. Two-thirds of the gas Germany burned last year came from Russia.Future plans called for even more gas to be delivered through Nord Stream 2, a new 746-mile pipeline under the Baltic Sea that directly links Russia to northeastern Germany.On Tuesday, after President Vladimir V. Putin of Russia recognized two breakaway republics in Ukraine and mobilized forces, Chancellor Olaf Scholz of Germany halted final regulatory review of the $11 billion pipeline, which was completed last year.The Nord Stream 2 pipeline was set to deliver Russian gas to Lubmin, Germany.Stefan Sauer/picture alliance via Getty Images“I don’t think the threat from Russia is outweighing the threat of climate change, and I don’t see coal mines opening up across Europe,” said James Nixey, director of the Russia-Eurasia program at Chatham House, a research organization in London.Certainly, the path of energy transition has never been clear. Five climate summits have taken place over the past 30 years, and progress has always fallen short. This latest setback may just be the latest in a long series of halfway measures and setbacks.Still, without a more comprehensive strategy to wean itself off gas, Europe won’t be able to accomplish its goal of reducing emissions 55 percent by 2030 compared with 1990 levels, or to reach the Glasgow summit’s target of cutting net greenhouse gases to zero by 2050.As Mr. Nixey acknowledged, “this debate is changing” as leaders are forced to acknowledge the downsides of dependency on Russian energy.Even in Germany, where the progressive Greens have gained a more influential voice in the government, there has been a shift in tone.This month, Robert Habeck, Germany’s new minister for the economy and climate change and a member of the Greens, said events had underscored the need to diversify supplies. “We need to act here and secure ourselves better,” he said. “If we don’t, we will become a pawn in the game.”Energy prices started to climb before Mr. Putin began massing troops on Ukraine’s eastern border, as countries emerged from pandemic closures and demand shot up.But as Mr. Putin moved aggressively against Ukraine and energy prices soared further, the political and strategic vulnerabilities presented by Russia’s control of so much of Europe’s supply took center stage.“Europe is quite dependent on Russian gas and oil, and this is unsustainable,” said Sarah E. Mendelson, the head of Heinz College in Washington. She added that the United States and its European allies had not focused enough on energy independence in recent years.Overall, Europe gets more than a third of its natural gas and 25 percent of its oil from Russia. Deliveries have slowed significantly in recent months, while reserves in Europe have fallen to just 31 percent of capacity.Mateusz Garus, a blacksmith at a coal mine in Poland. “We will destroy the power sector,” he said, “and we will be dependent on others like Russia.”Maciek Nabrdalik for The New York TimesFor critics of the European Union’s climate policies, the sudden focus away from greenhouse gas emissions and on existing fuel reserves is validating.Arkadiusz Siekaniec, vice president of the Trade Union of Miners in Poland, has long argued that the European Union’s push to end coal production on the continent was folly. But now he hopes that others may come around to his point of view.The climate policy “is a suicidal mission” that could leave the entire region overly dependent on Russian fuel, Mr. Siekaniec said last week as American troops landed in his country. “It threatens the economy as well as the citizens of Europe and Poland.”For Mateusz Garus, a blacksmith at Jankowice, a coal mine in Upper Silesia, the heart of coal country, politics and not climate change are driving policy. “We will destroy the power sector,” he said, “and we will be dependent on others like Russia.” More

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    What’s at Stake for the Global Economy as Conflict Looms in Ukraine

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    Countries that depend on the region’s rich supply of energy, wheat, nickel and other staples could feel the pain of price spikes.After getting battered by the pandemic, supply chain chokeholds and leaps in prices, the global economy is poised to be sent on yet another unpredictable course by an armed clash on Europe’s border.Even before the Kremlin ordered Russian troops into separatist territories of Ukraine on Monday, the tension had taken a toll. The promise of punishing sanctions in return by President Biden and the potential for Russian retaliation had already pushed down stock returns and driven up gas prices.An outright attack by Russian troops could cause dizzying spikes in energy and food prices, fuel inflation fears and spook investors, a combination that threatens investment and growth in economies around the world.However harsh the effects, the immediate impact will be nowhere near as devastating as the sudden economic shutdowns first caused by the coronavirus in 2020. Russia is a transcontinental behemoth with 146 million people and a huge nuclear arsenal, as well as a key supplier of the oil, gas and raw materials that keep the world’s factories running. But unlike China, which is a manufacturing powerhouse and intimately woven into intricate supply chains, Russia is a minor player in the global economy.Italy, with half the people and fewer natural resources, has an economy that is twice the size. Poland exports more goods to the European Union than Russia.“Russia is incredibly unimportant in the global economy except for oil and gas,” said Jason Furman, a Harvard economist who was an adviser to President Barack Obama. “It’s basically a big gas station.”An underground gas storage facility in Kasimov, east of Moscow. Russia supplies nearly 40 percent of Europe’s natural gas.Andrey Rudakov/BloombergOf course, a closed gas station can be crippling for those who depend on it. The result is that any economic damage will be unevenly spread, intense in some countries and industries and unnoticed in others.Europe gets nearly 40 percent of its natural gas and 25 percent of its oil from Russia, and is likely to be walloped with spikes in heating and gas bills, which are already soaring. Natural gas reserves are at less than a third of capacity, with weeks of cold weather ahead, and European leaders have already accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.And then there are food prices, which have climbed to their highest level in more than a decade largely because of the pandemic’s supply chain mess, according to a recent United Nations report. Russia is the world’s largest supplier of wheat, and together with Ukraine, accounts for nearly a quarter of total global exports. For some countries, the dependence is much greater. That flow of grain makes up more than 70 percent of Egypt and Turkey’s total wheat imports.This will put further strain on Turkey, which is already in the middle of an economic crisis and struggling with inflation that is running close to 50 percent, with skyrocketing food, fuel and electricity prices.And as usual, the burden falls heaviest on the most vulnerable. “Poorer people spend a higher share of incomes on food and heating,” said Ian Goldin, a professor of globalization and development at Oxford University.Ukraine, long known as the “breadbasket of Europe,” actually sends more than 40 percent of its wheat and corn exports to the Middle East or Africa, where there are worries that further food shortages and price increases could stoke social unrest.Lebanon, for example, which is experiencing one of the most devastating economic crises in more than a century, gets more than half of its wheat from Ukraine, which is also the world’s largest exporter of seed oils like sunflower and rapeseed.On Monday, the White House responded to Mr. Putin’s decision to recognize the independence of two Russian-backed territories in the country’s east by saying it would begin imposing limited sanctions on the so-called Donetsk and Luhansk People’s Republics. Jen Psaki, the White House press secretary, said Mr. Biden would soon issue an executive order prohibiting investment, trade and financing with people in those regions.Analysts watching the unfolding conflict have mapped out a range of scenarios from mild to severe. The fallout on working-class families and Wall Street traders depends on how an invasion plays out: whether Russian troops stay near the border or attack the Ukrainian capital, Kyiv; whether the fighting lasts for days or months; what kind of Western sanctions are imposed; and whether Mr. Putin responds by withholding critical gas supplies from Europe or launching insidious cyberattacks.“Think about it rolling out in stages,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council. “This is likely to play out as a slow motion drama.”As became clear from the pandemic, minor interruptions in one region can generate major disruptions far away. Isolated shortages and price surges— whether of gas, wheat, aluminum or nickel — can snowball in a world still struggling to recover from the pandemic.“You have to look at the backdrop against which this is coming,” said Gregory Daco, chief economist for EY-Parthenon. “There is high inflation, strained supply chains and uncertainty about what central banks are going to do and how insistent price rises are.”Ukraine’s port of Mykolaiv. The Middle East and Africa are especially reliant on Ukraine’s exports of wheat and corn.  Brendan Hoffman for The New York TimesThe additional stresses may be relatively small in isolation, but they are piling on economies that are still recovering from the economic body blows inflicted by the pandemic.What’s also clear, Mr. Daco added, is that “political uncertainty and volatility weigh on economic activity.”That means an invasion could have a dual effect — slowing economic activity and raising prices.In the United States, the Federal Reserve is already confronting the highest inflation in 40 years, at 7.5 percent in January, and is expected to start raising interest rates next month. Higher energy prices set off by a conflict in Europe may be transitory but they could feed worries about a wage-price spiral.“We could see a new burst of inflation,” said Christopher Miller, a visiting fellow at the American Enterprise Institute and an assistant professor at Tufts University.Also fueling inflation fears are possible shortages of essential metals like palladium, aluminum and nickel, creating another disruption to global supply chains already suffering from the pandemic, trucker blockades in Canada and shortages of semiconductors.The price of palladium, for example, used in automotive exhaust systems, mobile phones and even dental fillings, has soared in recent weeks because of fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, used to make steel and electric car batteries, has also been jumping.It’s too early to gauge the precise impact of an armed conflict, said Lars Stenqvist, the chief technology officer of Volvo, the Swedish truck maker. But he added, “It is a very, very serious thing.”“We have a number of scenarios on the table and we are following the developments of the situation day by day,” Mr. Stenqvist said Monday.The West has taken steps to blunt the impact on Europe if Mr. Putin decides to retaliate. The United States has ramped up delivery of liquefied natural gas and asked other suppliers like Qatar to do the same.A front line position in Luhansk Oblast, in eastern Ukraine, a scene of mortar attacks. “This is likely to play out as a slow motion drama,” said one analyst.Tyler Hicks/The New York TimesThe demand for oil might add momentum to negotiations to revive a deal to curb Iran’s nuclear program. Iran, which is estimated to have as many as 80 million barrels of oil in storage, has been locked out of much of the world’s markets since 2018, when President Donald J. Trump withdrew from the nuclear accord and reimposed sanctions.Some of the sanctions against Russia that the Biden administration is considering, such as cutting off access to the system of international payments known as SWIFT or blocking companies from selling anything to Russia that contains American-made components, would hurt anyone who does business with Russia. But across the board, the United States is much less vulnerable than the European Union, which is Russia’s largest trading partner.Americans, as Mr. Biden has already warned, are likely to see higher gasoline prices. But because the United States is itself a large producer of natural gas, those price increases are not nearly as steep and as broad as elsewhere. And Europe has many more links to Russia and engages in more financial transactions — including paying for the Russian gas.Oil companies like Shell and Total have joint ventures in Russia, while BP boasts that it “is one of the biggest foreign investors in Europe,” with ties to the Russian oil company Rosneft. Airbus, the European aviation giant, gets titanium from Russia. And European banks, particularly those in Germany, France and Italy, have lent billions of dollars to Russian borrowers.“Severe sanctions that hurt Russia painfully and comprehensively have potential to do huge damage to European customers,” said Adam Tooze, director of the European Institute at Columbia University.Depending on what happens, the most significant effects on the global economy may manifest themselves only over the long run.One result would be to push Russia to have closer economic ties to China. The two nations recently negotiated a 30-year contract for Russia to supply gas to China through a new pipeline.“Russia is likely to pivot all energy and commodity exports to China,” said Carl Weinberg, chief economist at High Frequency Economics.The crisis is also contributing to a reassessment of the global economy’s structure and concerns about self-sufficiency. The pandemic has already highlighted the downsides of far-flung supply chains that rely on lean production.Now Europe’s dependence on Russian gas is spurring discussions about expanding energy sources, which could further sideline Russia’s presence in the global economy.“In the longer term, it’s going to push Europe to diversify,” said Jeffrey Schott, a senior fellow working on international trade policy at the Peterson Institute for International Economics. As for Russia, the real cost “would be corrosive over time and really making it much more difficult to do business with Russian entities and deterring investment.” More

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    European Steel Plan Shows Biden’s Bid to Merge Climate and Trade Policy

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    A potential agreement on steel trade provides the clearest look yet at how the Biden administration plans to implement a trade policy that is both protectionist and progressiveWASHINGTON — President Biden has promised to use trade policy as a tool to mitigate climate change. This weekend, the administration provided its first look at how it plans to mesh those policy goals, saying the United States and the European Union would try to curb carbon emissions as part of a trade deal covering steel and aluminum.The arrangement, which American and European leaders aim to introduce by 2024, would use tariffs or other tools to encourage the production and trade of metals made with fewer carbon emissions in places including the United States and European Union, and block dirtier steel and aluminum produced in countries including China.If finalized, it would be the first time a U.S. trade agreement includes specific targets on carbon emissions, said Ben Beachy, the director of the Sierra Club’s Living Economy program.“No U.S. trade deal to date has even mentioned climate change, much less included binding climate standards,” said Mr. Beachy.The announcement was short on details, and negotiations with European leaders are likely to face multiple roadblocks. But it provided an outline for how the Biden administration hopes to knit together its concerns about trade and climate and work with allies to take on a recalcitrant China, at a time when progress on multicountry trade negotiations at the World Trade Organization has stalled.“The U.S. leads the world in our clean steel technology,” Gina Raimondo, the secretary of commerce, said in an interview on Monday. She said the United States would work with allies “to preference cleaner steel, which will create an incentive to make more investments in technology,” resulting in fewer carbon emissions and more jobs.In the same interview, Katherine Tai, the United States Trade Representative, said the potential agreement would restrict market access for countries that don’t meet certain carbon standards, or that engage in nonmarket practices and contribute to global overcapacity in the steel sector — accusations that are often levied at China.The effort would seek to build “a global arrangement that promotes not just fair trade in steel but also pro-climate and responsible trade in steel,” Ms. Tai said.Kevin Dempsey, the president of the American Iron and Steel Institute, said at an industry forum in Washington on Tuesday that the arrangement would be “positive for the U.S. industry,” which has the lowest carbon intensity per ton of steel of the major steel-producing countries.China accounts for nearly 60 percent of global steel production. Its use of a common steel-production method causes more than twice as much climate pollution as does the same technology in the United States, according to estimates by Global Efficiency Intelligence.In its announcement on Saturday, the Biden administration also said it had reached a deal to ease the tariffs that former President Donald J. Trump had imposed on European metals while the governments work toward the carbon accord.The United States would replace the 25 percent tariff on European steel and a 10 percent tariff on European aluminum with a so-called tariff-rate quota. In return, the European Union would drop the retaliatory tariffs it imposed on other American products, like bourbon and motorcycles.Under the new terms, 3.3 million metric tons of European steel would be allowed to enter the United States duty-free each year, with any steel above that volume subject to a 25 percent tariff.European producers would be allowed to ship 18,000 metric tons of unwrought aluminum, which often comes in the form of ingots, and 366,000 metric tons of wrought or semifinished aluminum into the United States each year, while volumes above that would be charged a 10 percent tariff, the commerce department said.To qualify for zero tariffs, the steel must be entirely made in the European Union — a provision designed to keep cheaper steel from countries including China and Russia from finding a backdoor into the United States via Europe.Supporters of free trade have criticized the Biden administration for relying on the same protectionist trade measures used by the Trump administration, which deployed both tariffs and quotas to protect domestic metal makers.Jake Colvin, the president of the National Foreign Trade Council, said the announcement would ratchet down trade tensions between the United States and Europe. But he called the trade barriers “an unwelcome form of managed trade” that would add costs and undermine American competitiveness.Ms. Tai said the administration had made a deliberate choice not to heed calls “for the president to just undo everything that the Trump administration had done on trade.”Mr. Biden’s plan, she said, “is that we formulate a worker-centered trade policy. And that means not actually going back to the way things were in 2015 and 2016, challenging us to do trade in a different way from how we’ve done it earlier, but also, critically, to challenge us to do trade in a way different from how the Trump administration did.”A factory in southern China that makes steel parts. The trade proposal would block dirtier steel and aluminum produced in countries including China.The New York TimesThe focus on carbon emissions differs from that of the Trump administration, which rejected any attempts to negotiate on carbon mitigation and withdrew the United States from the Paris Agreement on climate change.But negotiations with Europe will face challenges, among them developing a common methodology for measuring how much carbon is emitted as certain products are made. Still, the announcement suggests that the United States and Europe might be ready to work toward a collaborative approach on lowering carbon emissions, despite past differences on how the problem should be addressed.European leaders have long advocated an explicit price on the carbon dioxide that companies emit while making their products. In July, the European Union proposed a carbon border adjustment mechanism that would require companies to pay for carbon emissions produced outside Europe, to discourage manufacturers from evading Europe’s restrictions on pollution by moving abroad.An explicit tax on carbon has met with more resistance in the United States, where some politicians want to update regulatory requirements or put the onus on companies to invest in cleaner production technology.Todd Tucker, the director of governance studies at the Roosevelt Institute, said the latest announcement suggested that the European Union may be “a little bit more flexible” on how the United States and other partners would go about lowering emissions. Mr. Biden’s reconciliation bill, for example, contains a proposal for a “green bank” that could provide financing for firms to transition to cleaner technologies, he said.“If the U.S. ends up achieving decarbonization through more of an investments and industrial-policy approach, it seems like they’re OK with that,” Mr. Tucker said.Though the earliest negotiations over carbon emissions in the steel sector involve the European Union, the Biden administration says it wants to quickly extend the partnership to other countries.In twin announcements on Sunday, the Department of Commerce said it had begun close consultations with Japan and the United Kingdom “on bilateral and multilateral issues related to steel and aluminum,” with a focus on “the need for like-minded countries to take collective action.”Both Japan and the United Kingdom still face a 25 percent tariff on steel exports to the United States imposed by Mr. Trump.The talks suggest a template for how the Biden administration will try to engage allies to counter China’s growing economic heft and make progress on goals like climate and workers rights.The administration has rejected Mr. Trump’s “America First” approach to trade, saying the United States needs to work with like-minded countries. But they have also acknowledged that the inefficiency of negotiations at the World Trade Organization, and distanced themselves from broader, multicountry trade deals, like the Trans-Pacific Partnership.The announcements suggest that the Biden administration may not see comprehensive trade deals as the most effective way to accomplish many of its goals, but rather, industry-specific agreements among a limited number of democratic, free-market countries. That approach is similar to the cooperation the United States announced with the European Union for the civil aircraft industry in June.Ms. Raimondo said the agreement to ease the tariffs on the European Union was a “very significant achievement” that would help to alleviate supply chain problems and lower prices for companies that use steel and aluminum to make other products.“It’s all kind of a table setter to a global arrangement, whereby we work with our allies all over the world over the next couple of years,” she said. More

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    U.K. Braces for a Difficult Holiday Season Due to Shortages

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    Military personnel are driving transport trucks. Pig farmers may start culling their stock. Even the government says shortages will affect Christmas, as Britons brace for a challenging winter.BUNGAY, England — To understand the deep sense of anxiety Britons feel about the supply shortages currently afflicting the nation — and threatening disruptions to the Christmas dinner table — one need only travel to Simon Watchorn’s pig farm, about two hours northeast of London.In 2014, Mr. Watchorn was England’s pig farmer of the year, with a thriving business. But this year, he said, the outlook for the fall is bleak.Slaughterhouses are understaffed and are processing a smaller-than-usual number of pigs. There is a shortage of drivers to move pork to grocery stores and butcher shops. And there are fewer butchers to prepare the meat for consumers.If the problems persist, Mr. Watchorn may have to start culling some of his 7,500 pigs by the end of next month. Pigs grow about 15 pounds each week, and after a certain point, they are too big for slaughterhouses to process.Mr. Watchorn said the last time he can remember things being this bad was during an outbreak of mad cow disease in the late 1990s. “It’s a muddle,” he said. “It’s worse than a muddle, it’s a disaster, and I don’t know when it’s going to finish.”Mr. Watchorn, 66, is one of many producers of food and other goods warning of a daunting winter ahead for Britons. Shortages continued to bedevil the British economy on Monday as gas stations in London and in southeastern England reported trouble getting fuel, and the government began deploying military personnel to help ease the lack of drivers. Supermarket consortiums say pressures from rising transport costs, labor shortages and commodity costs are already pushing prices higher and will likely continue to do so.The chancellor of the Exchequer, Rishi Sunak, acknowledged on BBC Radio on Monday that there will shortages at Christmastime. He said the government was doing “everything we can” to mitigate the supply chain issues but admitted there was no “magic wand.”Mr. Watchorn, whose farm is near the town of Bungay, England, northeast of London, is convinced that Brexit is responsible for the current distress.Andrew Testa for The New York TimesMr. Watchorn, who prides himself on running a farm where all adult stock live outside, is convinced that Brexit is responsible for the current distress, saying the exodus of European workers from Britain had led to damaging labor shortages. The British people voted to break with the European Union to reduce immigration, he believes, without realizing how damaging a cliff-edge exit from the bloc would be for businesses.“They didn’t vote for supermarket shortages,” he said on Sunday as dozens of pigs gathered around him to be fed. “They didn’t understand that was going to be a probable, likely outcome.”Mr. Sunak and other Conservative leaders say supply problems are a global issue largely attributable to the pandemic and not limited to Britain. Indeed, businesses around the world are facing rising energy prices, product shortages and labor shortages.But the challenges in Britain are acute, with many industries facing a shortage of workers — in part because of the pandemic, but also, many business owners say, because of stricter immigration laws that came into effect after Britain’s exit from the European Union on Jan. 1.“We are desperately trying to find workers,” said Jon Hare, a spokesman for the British Meat Processors Association, which estimates that Britain is short of about 25,000 butchers and processing plant workers.He called on the government to issue more short-term visas to foreign workers to help the industry with the transition outside of the European Union. “There are only so many people you can take out of the production system before the system starts breaking down,” he said.A shopper confronted sparse food shelves in a Co-op supermarket in Harpenden, England, in September.Peter Cziborra/ReutersThe specter of disruptions to the holiday season is particularly resonant in Britain, where Christmas isn’t Christmas without traditional foods. And yet British meat producers say the dinner table could be lacking some of the seasonal specialties that people count on every December. That includes pigs in a blanket (bacon-wrapped sausages that are different from the American version), glazed ham and Yorkshire pudding, which require additional labor to prepare, Mr. Hare said.The National Pig Association has warned that about 120,000 pigs are backed up on farms because of a lack of slaughterhouse workers, and the British Poultry Council said it expected to cut Christmas turkey production by 20 percent. On Monday, protesters gathered outside of the Conservative Party conference in Manchester with signs that said “All we want for Christmas is our pigs in a blanket” and “#saveourbacon.”Consumers are already anticipating shortages. One farmer in Leeds said that by last month, customers had already ordered all 3,500 turkeys she was raising for Christmas — a first.A lack of truck drivers has also caused sporadic shortages for staples including eggs, milk and baked goods. One in six people in Britain said that in recent weeks they had not been able to buy certain essential food items because they were unavailable, according to a report by the Office for National Statistics, which surveyed about 3,500 households.Some consumers interviewed in recent days said they had not had any trouble finding what they wanted at grocery stores. But Meriem Mahdhi, 22, who moved from Italy to Colchester in southeast England last month to attend college, said she had struggled to find essential items at her local grocery store, Tesco, Britain’s largest supermarket chain.“All the dried foods like pasta, canned fruit, it’s all gone, every day,” she said. Tesco did not respond to a request for comment.Seeking a quick fix, 200 military personnel in fatigues on Monday arrived at refineries to help deliver fuel to gas stations. About half of them drove civilian vehicles and the others provided logistical support. “As an extra precaution we have put the extra drivers on,” Mr. Sunak said.Over the weekend, the government said it had extended thousands of temporary visas for foreign workers to work in Britain until the first few months of next year. But economists said the temporary visas were unlikely to be enough to make much of a difference, since there are shortages at every link in the supply chain.“There is a lack of workers coming in, and British people are not willing to do the job,” said Robert Elliott, a professor at the University of Birmingham. He said it was difficult to say how much of the supply-chain issues were a result of Brexit versus the pandemic, but regardless, the government has chosen policies that have not made the situation better.The government has underinvested in training workers to drive trucks, he said, and too few young people are pursuing the profession to replace ones who have retired.Even before Brexit, the meat industry had difficulties attracting workers because of the hard work, low pay and remote locations of processing plants. Producers have raised wages for butchers by an average of 10 percent this year, the British Meat Processors Association said, but shortages are still so severe that members of the British Poultry Council reported they had cut weekly chicken production by five to 10 percent.Mr. Watchorn said the situation was “a disaster, and I don’t know when it’s going to finish.”Andrew Testa for The New York TimesJames MacGregor, the general manager at Riverford, an organic food company based in Devon, England, said he was short of about 40 workers, or about 16 percent of the company. Butchers have been particularly hard to find, he said. To cope with the shortages, Riverford will likely offer fewer products for sale around Christmas.“It feels like we’re staring down the barrel of a gun a little bit at the moment,” Mr. MacGregor said. “It’s highly likely if we don’t see movement in terms of fuel and labor, we will ultimately end up passing some of this cost on to the consumer.”Kathy Martyn, the owner of Oakfield Farm in East Sussex, which has about 100 pigs, said she was relieved to find fuel on Friday, just in time to make it to a catering job for a wedding over the weekend. She said that fuel shortages have made planning difficult, and that she may have to cull about 20 of her pigs this year.“We’ll just roll up our sleeves and take a deep breath,” Ms. Martyn said.Mr. Watchorn, the pig farmer, said his farm will be losing money this year. Even culling pigs is costly. If it comes to that, he would have to find someone to slaughter the animals and then take them away. Financial help from the government to do that would help, but he said he was not counting on it. “When pigs fly,” he quipped.Mr. Watchorn said the last time he can remember things being this bad was during an outbreak of mad cow disease in the 1990s.Andrew Testa for The New York TimesAina J. Khan More

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    U.S. and Europe Announce New Trade Cooperation, but Disputes Linger

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    A new trade and technology partnership aims to counter China, but tensions over issues like metal tariffs remain.WASHINGTON — The United States and the European Union took a step this week toward a closer alliance by announcing a new partnership for trade and technology, but tensions over a variety of strategic and economic issues are still simmering in the background.The establishment of the Trade and Technology Council, which aims to establish a united front on trade practices and sophisticated technologies, is a significant test of whether President Biden can fulfill his pledge to mitigate trans-Atlantic tensions that soared under President Donald J. Trump. The Biden administration has long described Europe as a natural partner in a broader economic and political confrontation with China, and it criticized the Trump administration for picking trade fights that alienated European governments.But while officials on both sides say trans-Atlantic relations have been improving, the U.S.-Europe reset has been rockier than anticipated.The inaugural meeting of the Trade and Technology Council in Pittsburgh this week was nearly scuttled after the Biden administration said it would share advanced submarine technology with Australia, a deal that enraged the French government.Europeans say they have been frustrated by a lack of consultation with the Biden administration on a range of issues, including the U.S. withdrawal from Afghanistan. And officials face a difficult negotiation in the coming weeks over metal tariffs that Mr. Trump imposed globally in 2018.Europeans have said they will impose retaliatory tariffs on other U.S. products as of Dec. 1 unless Mr. Biden rolls back a 25 percent tax on European steel and a 10 percent duty on aluminum.“The E.U. initially viewed the Biden administration as a ‘breath of fresh air’ but is now increasingly wondering how much Biden will differ from Trump,” Stephen Olson, a senior research fellow at the Hinrich Foundation and a former U.S. trade negotiator, wrote in a recent analysis. “Prospects for a U.S.-E.U. ‘united front’ have been overblown from the start.”Valdis Dombrovskis, the European commissioner for trade, said in a round table with journalists in Washington on Tuesday that the two sides had been doing intensive work on the issue. They were aiming to reach an agreement by early November to have enough time to avert European countertariffs, he said.The European Union was disappointed with the Biden administration’s handling of the Australian submarine agreement, Mr. Dombrovskis added, but “occasional divergences” should not disrupt their strategic alliance.“Of course, as allies and friends, we do not always agree on everything, and we have seen this in recent weeks,” Mr. Dombrovskis said, adding that there had been more engagement from the Biden administration than the Trump administration.In meetings this week, Secretary of State Antony J. Blinken; Gina Raimondo, the commerce secretary; Katherine Tai, the U.S. trade representative; and their European counterparts pledged to collaborate on a variety of 21st-century issues, such as controlling exports of advanced technology, screening investments for national security threats and offering incentives to manufacture chips in Europe and the United States as a semiconductor shortage continues.Though official documents did not explicitly mention China, the partnership is clearly aimed in part at countering the country’s authoritarian practices. Among other goals, the council promised to combat arbitrary and unlawful technological surveillance and the trade-distorting practices of nonmarket economies.U.S. and European officials in June announced an agreement ending a 17-year dispute over aircraft subsidies given to Airbus and Boeing.But a lingering fight over Mr. Trump’s metal tariffs on imports from Europe and elsewhere could prove harder to resolve. Mr. Biden is under intense pressure to maintain barriers to imports from domestic steel makers and labor unions that supported his campaign.In a virtual round table on Thursday, industry executives and labor leaders said that cheap steel produced in Europe could still damage the U.S. industry.While China is best known for subsidizing its steel industry, European makers have also been major recipients of government subsidies, giving them an unfair advantage over U.S. competitors, said Lourenco Goncalves, the chief executive of Cleveland-Cliffs Inc., an American iron ore mining company.He urged the Biden administration to negotiate from a “position of strength.”“We need the White House, and we need the ones on the front line not to be affected by sweet talk, particularly from the Europeans,” Mr. Goncalves said. “I believe that the friends are a lot worse than the enemies.”U.S. officials made an offer to their European counterparts this summer to transform the current 25 percent tariff on European steel into a so-called tariff-rate quota, an arrangement in which higher levels of imports are met with higher duties, according to a person familiar with the discussions, who spoke on the condition of anonymity to discuss confidential matters.The Europeans have argued for a more flexible arrangement, and discussions are expected to intensify over the next three weeks, the person said.Thomas Kaplan More

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    Inflation's Worldwide Surge May Be a Good Sign

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    Inflation has surged across advanced economies. The shared experience underlines that price gains come from temporary drivers — for now.Price gains are shooting higher across many advanced economies as consumer demand, shortages and other pandemic-related factors combine to fuel a burst of inflation.The spike has become a source of annoyance among consumers and worry among policymakers who are concerned that rapid price gains might last. It is one of the main factors central bankers are looking at as they decide when — and how quickly — to return monetary policy to normal.Most policymakers believe that today’s rapid inflation will fade. That expectation may be reinforced by the fact that many economies are experiencing a price pop in tandem, even though they used vastly different policies to cushion the blow of pandemic lockdowns.The shared inflation experience underscores that mismatches between what consumers want to buy and what companies are able to deliver are helping to drive the price increases. While those may be amplified by worldwide stimulus spending, they are not the simple result of nation-specific policy choices — and they should eventually work themselves out.“There is a lot of stimulus in the system, and it is pushing up demand and that’s driving higher inflation,” said Kristin Forbes, a Massachusetts Institute of Technology economist and former external member of the Bank of England’s Monetary Policy Committee.“Some of these big global moves do tend to pass through and prove temporary,” Ms. Forbes said. “The big question is: How long will these supply chain pressures last?”The United States Federal Reserve’s preferred price index rose 4.2 percent in July from the prior year, more than double the central bank’s 2 percent target, which it seeks to hit on average over time. In the eurozone, inflation recently accelerated to the highest level in about a decade. In Britain, Canada, New Zealand, South Korea and Australia, price gains have jumped well above the level central banks set as their goals.The big increases have come as supply chains have snarled around the world, adding to transportation costs and throwing the delicate balance of corporate globalization badly out of whack. Prices for airline tickets and hotel rooms dipped last year in the depths of the pandemic, and now they’re bouncing back to normal levels, making the numbers look higher than they would if compared with a less depressed base. Neither issue should last indefinitely.There is a danger that the global price surge could last longer — and become more country-specific — if workers in nations experiencing high inflation today bargain for wage increases and are more accepting of steadily higher prices. Bringing entrenched inflation back under control could require painful monetary policy responses, ones that would probably plunge national economies back into recession.Given those high stakes, the mere possibility of lasting inflation is ramping up pressure on central banks around the world to consider dialing back their still-substantial monetary policy support — even though many are not yet fully recovered and the pandemic has not ended.Economies around the world are growing quickly this year, partly as a result of enormous government spending that has pumped some $8.7 trillion into the advanced Group of 20 markets since January 2020 and central bank policies that have made money very cheap to borrow and spend. Central banks have been buying bonds to hold down longer-term interest rates and keeping short-term borrowing costs near or even below zero.It’s not just higher prices that advanced economies have in common. Complaints about labor shortages in some fields are also bubbling up around the world. Job vacancy rates have been climbing in Europe’s construction, leisure and hospitality, and information technology sectors. In Britain, firms widely complain of labor shortages, and a dearth of truck drivers caused partly by the nation’s exit from the European Union has disrupted supply chains and fueled shortages of milkshakes at McDonald’s and peri-peri chicken at Nando’s, a restaurant chain famous for the dish.A restaurant in London in June. Job vacancy rates have been climbing in Europe’s construction, leisure and hospitality, and information technology sectors.Andrew Testa for The New York TimesThose widespread trends highlight the oddities of the current economic moment. Commerce came to a sudden stop and then abruptly restarted when government relief payments padded consumers’ wallets, making people eager to spend even as manufacturers struggled to get back to full production and restaurants scrambled to staff back up.Still, some central bankers are growing nervous about their policies in countries where inflation is higher and labor supply issues are beginning to push up wages. They fret that a cocktail of low interest rates and big government bond buying will add fuel to the temporary-inflation fire, helping asset prices and consumer prices to remain higher. Prominent commentators, both in the media and in financial centers from the City of London to Wall Street, have added to the chorus arguing that central bankers are “behind the curve.”In Britain, Michael Saunders, a policymaker, already voted to end the central bank’s bond-buying program, predicting that some of the inflation spike would not be temporary. A few European central bankers have indicated that they should start debating slowing down their pandemic-era stimulus purchase program, and at least one has even suggested an immediate slowdown. Some U.S. officials, including the president of the Federal Reserve Bank of St. Louis, James Bullard, have said that today’s inflation might not fully fade and that policy ought to be poised to react.The extreme worriers are in the minority. Most policymakers in advanced economies are betting that price increases be temporary, and that inflation might even fade back to uncomfortably low levels over the longer term. From Ottawa to Frankfurt, they have warned against overreacting.“While the underlying global disinflationary factors are likely to evolve over time, there is little reason to think that they have suddenly reversed or abated,” Jerome H. Powell, the Fed chair, said during a recent speech. “It seems more likely that they will continue to weigh on inflation as the pandemic passes into history.”Before the pandemic, advanced economies had spent years trying to coax inflation higher, trying to stop an economically damaging downward spiral that had begun to take hold.Slow price gains may sound like good news to people buying gas, baguettes or hot dogs, but inflation counts into interest rates, so its downward trend in the 21st century has left less room for policymakers to cut rates to rescue the economy during times of trouble. That has helped to weaken recoveries, dragging inflation even lower and fueling a cycle of stagnation.Even amid the reopening, Japan — a notable outlier among advanced economies — continues to fight that long-run war, battling outright price declines. Coronavirus outbreaks have kept shoppers there at home, weighing on prices for Uniqlo attire and snacks alike. Persistent forces like population aging have also put a lid on demand and constrained companies’ ability to charge more.A shopping district in Tokyo last month. Coronavirus outbreaks have kept shoppers there at home.Franck Robichon/EPA, via ShutterstockOther economies are expected to return to their trends of slow growth and weak inflation as the pandemic shock fades and population aging becomes a more dominant force, said Jay Bryson, chief economist at Wells Fargo. “It’s like going up a step,” Mr. Bryson said. “Once you get to the next step, the rate of increase drops off. It’s a one-time price level adjustment because of the pandemic.”If inflation does fade as policymakers expect, the current burst could actually offer benefits: In the United States, it has helped to nudge inflation expectations back out of the dangerously low zone, to levels that are historically consistent with healthy price gains. It has proved harder for central bankers to move prices up than it is for them to cool them off, so that opportunistic inflation could help the Fed to nail its price goals in the longer run.But if it takes too long to go away, the consequences could be more serious.“If I’m wrong and inflation does get out of hand, that would lead to slower economic growth in a longer-run sense,” Mr. Bryson said, explaining that high inflation tends to bounce around a lot, making it tough for companies to plan and invest.But he said that even if higher prices lasted, they might settle in at 2.5 percent or 3 percent — which would not cause meaningful problems. By contrast, inflation in the United States popped to double digits during the Great Inflation of the 1970s.“I don’t think we’re talking about 1970s-style inflation,” agreed Mark Gertler, an economist at New York University. Policymakers around the world have committed to fighting inflation and will not allow it to run out of control. “Central banks can always make inflation transitory by raising interest rates enough.”Eshe Nelson More

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    Europe’s Pandemic Aid Is Winding Down. Is Now the Best Time?

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    Governments want vaccinations and a business rebound to carry the economy now, but cutting aid too quickly could create economic aftershocks.PARIS — After almost 18 months of relying on expensive emergency aid programs to support their economies through the pandemic, governments across Europe are scaling back some of these measures, counting on burgeoning economic growth and the power of vaccines to carry the load from here.But the insurgent spread of the Delta variant of the coronavirus has thrown a new variable into that calculation, prompting concerns about whether this is the time for scheduled rollbacks in financial assistance.The tension can be seen in France, where the number of virus cases has increased more than 200 percent from the average two weeks ago, prompting President Emmanuel Macron to try to push the French into getting vaccinated by threatening to make it harder to shop, dine or work if they don’t.At the same time, some pandemic aid in France — including generous state funding that prevented mass layoffs by subsidizing wages, and relief for some businesses struggling to pay their bills — is being reduced.A government panel recently urged “the greatest caution” about winding down emergency aid even further at the end of the summer.The eurozone economy has finally exited a double-dip recession, data last week showed, reversing the region’s worst downturn since World War II. European Union governments, which have spent nearly 2 trillion euros in pandemic aid and stimulus, have released nearly all businesses from lockdown restrictions, and the bloc is on target to fully vaccinate 70 percent of adults by autumn to help cement the rebound.But the obstacles to a full recovery in Europe remain large, prompting worries about terminating aid that has been extended repeatedly to limit unemployment and bankruptcies.“Governments have provided very generous support through the pandemic with positive results,” said Bert Colijn, senior eurozone economist at ING. “Cutting the aid short too quickly could create an aftershock that would have negative economic effects after they’ve done so much.”In Britain, the government has halted grants for businesses reopening after Covid-19 lockdowns, and will end a special unemployment benefit top-up by October. At least half of the 19 countries that use the euro have already sharply curtailed pandemic aid, and governments from Spain to Sweden plan to phase out billions of euros’ worth of subsidies more aggressively in autumn and through the end of the year.Germany recently allowed the expiration of a rule excusing firms from declaring bankruptcy if they can’t pay their bills. Debt repayment holidays for companies that took cheap government-backed loans will soon wind down in most eurozone economies.And after repeated extensions, state-backed job retention schemes, which have cost European Union countries over €540 billion, are set to end in September in Spain, the Netherlands, Sweden and Ireland, and become less generous in neighboring countries in all but the hard-hit tourism and hospitality sectors.Aid programs that helped cushion income losses for 60 million people at the height of the crisis continue to pay for millions of workers on standby. Businesses and the self-employed have access to billions in low-interest loans, state-funded grants and tax holidays.Meanwhile, employees have begun returning to offices, shops and factory floors. Global automakers are working to adapt to supply-chain issues. Small retailers are offering click-and-collect sales, and cafes are providing takeout service.Governments are betting that the growth momentum will be enough to wean their economies off life support.“We can’t use public money to make up for losses in the private sector forever,” said Guntram Wolff, the director of Bruegel, an economic research institution based in Brussels. “That’s why we need to find a strategy for exiting.”Governments are looking to reallocate more spending toward areas of the economy that promise future growth.“It’s crucial to shift spending towards sectors that will outlast the pandemic,” said Denis Ferrand, the director of Rexecode, a French economic research organization. “We need to accelerate a transformation in digitalization, energy and the environment.”But swaths of workers risk losing their jobs when the income support is withdrawn, especially in the hospitality and travel industries, which continue to operate at up to 70 percent below prepandemic levels. The transition is likely to be painful for many.Diners in London last week. The Bank of England expects about a quarter of a million people to lose their jobs when Britain’s furlough program ends next month.Tolga Akmen/Agence France-Presse — Getty ImagesIn Britain, a furlough program that has saved 12 million jobs since the start of the pandemic today keeps fewer than two million workers on standby support. But after the scheme ends in September, around a quarter of a million people are likely to lose their jobs, the Bank of England has forecast.“A significant fraction of people coming off furlough and not being rehired will find themselves facing very large drops of income,” said Tom Waters, a senior research economist at the Institute for Fiscal Studies in London.Small businesses that wouldn’t have made it through the crisis without government assistance are now calculating how to stay on their feet without it..css-1xzcza9{list-style-type:disc;padding-inline-start:1em;}.css-3btd0c{font-family:nyt-franklin,helvetica,arial,sans-serif;font-size:1rem;line-height:1.375rem;color:#333;margin-bottom:0.78125rem;}@media (min-width:740px){.css-3btd0c{font-size:1.0625rem;line-height:1.5rem;margin-bottom:0.9375rem;}}.css-3btd0c strong{font-weight:600;}.css-3btd0c em{font-style:italic;}.css-w739ur{margin:0 auto 5px;font-family:nyt-franklin,helvetica,arial,sans-serif;font-weight:700;font-size:1.125rem;line-height:1.3125rem;color:#121212;}#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-family:nyt-cheltenham,georgia,’times new roman’,times,serif;font-weight:700;font-size:1.375rem;line-height:1.625rem;}@media (min-width:740px){#NYT_BELOW_MAIN_CONTENT_REGION .css-w739ur{font-size:1.6875rem;line-height:1.875rem;}}@media (min-width:740px){.css-w739ur{font-size:1.25rem;line-height:1.4375rem;}}.css-9s9ecg{margin-bottom:15px;}.css-uf1ume{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-box-pack:justify;-webkit-justify-content:space-between;-ms-flex-pack:justify;justify-content:space-between;}.css-wxi1cx{display:-webkit-box;display:-webkit-flex;display:-ms-flexbox;display:flex;-webkit-flex-direction:column;-ms-flex-direction:column;flex-direction:column;-webkit-align-self:flex-end;-ms-flex-item-align:end;align-self:flex-end;}.css-12vbvwq{background-color:white;border:1px solid #e2e2e2;width:calc(100% – 40px);max-width:600px;margin:1.5rem auto 1.9rem;padding:15px;box-sizing:border-box;}@media (min-width:740px){.css-12vbvwq{padding:20px;width:100%;}}.css-12vbvwq:focus{outline:1px solid #e2e2e2;}#NYT_BELOW_MAIN_CONTENT_REGION .css-12vbvwq{border:none;padding:10px 0 0;border-top:2px solid #121212;}.css-12vbvwq[data-truncated] .css-rdoyk0{-webkit-transform:rotate(0deg);-ms-transform:rotate(0deg);transform:rotate(0deg);}.css-12vbvwq[data-truncated] .css-eb027h{max-height:300px;overflow:hidden;-webkit-transition:none;transition:none;}.css-12vbvwq[data-truncated] .css-5gimkt:after{content:’See more’;}.css-12vbvwq[data-truncated] .css-6mllg9{opacity:1;}.css-qjk116{margin:0 auto;overflow:hidden;}.css-qjk116 strong{font-weight:700;}.css-qjk116 em{font-style:italic;}.css-qjk116 a{color:#326891;-webkit-text-decoration:underline;text-decoration:underline;text-underline-offset:1px;-webkit-text-decoration-thickness:1px;text-decoration-thickness:1px;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:visited{color:#326891;-webkit-text-decoration-color:#326891;text-decoration-color:#326891;}.css-qjk116 a:hover{-webkit-text-decoration:none;text-decoration:none;}Fabien Meaudre, who runs an artisanal soap boutique in central Paris, got over €10,000 in grants and a state-backed loan that allowed him to stay afloat during and after the three national lockdowns imposed in France since the pandemic hit.Now that his store is reopened, business is starting to get back to normal. “But there are no tourists, and it’s very calm,” he said.“We are very grateful for the aid we received,” Mr. Meaudre added. “But we know we will have to pay this money back.”Mr. Macron, who promised to steer Europe’s second-largest economy through Covid “no matter the cost,” is leading other countries in trying to push for a tipping point where the lockdowns that required massive government support become less and less necessary.But the Delta variant is upending even the most carefully calibrated efforts to keep economies open.In the Netherlands, where half the population is fully inoculated, the government recently reinstated some Covid restrictions days after lifting them, after Delta cases spiked.Spain and Portugal have been reeling from hotel cancellations as the variant spread in vacation hot spots that desperately need an economic boost. The Greek party island of Mykonos even banned music temporarily to stop large gatherings, sending tourists fleeing and creating fresh misery for businesses counting on a recovery.Moviegoers in France must present a “health pass” to enter the theater, which an industry group says has reduced the number of moviegoers.Rafael Yaghobzadeh/Associated PressAnd in France, trade organizations representing cinemas and sports venues are worried that Mr. Macron’s new requirement that people carry a so-called health pass — proving vaccination, a negative test or a recent Covid recovery — to get into crowded spaces is already killing a budding recovery.Some big movie halls lost up to 90 percent of customers from one day to the next when the health pass requirement went into effect this week, said Marc-Olivier Sebbag, a representative for the National Federation of French Cinemas. “It’s a catastrophe,” he said.Such precariousness helps explain why some officials are wary of letting the support expire entirely, and economists say governments are likely to have to keep spending, albeit at lower levels, well beyond when they had hoped to wind down.Withdrawing aid is “totally justified if there’s a rapid recovery,” Benoît Coeuré, a former European Central Bank governor and head of the French government panel assessing pandemic spending, told journalists last week.“But there is still uncertainty, and if the rebound doesn’t come or if it’s weaker than expected,” he said, “we’ll need to pace the removal of support.”Jack Ewing More

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    E.U. Delays Digital Levy as Tax Talks Proceed

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    The postponement came as Treasury Secretary Janet Yellen arrived in Brussels to continue pushing for a global minimum tax.BRUSSELS — The United States secured a diplomatic victory in Europe on Monday when European Union officials agreed to postpone their proposal for a digital levy that threatened to derail a global effort to crack down on tax havens.The delay removes another potential obstacle to the broader tax agreement, which gained momentum over the weekend after finance ministers from the Group of 20 countries formally backed a new framework. That deal, which officials hope to make final by October, would usher in a global minimum tax of at least 15 percent and allow countries to tax large, profitable companies based on where their goods and services are sold. If enacted, the changes would entail the biggest overhaul of the international tax system in a century.With those negotiations in their final stretch, the European Union was planning to propose a 0.3 percent tax on the goods and services sold online by all companies operating in the European Union with annual sales of at least 50 million euros. That was intended to help fortify a fiscal recovery fund and had been in development since last year, when the international talks taking place at the Organization for Economic Cooperation and Development appeared to be on life support.But that new levy had been unacceptable to U.S. officials, who viewed it as disproportionately hitting American firms. As Treasury Secretary Janet L. Yellen arrived in Brussels to pressure the European Union to drop or delay the plan, officials announced on Monday that it would be shelved.“I think we will work together to reach this global agreement,” Paolo Gentiloni, European commissioner for economy, told reporters after a meeting with Ms. Yellen. “In this framework I informed Secretary Yellen of our decision to put on hold the proposal of the commission of a digital levy to allow to us to concentrate, working hand in hand to achieve the last mile of this historic agreement.”A European Commission spokesman suggested that the delay would remain in place until October, a time frame that is in line with the deadline set by the O.E.C.D. to complete a global tax agreement.Ahead of a meeting with the Eurogroup, a club of euro-area finance ministers, Ms. Yellen had waved off questions about the significance of the digital levy delay. A Treasury Department spokeswoman said she had no comment.At a news conference in Venice on Sunday, Ms. Yellen made clear that she believed that the new E.U. proposal ran counter to the broader talks over a minimum tax and the elimination of digital services taxes in Europe and other countries.“It’s really up to the European Commission and the members of the European Union to decide how to proceed, but those countries have agreed to avoid putting in place in the future and to dismantle taxes that are discriminatory against U.S. firms,” Ms. Yellen said.Other finance ministers indicated that the delay was another sign of progress.“It’s very, very good that we are now going to the next step, discussing how we will implement this at the European Union and that the European Union is deciding not to go with its own proposal to the public today,” Olaf Scholz, Germany’s finance minister, said as he entered the meeting.The E.U. digital levy proposal faced a difficult path to becoming law in Europe, but the prospect of a new proposal that could be construed as a tax that targets American companies would have been another distraction for the fragile negotiations.The United States has already been angered by other digital taxes that countries like France, Italy and Britain have enacted, which are separate from the new proposal. More than a dozen countries have enacted or announced plans in recent years to move forward with their own digital taxes.The Biden administration has asked countries to immediately drop their digital taxes and has prepared retaliatory tariffs on a wide swath of European goods, including cheese, wine and clothing. As part of the global tax negotiations, countries have said they are willing to do so in exchange for additional tax on the largest and most profitable multinational enterprises, those with profit margins of at least 10 percent, that would be based on where their goods or services were sold, even if they had no physical presence there.France, Europe’s biggest proponent of a digital tax, had no comment Monday. Its finance minister, Bruno Le Maire, had said during the weekend that France would legally commit to withdrawing its digital services tax only after an agreement was in effect, which is unlikely to happen before 2023.In remarks at the meeting on Monday, Ms. Yellen emphasized the importance of a close relationship between the United States and the European Union and underscored the importance of the global tax agreement that she has been helping to broker. She argued that a deal over a global minimum tax would help European nations make important investments in their economies and reduce inequality.“Long-run fiscal sustainability is critically important, which is one of the reasons why we need to continue working collectively to implement a global minimum tax of at least 15 percent, in line with the commitment the G20 made just days ago,” Ms. Yellen said. “We hope all E.U. member states will join the consensus and the European Union will move forward on this issue at E.U. level.”Ms. Yellen made the case that fiscal sustainability should be achieved by taxing multinational companies, adding: “We need sustainable sources of revenue that do not rely on further taxing workers’ wages and exacerbating the economic disparities that we are all committed to reducing.”The meeting also offered Ms. Yellen an opportunity to persuade Ireland to join the global agreement. Ireland, Estonia and Hungary have yet to sign on to the deal, which is now backed by 132 countries. Because support must be unanimous within the European Union, their resistance could scuttle the entire agreement.The United States has been trying to make the case to Ireland that the proposed tax changes in the United States that aim to curb profit shifting would nullify many of the benefits Ireland had gained from having a tax rate of just 12.5 percent. They are also trying to convince Ireland that its status as a corporate hub would be secure even if it raised its tax rate, hoping to alleviate Irish concerns that joining the agreement would upend its economic model.O.E.C.D. officials believe that Ireland is withholding its support for the agreement until the Biden administration demonstrates that it can pass tax legislation in the United States. Ms. Yellen will return to Washington on Tuesday and work with members of Congress to win support for the deal.After a meeting with Ms. Yellen, Paschal Donohoe, Ireland’s finance minister and president of the Eurogroup, offered an optimistic tone but made no commitments. He said that he had a “very good engagement” with the Treasury secretary and that there was “further work ahead.”“I affirmed to Secretary Yellen that Ireland remains very committed to the process,” Mr. Donohoe said, promising that he would remain “constructively engaged.”Liz Alderman More