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    Russia Is Importing Western Weapons Technology, Bypassing Sanctions

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    Western technology goods are winding up in Russian missiles, raising questions about the efficacy of sanctions.Late last month, American and European Union officials traded information on millions of dollars’ worth of banned technology that was slipping through the cracks of their defenses and into Russian territory.Senior tax and trade officials noted a surge in chips and other electronic components being sold to Russia through Armenia, Kazakhstan and other countries, according to slides from the March 24 meeting obtained by The New York Times. And they shared information on the flow of eight particularly sensitive categories of chips and other electronic devices that they have deemed as critical to the development of weapons, including Russian cruise missiles that have struck Ukraine.As Ukraine tries to repel Russia from its territory, the United States and its allies have been fighting a parallel battle to keep the chips needed for weapons systems, drones and tanks out of Russian hands.But denying Russia access to chips has been a challenge, and the United States and Europe have not made a clear victory. While Russia’s ability to manufacture weaponry has been diminished because of Western sanctions adopted more than a year ago, the country is still gaining circuitous access to many electronic components.The result is devastating: As the United States and the European Union rally to furnish Ukrainians with weapons to keep fighting against Russia, their own technology is being used by Russia to fight back.American officials argue that the sweeping sanctions they have imposed in partnership with 38 other governments have severely damaged Russia’s military capacity, and raised the cost to Russia to procure the parts it needs.“My view is that we’ve been very effective in impeding Russia’s ability to sustain and reconstitute a military force,” said Alan Estevez, who oversees U.S. export controls at the Bureau of Industry and Security at the Commerce Department, in an interview in March.“We recognize that this is hard, hard work,” Mr. Estevez added. “They’re adapting. We’re adapting to their adaptations.”There is no doubt that the trade restrictions are making it significantly harder for Russia to obtain technology that can be used on the battlefield, much of which is designed by firms in the United States and allied countries.Direct sales of chips to Russia from the United States and its allies have plummeted to zero. U.S. officials say Russia has already blown through much of its supply of its most accurate weapons and has been forced to substitute lower-quality or counterfeit parts that make its weaponry less accurate.But trade data shows that other countries have stepped in to provide Russia with some of what it needs. After dropping off sharply immediately after the Ukrainian invasion, Russia’s chip imports crept back up, particularly from China. Imports between October and January were 50 percent or more of median prewar levels each month, according to tracking by Silverado Policy Accelerator, a think tank.Sarah V. Stewart, Silverado’s chief executive, said the export controls imposed on Russia had disrupted pre-existing supply chains, calling that “a really positive thing.” But she said Russia was “still continuing to get quite a substantial amount” of chips.“It’s really a supply chain network that is very, very large and very complex and not necessarily transparent,” Ms. Stewart said. “Chips are truly ubiquitous.”A Ukrainian serviceman holding an electronic unit of an unmanned aerial vehicle used by Russia against Ukraine, during a media briefing of the Security and Defense Forces of Ukraine in Kyiv last week.STR/NurPhoto, via Getty ImagesAs Russia has tried to get around restrictions, U.S. officials have steadily ratcheted up their rules, including adding sanctions on dozens of companies and organizations in Russia, Iran, China, Canada and elsewhere. The United States has also expanded its trade restrictions to include toasters, hair dryers and microwaves, all of which contain chips, and set up a “disruptive technology strike force” to investigate and prosecute illicit actors trying to acquire sensitive technology.But the illicit trade in chips is proving hard to police given the ubiquity of semiconductors. Companies shipped 1.15 trillion chips to customers globally in 2021, adding to a huge worldwide stockpile. China, which is not part of the sanctions regime, is pumping out increasingly sophisticated chips.The Semiconductor Industry Association, which represents major chip companies, said that it was engaging with the U.S. government and other parties to combat the illicit trade in semiconductors, but that controlling their flow was extremely difficult.“We have rigorous protocols to remove bad actors from our supply chains, but with about one trillion chips sold globally each year, it’s not as simple as flipping a switch,” the association said in a statement.So far, the Russian military appears to have been relying on a large stockpile of electronics and weaponry it accumulated before the invasion. But that supply may be drying up, making it more urgent for Russia to obtain new shipments.A report issued Tuesday by Conflict Armament Research, an independent group that examines Russian weaponry recovered from the battlefield, revealed the first known example of Russia’s making weapons with chips manufactured after the invasion began.Three identical chips, made by a U.S. company in an offshore factory, were found in Lancet drones recovered from several sites in Ukraine this past February and March, according to Damien Spleeters, who led the investigation for C.A.R.Mr. Spleeters said his group was not revealing the chip’s manufacturer while it worked with the company to trace how the product ended up in Russia.These chips were not necessarily an example of an export control violation, Mr. Spleeters said, since the United States did not issue restrictions on this specific type of chip until September. The chips were manufactured in August and may have been shipped out soon thereafter, he said.But he saw their presence as evidence that Russia’s big prewar stockpile of electronics was finally running out. “Now we are going to start seeing whether controls and sanctions will be effective,” Mr. Spleeters said.The parent company of the firm that designed the drone, the Kalashnikov Group, a major Russian weapons manufacturer, has publicly challenged the West’s technology restrictions.“It is impossible to isolate Russia from the entire global electronic component base,” Alan Lushnikov, the group’s president, said in a Russian-language interview last year, according to a translation in a report from the Center for Strategic and International Studies, a think tank. “It’s a fantasy to think otherwise.”That quote included “some bluster,” Gregory Allen, one of the report’s authors, said at an event in December. But he added: “Russia is going to try and do whatever it takes to get around these export controls. Because for them, the stakes are incredibly, incredibly high.”As the documents from the March meeting show, U.S. and European officials have become increasingly concerned that Russia is obtaining American and European goods by rerouting them through Armenia, Kazakhstan and other Central Asian countries.One document marked with the seal of the U.S. Bureau of Industry and Security said that in 2022, Armenia imported 515 percent more chips and processors from the United States and 212 percent more from the European Union than in 2021. Armenia then exported 97 percent of those same products to Russia, the document said.In another document, the Bureau of Industry and Security identified eight categories of chips and components deemed critical to Russian weapons development, including one called a field programmable gate array, which had been found in one model of Russian cruise missile, the KH-101.The intelligence sharing between the United States and Europe is part of a nascent but intensifying effort to minimize the leakage of such items to Russia. While the United States has deeper experience with enforcing sanctions, the European Union lacks centralized intelligence, customs and law enforcement abilities.The United States and the European Union have both recently dispatched officials to countries that were shipping more to Russia, to try to cut down that trade. Mr. Estevez said a recent visit to Turkey had persuaded that government to halt transshipments to Russia through their free trade zone, as well the servicing of Russian and Belarusian airplanes in Turkish airports.Biden administration officials say shipments to Russia and Belarus of the electronic equipment they have targeted fell 41 percent between 2021 and 2022, as the United States and its allies expanded their restrictions globally.Matthew S. Axelrod, the assistant secretary for export enforcement at the Bureau of Industry and Security, said the picture was one of a “broad decrease.”“But still there are certain areas of the world that are being used to get these items to Russia,” he said. “That’s a problem that we are laser-focused on.”John Ismay More

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    Pressure Mounts on China to Offer Debt Relief to Poor Countries Facing Default

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    There was optimism at the spring meetings of the I.M.F. and World Bank that China will make concessions over restructuring its loans.WASHINGTON — China, under growing pressure from top international policymakers, appeared to indicate this week that it is ready to make concessions that would unlock a global effort to restructure hundreds of billions of dollars of debt owed by poor countries.China has lent more than $500 billion to developing countries through its lending program, making it one of the world’s largest creditors. Many of those countries, including several in Africa, have struggled economically in the wake of the pandemic and face the possibility of defaulting on their debt payments. Their problems have been compounded by rising interest rates and disruptions to supplies of food and energy as a result of Russia’s war in Ukraine.The United States, along with other Western nations, has been pressing China to allow some of those countries to restructure their debt and reduce the amount that they owe. But for more than two years, China has insisted that other creditors and multilateral lenders absorb financial losses as part of any restructuring, bogging down a critical loan relief process and threatening to push millions of people in developing countries deeper into poverty.A breakthrough would offer an economic lifeline to vulnerable nations at a time of sluggish growth and uncertain financial stability, and it would signal a renewed interest from China in economic diplomacy.Economists and development experts are watching carefully to determine if China is serious about easing the loan forgiveness logjam and if its talk will be followed by action. By some calculations, the world’s poor countries owe around $200 billion to wealthy nations, multilateral development banks and private creditors. Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Zambia, Sri Lanka and Ghana.Africa’s private and public external debt has increased more than fivefold over the last two decades to about $700 billion and Chinese lenders account for 12 percent of that total, according to Chatham House, the London policy institute. Researchers for the Debt Relief for Green and Inclusive Recovery Project estimated in a recent report that 61 emerging market and developing economies were facing debt distress, and that more than $800 billion in debt must be restructured.Leaders of the world’s advanced economies have been grappling in recent months with how to avert financial crises in teetering markets such as Sri Lanka.Dinuka Liyanawatte/Reuters“China is facing increasing pressure from every quarter, including from other emerging market economies, to play a more constructive role in the negotiations over debt restructuring,” said Eswar Prasad, a former head of the International Monetary Fund’s China division, who said China’s intransigence had left it “increasingly isolated.”There were indications this week that China was prepared to end that isolation as top economic officials from around the world convened at the spring meetings of the I.M.F. and World Bank. Participants expressed optimism that representatives from Beijing appeared to be ready to back off its insistence that multilateral lenders such as the World Bank, which provides low-interest loans and grants to poor countries, accept losses in the debt restructuring.“My sense from the current context is we’re moving on to new steps,” David Malpass, the departing World Bank president, said at a news conference on Thursday, pointing to “progress on equal burden sharing.”Kristalina Georgieva, the I.M.F.’s managing director, said she was “very encouraged” that a “common understanding” had been reached that could accelerate relief for countries such as Zambia, Ghana, Ethiopia and Sri Lanka.“I always say the proof of the pudding is in the eating,” Ms. Georgieva said.To restructure a country’s debt, creditors generally must agree to a combination of lowering the interest rate on the loan, extending the duration of the loan or writing off some of what is owed. China, which has faced an array of domestic economic challenges over the last three years, has been reluctant to take losses on debt and has pushed for other lenders, such as the World Bank, to incur losses.The urgency for a resolution was palpable among countries that are most in need of relief. Zambia defaulted in 2020 and has been trying to restructure $8.4 billion that it owes through a program established by the Group of 20 nations. It owes about $6 billion to Chinese lenders, and its total debt to foreign lenders is approaching $20 billion.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education.Yuri Gripas for The New York Times“Zambia urgently needs debt relief,” Situmbeko Musokotwane, Zambia’s finance minister, told The New York Times. “Delay on debt restructuring puts our currency under pressure, excludes Zambia from capital markets and makes it difficult to attract much-needed foreign direct investment.”Ghana appealed to the Group of 20 nations this year for debt relief through a fledgling program known as the Common Framework after securing preliminary approval for a $3 billion loan from the I.M.F. That money is contingent on Ghana’s receiving assurances that it can restructure the approximately $30 billion that it owes to foreign lenders. Officials from Ghana have been meeting with their Chinese counterparts about restructuring the $2 billion that it owes China.On Friday, Ghana’s finance minister, Ken Ofori-Atta, lamented that 33 African nations were saddled with interest payments that approached or exceeded what their governments spent on health and education and expressed disappointment that advanced economies had been slow to act.“Honestly, it is disheartening to watch Africa struggle in this way, especially considering the potential loss of productivity over the next decade should African economies buckle under the weight of suffocating debts,” Mr. Ofori-Atta said at an Atlantic Council event on Friday.But it remains uncertain how far China is willing to go.Brad Setser, a senior fellow at the Council on Foreign Relations, said that it was not clear what financial terms Beijing would accept when restructuring debt but that it appeared to be taking a “positive step” that would remove “a financially unwarranted roadblock to any progress.”Treasury Secretary Janet Yellen at a farm in Zambia in January. She said this week that she would continue to press her Chinese counterparts to make the restructuring process work better.Fatima Hussein/Associated PressBut given the grinding pace of the talks, big investors in emerging markets are not counting on quick resolutions.“We are starting to see tokens of flexibility from China on their stance in sovereign debt restructuring, but complexities abound,” said Yacov Arnopolin, emerging markets portfolio manager at PIMCO. “Near term, we don’t expect a clear-cut solution on China’s willingness to take losses.”China’s reluctance has been another source of tension with the United States, which has expressed concern that Beijing’s onerous lending terms and refusal to renegotiate have amplified the financial problems that developing countries are facing. Treasury Secretary Janet L. Yellen said this week that she would continue to press her Chinese counterparts to improve the restructuring process but that she was encouraged that China had recently expressed a willingness to help Sri Lanka restructure its debt.People familiar with Chinese economic policymaking said domestic politics had made it hard for China to make difficult decisions last autumn and over the winter about accepting possible losses on its loans.In October, the Communist Party held its once-in-five-years national congress and chose a new team of senior party officials to work with Xi Jinping, the country’s top leader. Maneuvering then began to reshuffle the government’s senior ranks, which had been expected during the annual session of the National People’s Congress in early March, although some changes of financial policymakers were unexpectedly delayed.China is now ready to focus on addressing a wide range of economic issues, including international debt, the people said. However, Beijing still faces other challenges that may limit its willingness to bargain, including a commercial banking system that faces very heavy losses on loans to real estate developers and does not want to accept large losses on loans to developing countries at the same time.Chinese officials offered support for the debt relief initiatives in broad terms this week.Wang Wenbin, a spokesman for the Chinese Foreign Ministry, said on Friday that China had put forward a three-point proposal that included calling for the I.M.F. to more quickly share its debt sustainability assessments for countries that need relief, and for creditors to detail how they will carry out the restructurings on “comparable terms.”After a meeting in Washington between Yi Gang, China’s central bank governor, and Mr. Musokotwane of Zambia, the Chinese central bank released a brief statement.“They exchanged views on issues of common concern including bilateral financial cooperation,” it said.Keith Bradsher More

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    Support Grows to Have Russia Pay for Ukraine’s Rebuilding

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    Although U.S. officials have cautioned against seizing Russia’s reserves in foreign banks, others say it’s “crazy” not to after Moscow’s war of aggression.When the World Bank released its latest damage assessment of war-torn Ukraine this week, it announced that the price of recovery and rebuilding had grown to $411 billion. What it didn’t say, though, was who would pay for it.To Ukraine, the answer seems obvious: Confiscate the roughly $300 billion in Russian Central Bank assets that Western banks have frozen since the invasion last year. As the war grinds on, the idea has gained supporters.The European Union has already declared its desire to use the Kremlin’s bankroll to pay for reconstruction in Ukraine. At the urging of a handful of Eastern European and Baltic nations, the bloc convened a working group last month to assess the possibility of grabbing that money as well as frozen assets owned by private individuals who have run afoul of European sanctions.“In principle, it is clear-cut: Russia must pay for the reconstruction of Ukraine,” said Sweden’s prime minister, Ulf Kristersson, who holds the presidency of the Council of the European Union.At the same time, he noted, turning that principle into practice is fraught. “This must be done in accordance with E.U. and international law, and there is currently no direct model for this,” Mr. Kristersson said.The working group, which has a two-year mandate, is scheduled to meet in Brussels next week.Other top officials, in the United States and elsewhere, have sounded more skeptical. After visiting Kyiv last month, Treasury Secretary Janet L. Yellen reiterated her warnings of formidable legal obstacles. The Swiss government declared that confiscating private Russian assets from banks would violate Switzerland’s Constitution as well as international agreements.The legal debate is just one skein in the tangle of moral, political and economic concerns that the potential seizure of Russia’s reserves poses.Departing a Mass in Lviv, Ukraine. Some U.S. officials worry about side effects from seizing assets in order to rebuild the country. Maciek Nabrdalik for The New York TimesMs. Yellen and others have argued that seizing Russia’s accounts could undermine faith in the dollar, the most widely used currency for the world’s trade and transactions. Foreign nations might be more reluctant to keep money in U.S. banks or make investments, fearing that it could be seized. At the same time, experts worry that such a move could put American and European assets held in other countries at higher risk of expropriation in the future if there is an international dispute.There are also concerns that seizure would erode faith in the system of international laws and agreements that Western governments have championed most vocally.But Russia’s pummeling of Ukraine’s infrastructure, charges of war crimes against President Vladimir V. Putin, and the difficulty of squeezing Russia economically when demand for its energy and other exports remains high have helped the idea gain ground.Also, there is the uncomfortable realization that the cost of rebuilding Ukraine once the war is over will far outstrip the amount that even wealthy allies like the United States and Europe may be willing to give.The United States, the European Union, Britain and other allies have funneled billions of dollars into Ukraine’s war effort, as well as tanks, missiles, ammunition, drones and other military equipment. And this week the International Monetary Fund approved its biggest loan yet — $15.6 billion — just to keep Ukraine’s battered economy afloat.But public support for continued funding is not inexhaustible.“If it’s difficult to get funding now for maintaining the infrastructure or housing, why is it going to be easier to get funding later?” asked Tymofiy Mylovanov, the president of the Kyiv School of Economics and a former government minister.It’s hard enough for Ukraine to get money and equipment “while we are being killed,” Mr. Mylovanov said. “Once we’re not being killed, we’ll have difficulty getting anything.”Laurence Tribe, a university professor of constitutional law at Harvard, has argued that a 1977 law, the International Emergency Economic Powers Act, gives the U.S. president the authority to confiscate sovereign Russian assets and repurpose them for Ukraine.The U.S. authorities previously seized Iraqi and Iranian assets and redirected them to compensate victims of violence, settle lawsuits or provide financial assistance.Mr. Tribe concedes that calculations about the ripple effect on the dollar or invested assets will ultimately matter more to policymakers than legal ones. But he finds those broader political concerns unpersuasive.“It’s crazy to argue that it’s more destabilizing to have assets seized than to have wars of aggression,” Mr. Tribe said in an interview on Friday. “The survival of the global economy is far more threatened by the way Russia behaved” than by any financial retaliation.And, he added, taking billions of dollars is much more meaningful either as a deterrent or punishment than bringing war crime charges.A destroyed garage in Hostomel, a Kyiv suburb. Prominent Americans like Laurence Tribe and Lawrence Summers argue that seizing Russian assets would be the right thing to do.Emile Ducke for The New York TimesOther prominent voices in the United States have endorsed the notion. Lawrence H. Summers, a former Treasury secretary; Robert B. Zoellick, a former president of the World Bank and U.S. trade representative; and Philip D. Zelikow, a historian at University of Virginia and a former State Department counselor, made their case this week in an opinion piece in The Washington Post.“Transferring frozen Russian reserves would be morally right, strategically wise and politically expedient,” they wrote.A few countries in addition to Ukraine have taken steps to pry loose foreign assets owned by Russian individuals and entities and use the money for reconstruction. In December, the Canadian government began the process of seizing $26 million owned by the Russian oligarch Roman Abramovich after passing a law easing the forfeiture of private Russian assets from individuals who are under sanctions.A federal judge in Manhattan gave the go-ahead last month to confiscate $5.4 million from another Russian businessman facing sanctions, Konstantin Malofeev. And Estonia is also seeking to pass legislation that would give the government there similar powers.But Mr. Tribe, Mr. Summers and others argue that the main focus should be not on seizing private assets, which would be legally much more complicated and time-consuming, but on the hundreds of billions owned by Russia’s central bank.Wherever the money comes from, the bill keeps growing. Over the past year, Ukraine’s economy has shrunk by a third. The war has pushed more than seven million people into poverty, the World Bank reported, and reversed 15 years of development progress. More

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    U.S. and Europe Angle for New Deal to Resolve Climate Spat

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    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

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    Biden’s World Bank Pick Looks to Link Climate and Development Goals

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    Ajay Banga will begin a monthlong “global listening tour” to drum up support for his nomination to be the bank’s next president.The Biden administration’s nominee to be the next president of the World Bank, the international development and climate institution, is embarking on a monthlong sprint around the globe to solidify support for his candidacy.It will be the first opportunity for the nominee, Ajay Banga, to share his vision for the bank, which has been aiming to take on a more ambitious role in combating climate change while maintaining its core commitment to alleviating poverty.Mr. Banga, who has had a long career in finance, faces the challenge of convincing nations that his decades of private-sector experience will help him transform the World Bank.He will begin his “global listening tour” on Monday with stops in Ivory Coast and Kenya, the Treasury Department said on Friday. In Ivory Coast, he will meet with senior government officials, leaders of the African Development Bank and civil society organizations. In Kenya, he will visit the Kenya Climate Innovation Center and a World Bank-backed project that helps local entrepreneurs find ways to address climate change.Mr. Banga will focus on how finding development solutions can be intertwined with climate goals and emphasize his experience working on financial inclusion in Africa, where he helped expand access to electronic payments systems while chief executive of Mastercard, a Treasury official said.The whirlwind campaign will also take Mr. Banga to Asia, Latin America and Europe.The White House nominated him last week after the unexpected announcement last month that David Malpass will step down as World Bank president by the end of June, nearly a year before the end of his five-year term. Mr. Malpass, who was nominated by President Donald J. Trump, ignited a controversy last year when he appeared to express skepticism about whether fossil fuels contribute to global warming.During a briefing at the Treasury Department this week, Mr. Banga made clear that he had no doubts about the causes of climate change. “Yes, there is scientific evidence, and it matters,” he said.Careful to strike a balance between the bank’s growing climate ambitions and its poverty-reduction goals, Mr. Banga emphasized that both issues were interconnected and equally important.“My belief is that poverty alleviation, or shared prosperity, or all those words that essentially imply the idea of tackling inequality, cannot be divorced from the challenges of managing nature in a constructive way,” Mr. Banga added.The World Bank’s nomination process runs through March 29, and other countries may offer candidates. But by tradition, the United States, the bank’s largest shareholder, selects an American to be its president. The executive board hopes to choose a new president by early May.A climate protest in Munich on Friday. Mr. Banga will focus on how finding development solutions can be intertwined with climate goals.Anna Szilagyi/EPA, via ShutterstockIf approved by the board, Mr. Banga will face an array of challenges. The world economy is slowly emerging from three years of pandemic and war that have slowed global growth and worsened poverty. Emerging economies face the prospect of a cascade of defaults in the coming years, and the World Bank has been vocal in calling for debt reduction.The Biden administration has pointed to China, one of the world’s largest creditors, as a primary obstacle in debt-restructuring efforts. Mr. Banga was careful not to be critical of China and said he expected to travel there in the coming weeks.“Today I’m the nominee of the United States, but if I’m lucky enough to be elected, then I represent all the countries who are part of the bank,” Mr. Banga said on Thursday. “Having their points of view known, understood and openly discussed — maybe not agreed to, but openly discussed — is an important part of leading a multilateral institution.”His nomination has won both praise and skepticism from climate activists and development experts.Some climate groups have lamented Mr. Banga’s lack of direct public-sector experience and expressed concern about his affiliation with companies that invest in the oil and gas industries.“Many question whether his history at global multinationals such as Citibank, Nestlé, KFC and Mastercard will prepare him for the huge challenges of poverty and inequality,” Recourse, a nonprofit environmental organization, said in a statement this week. Recourse has been critical of the World Bank’s policies on gas transition, its exposure to coal and its pace of action on climate change.Other prominent activists have praised Mr. Banga, including Vice President Al Gore, who predicted that he would bring “renewed leadership on the climate crisis to the World Bank.”And others viewed Mr. Banga as a natural choice to bridge the gap between the bank’s broad mandates.“Throughout discussions of the World Bank’s evolution, borrowing countries have consistently communicated that financing for climate should not come at the expense of other development priorities,” Stephanie Segal, a senior fellow with the Economics Program at the Center for Strategic and International Studies, wrote in an essay this week. “In nominating Banga, whose candidacy does not lead with climate, the United States has signaled agreement that the bank’s development mandate cannot be abandoned in favor of a ‘climate only’ agenda.”The Biden administration has also faced questions about why it did not choose a woman to lead the bank, which has had only men serve as its full-time president.Mr. Banga asserted that as someone who was born and educated in India, he would bring diversity and a unique perspective to the World Bank. He also emphasized that at Mastercard, he had demonstrated a commitment to empowering women and elevating them to senior roles.“I think that you should credit the administration with taking a huge leap forward into finding somebody who wasn’t born here, wasn’t educated here,” Mr. Banga said. “I believe that giving people a level playing field is our job.”He added: “And that means whether you’re a woman, your color, your sexual orientation, growing up on the wrong side of the tracks, it doesn’t matter.” More

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    China’s Economic Support for Russia Could Elicit More Sanctions

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    U.S. officials pledged to crack down on shipments to Russia that can be used for both civilian and military purposes, but that has proved hard to police.WASHINGTON — President Biden and his top officials vowed this week to introduce additional sanctions aimed at impeding Russia’s war efforts against Ukraine. But the administration’s focus is increasingly shifting to the role that China has played in supplying Russia with goods that have both civilian and military uses.As one of the world’s biggest manufacturers of products like electronics, drones and vehicle parts, China has proved to be a particularly crucial economic partner for Russia.Beijing has remained officially unaligned in the war. Yet China, along with countries like Turkey and some former Soviet republics, has stepped in to supply Russia with large volumes of products that either civilians or armed forces could use, including raw materials, smartphones, vehicles and computer chips, trade data shows.Administration officials are now expressing concern that China could further aid Russia’s incursion by providing Moscow with lethal weapons. While there is no clear evidence that China has given weapons and ammunition to Russia, Secretary of State Antony J. Blinken warned in recent days that China may be preparing to do so.President Biden, speaking in Kyiv on Monday, said the United States and its partners would announce new measures targeting sanctions evasion this week. He did not specify whether those actions would be directed at Moscow or its trading partners.“Together we have made sure that Russia is paying the price for its abuses,” he said the next day in Warsaw.And in a speech on Tuesday at the Council on Foreign Relations, Wally Adeyemo, the deputy Treasury secretary, said the United States would be working “to identify and shut down the specific channels through which Russia attempts to equip and fund its military.”“Our counterevasion efforts will deny Russia access to the dual-use goods being used for the war and cut off these repurposed manufacturing facilities from the inputs needed to fill Russia’s production gaps,” he said.The comments came on the same day that Wang Yi, China’s top diplomat, visited Moscow.The actions that the United States has taken against Russia in partnership with more than 30 countries constitute the broadest set of sanctions and export controls ever imposed against a major economy. But this regime still has its limits.One year into the war, the Russian economy is stagnant, but not crippled. The country has lost direct access to coveted Western consumer brands and imports of the most advanced technology, like semiconductors. But individuals and companies around the world have stepped in to provide Russia with black market versions of these same products, or cheaper alternatives made in China or other countries.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors, a U.S. official said.Maxim Shipenkov/EPA, via ShutterstockIn particular, the United States and its allies appear to have had limited success in stopping the trade of so-called dual-use technologies that can be used in both military equipment and consumer goods.The United States included many types of dual-use goods in the export controls it issued against Russia last February, because the goods can be repurposed for military uses. Aircraft parts that civilian airlines can use, for example, may be repurposed by the Russian Air Force, while semiconductors in washing machines and electronics might be used for tanks or other weaponry.The Chinese Spy Balloon ShowdownThe discovery of a Chinese surveillance balloon floating over the United States has added to the rising tensions between the two superpowers.Tensions Rise: In the aftermath of the U.S. downing of a Chinese spy balloon on Feb. 4 and three unidentified flying objects a week later, the nations have traded accusations over their spying programs.U.S.-China Meeting: Secretary of State Antony Blinken held a confrontational meeting with his Chinese counterpart on Feb. 18 in Munich, resuming diplomatic contact between Washington and Beijing.A ‘Military-Civil Fusion’: The international fracas over China’s spy balloon program has thrown a light on Beijing’s efforts to recruit commercial businesses to help strengthen the Chinese military.Unidentified Objects: As more objects were shot down after the balloon incident, experts warned that there was an “endless” array of potential targets crowding America’s skies. Here’s a look at some of them.Top U.S. officials warned their Chinese counterparts against supporting Russia’s war effort after the invasion of Ukraine last year, saying there would be firm consequences. While China has been careful not to cross that line, it has provided support for Russia in other ways, including through active trade in certain goods..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.The United States has cracked down on some of the companies and organizations providing goods and services to Russia. In January, it imposed sanctions on a Chinese company that had provided satellite imagery to the Wagner mercenary group, which has played a large role in the battle for eastern Ukraine. In December, it added two Chinese research institutes to a list of entities that supply the Russian military, which will restrict their access to U.S. technology.But tracking by research firms shows that trade in goods that the Russian military effort can use has flourished. According to the Observatory of Economic Complexity, an online data platform, shipments from China to Russia of aluminum oxide, a metal that can be used in armored vehicles, personal protective equipment and ballistic shields, soared by more than 25 times from 2021 to 2022.Shipments of minerals and chemicals used in the production of missile casings, bullets, explosives and propellants have also increased, according to the Observatory of Economic Complexity. And China shipped $23 million worth of drones and $33 million worth of certain aircraft and spacecraft parts to Russia last year, up from zero the prior year, according to the group’s data.Data from Silverado Policy Accelerator, a Washington nonprofit, shows that Russian imports of integrated circuits, or chips, which are crucial in rebuilding tanks, aircraft, communications devices and weaponry, plummeted immediately after the invasion but crept up over the past year.In December, Russia’s imports of chips had recovered to more than two-thirds of their value last February, just before the war began, according to Silverado. China and Hong Kong, in particular, together accounted for nearly 90 percent of global chip exports to Russia by value from March to December.Shipments from China to Russia of smart cards, light-emitting diodes, polysilicon, semiconductor manufacturing equipment and other goods have also risen, the firm said.Secretary of State Antony J. Blinken said he had shared concerns with Wang Yi, China’s top diplomat, that Beijing was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine.Pool photo by Stefani ReynoldsRelations between the United States and China have soured in recent weeks after the flight of a Chinese surveillance balloon across the United States early this month. But divisions over Russia are further straining geopolitical ties. A meeting between Mr. Blinken and Mr. Wang, his Chinese counterpart, on the sidelines of the Munich Security Conference on Saturday night was particularly tense.U.S. officials have been sharing information on China’s activities with allies and partners in their meetings in Munich, a person familiar with the matter said.On “Face the Nation” on Sunday, Mr. Blinken said he had shared concerns with Mr. Wang that China was considering providing weapons and ammunition to aid Russia’s campaign in Ukraine, and that such an action would have “serious consequences” for the U.S.-Chinese relationship.“To date, we have seen Chinese companies — and, of course, in China, there’s really no distinction between private companies and the state — we have seen them provide nonlethal support to Russia for use in Ukraine,” Mr. Blinken said.“The concern that we have now is, based on information we have, that they’re considering providing lethal support,” he added. “And we’ve made very clear to them that that would cause a serious problem for us and in our relationship.”U.S. officials have emphasized that China by itself is limited in its ability to supply Russia with all the goods it needs. China does not produce the most advanced types of semiconductors, for example, and restrictions imposed by the United States in October will prevent Beijing from buying some of the most advanced types of chips, and the equipment used to make them, from other parts of the world.Russia is unable to produce precision missiles today because the country no longer has access to leading-edge semiconductors made by the United States, Taiwan, South Korea and other allied sources, a senior administration official said on Monday.“While we are concerned about Russia’s deepening ties with them, Beijing cannot give the Kremlin what it does not have, because China does not produce the advanced semiconductors Russia needs,” Mr. Adeyemo said during his remarks. “And nearly 40 percent of the less advanced microchips Russia is receiving from China are defective.”But Ivan Kanapathy, a former China director for the National Security Council, said that most of what Russia needed for its weapons were less advanced chips, which are manufactured in plenty in China.“The U.S. government is very well aware that our export control system is designed in a way that really relies on a cooperative host government, which we don’t have in this case,” Mr. Kanapathy said.He added that it was “quite easy” for parties to circumvent export control through the use of front companies, or by altering the names and addresses of entities. “China is quite adept at that.” More

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    How Arizona Is Positioning Itself for $52 Billion to the Chips Industry

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    The state has become a hub for chip makers including Intel and TSMC, as the government prepares to release a gusher of funds for the strategic industry.In recent weeks, Gina Raimondo, the commerce secretary, has talked with Senator Mark Kelly of Arizona, spent time with the president of Arizona State University and appeared at a conference with the mayor of Phoenix.Their discussions centered on one main topic: chips.Ms. Raimondo is in charge of handing out $52 billion for semiconductor manufacturing and research under the CHIPS Act, a funding package intended to expand domestic production of the foundational technology, which acts as the brains of computers. The legislation, which passed in August, is a prime piece of President Biden’s industrial policy and part of a push to ensure America’s economic and technology leadership over China.Arizona wants to make sure it is in position for a portion of that once-in-a-generation gusher of federal funding, for which the Commerce Department will begin taking applications after Thursday. As a result, Arizona officials have inundated Ms. Raimondo to promote the state’s growing chip industry and talked with the chief executives of giant chip companies such as Intel and Taiwan Semiconductor Manufacturing Company.Arizona, which is vying for subsidies along with Texas, New York and Ohio, may have a head start on the action. The state has been home to semiconductor makers since the 1940s and has 115 chip-related companies, whereas there is one major manufacturer in Ohio.Arizona has also led the nation in chip investments since 2020, with the announcements of two new chip-making plants by TSMC and two additional factories from Intel that will cost a combined $60 billion. State leaders had helped persuade the companies to open the facilities by offering big tax breaks and water and other infrastructure grants. They also promised to expand technical and engineering education in the state.State officials and chip companies also acted as a lobbying bloc in Washington. They helped shape the CHIPS Act to include federal tax credits, subsidies, and research and work force grants. TSMC expanded its lobbying staff to 19 people from two in two years, and Intel spent more than $7 million in lobbying efforts last year, the most it had spent in two decades. Arizona State University spent $502,000 on lobbying last year, also the most in two decades.“It has been an intentional and an all-hands-on-deck effort,” said Sandra Watson, president of the Arizona Commerce Authority, a nonprofit economic development organization that has helped lead state efforts to attract chip companies and push for the CHIPS Act.Sandra Watson, president of the Arizona Commerce Authority, hosted more than 20 chief executives of chip companies at the Super Bowl this month.Caitlin O’Hara for The New York TimesThe Commerce Department is expected to soon begin handing out $39 billion in subsidies to semiconductor makers, later opening the process to companies, universities and others to apply for $13.2 billion in research and work force development subsidies. The CHIPS Act also provides an investment tax credit for up to 25 percent of a manufacturer’s capital expenditure costs.Ms. Raimondo has described the process as a “race” among states. “Every governor, every state legislature, every president of public universities in every state ought to be now putting their plan of attack together,” she said in August during a visit to Arizona State University’s tech research and development center. “This is going to be a competitive process.”The Commerce Department declined to comment.Arizona’s history with chip manufacturing stretches back to 1949, when the telecom hardware and services provider Motorola opened a lab in Phoenix that later developed transistors. In 1980, Intel built a semiconductor plant in Chandler, a suburb southeast of Phoenix, drawn by the state’s low property taxes, relative proximity to its Silicon Valley headquarters and stable geology. (Earthquakes are rare in Arizona.)During President Donald J. Trump’s administration, he pushed an “America First” policy agenda. That opened an opportunity for Doug Ducey, a Republican who was then Arizona’s governor, and other state officials to transform their economy into a tech hub.Arizona’s governor at the time, Doug Ducey, and Commerce Secretary Gina Raimondo while touring the TSMC construction site in December.T.J. Kirkpatrick for The New York TimesIn 2017, Mr. Ducey and other Arizona officials traveled to Taiwan to meet with executives of TSMC, the world’s biggest maker of leading-edge chips. They promoted the state’s low taxes, its business-friendly regulatory environment and Arizona State University’s engineering school of more than 30,000 students.Mr. Ducey, who was close to Mr. Trump, also had calls with Commerce Secretary Wilbur Ross, Defense Secretary Mark Esper and Secretary of State Mike Pompeo on financial incentives to expand domestic production of chips.“My job is to sell Arizona,” Mr. Ducey said. “In this case, it was to sell Arizona to TSMC but also to the administration.”In 2019, Mr. Ducey helped set up calls between the cabinet secretaries and TSMC’s executives to lock in a deal to open manufacturing plants in Arizona. The state promised tax credits and other financial incentives to help offset costs for the company to move production to the United States from Taiwan.In May 2020, TSMC announced plans to build a $12 billion factory in Phoenix. Later that year, the city provided TSMC with $200 million in infrastructure incentives, including water lines, sewage and roads. One traffic light would cost the city $500,000.“TSMC appreciates the support from our dedicated partners on the state, local and federal levels,” said Rick Cassidy, the chief executive of TSMC Arizona, adding that the CHIPS Act funds will enable the company and its suppliers to expand “for years to come.”The CHIPS Act is a prime piece of President Biden’s industrial policy. He toured TSMC’s Arizona plant in December.T.J. Kirkpatrick for The New York TimesIn early 2021, Pat Gelsinger, Intel’s chief executive, announced a sweeping strategy to increase U.S. production of chips. States began soliciting the company. Arizona officials highlighted their long relationship with Intel and perks, such as the state’s low property and business taxes.Intel soon announced a $20 billion expansion in Chandler, with two additional factories that would bring 3,000 new jobs to the state. Chandler also approved $30 million in water and road improvements for the new plants.“The Arizona government has been a great collaborator,” said Bruce Andrews, Intel’s chief government affairs officer. “By investing in semiconductors early, they created an ecosystem that has had a jobs multiplier effect and massive economic benefits.”But some of the tax breaks have rankled Arizona residents, who say the moves have hurt funding for public schools. The state ranks 47th in per-student spending.“We need to bring business to our state, but we need to look at balance,” said Beth Lewis, the executive director of Save Our Schools in Arizona. “Corporations are choosing not to settle in Arizona because of our devastated public education system.”Arizona pressed ahead with pushing Congress to create legislation for chip subsidies. In March 2021, Senator Kelly joined Senators John Cornyn, Republican of Texas, and Mark Warner, Democrat of Virginia, the authors of legislation that would become the CHIPS Act, in a call with the new Biden administration to push for the White House’s support of funding.Mr. Kelly, an early sponsor of the CHIPS Act, became a chief negotiator on the legislation in Congress. He negotiated the inclusion of a four-year 25 percent investment tax credit in the bill, including a provision that ensured Intel and TSMC would get the tax credits even though their Arizona factory projects were announced before the bill would go into effect.Mr. Kelly also helped the president of Arizona State University, Michael Crow, lobby for the inclusion of more than $13 billion in grants for research and development and work force training. And Mr. Kelly and state leaders hosted administration officials at events to showcase the state’s semiconductor efforts as part of the White House’s manufacturing strategy.Senator Mark Kelly of Arizona at TSMC’s factory in December.Adriana Zehbrauskas for The New York Times“We have the potential to lead the nation in microchip production,” Mr. Kelly said in a statement. “I was honored to lead this effort, and now I’m working to maximize it for Arizona”Mr. Ducey, who left office when his term ended in January, pushed for more tech-friendly policies, including an income-tax cut. He also said he would use $100 million that the state had received from federal Covid grants to attract more chip companies and help them apply for funds provided by the CHIPS Act.In December, TSMC announced a second factory that would bring its total investment in Arizona to $40 billion. Mr. Biden and Ms. Raimondo traveled to Phoenix to speak at the announcement, with Mr. Kelly accompanying them on Air Force One.Arizona officials continue to pitch semiconductor companies to open factories in the state.This month, Ms. Watson hosted more than 20 chief executives of chip companies at the Super Bowl in Glendale. Katie Hobbs, Arizona’s new governor and a Democrat, and Mr. Kelly heralded how the state could benefit from the CHIPS Act.“There’s a robust pipeline,” Ms. Watson said. More

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    U.S. Trade Deficit Surged in 2022

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    The gap between what the United States imports and what it exports hit a record as more foreign goods came into the country.WASHINGTON — The overall U.S. trade deficit rose 12.2 percent last year, nearing $1 trillion as Americans purchased large volumes of foreign machinery, medicines, industrial supplies and car parts, according to data released Tuesday by the Commerce Department.The goods and services deficit reached $948.1 billion, its largest total on record, after rising $103 billion from the previous year.The data showed evidence of the U.S. economy’s continuing recovery from the pandemic, which had held down spending on services like travel and entertainment and pushed up purchases of imported goods. Rapid inflation and higher energy prices were responsible for some of the growth, because the trade data is not adjusted for inflation.The numbers also showed signs that global supply chains appear to be reshuffling somewhat, as the U.S. government erects more barriers to trade with China and businesses seek to diversify where they get materials and goods. The Biden administration has identified the nation’s reliance on China for materials like solar panels and electric vehicle batteries as a security risk, and introduced incentives and penalties to try to persuade companies to change supply chains that proved vulnerable to pandemic disruptions.The U.S. trade deficit in goods with Mexico, Canada, India, South Korea, Vietnam and Taiwan all grew strongly last year as manufacturers sought new sources of foreign products.Inflation F.A.Q.Card 1 of 5What is inflation? More