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    Economy Contracted in the First Quarter, but Underlying Measures Were Solid

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    The U.S. economy contracted in the first three months of the year, but strong consumer spending and continued business investment suggested that the recovery remained resilient.Gross domestic product, adjusted for inflation, declined 0.4 percent in the first quarter, or 1.4 percent on an annualized basis, the Commerce Department said Thursday. That was down sharply from the 1.7 percent growth (6.9 percent annualized) in the final three months of 2021, and was the weakest quarter since the early days of the pandemic.The decline was mostly a result of the two most volatile components of the quarterly reports: inventories and international trade. Lower government spending was also a drag on growth. Measures of underlying demand showed solid growth.Most important, consumer spending, the engine of the U.S. economy, grew 0.7 percent in the first quarter despite the Omicron wave of the coronavirus, which restrained spending on restaurants, travel and similar services in January.“Consumer spending is the aircraft carrier in the middle of the ocean — it just keeps plowing ahead,” said Jay Bryson, chief economist for Wells Fargo.But choppy waters may lie ahead. The first-quarter data mostly predates the spike in gas prices that has accompanied Russia’s invasion of Ukraine and the lockdowns in China that have threatened to further disrupt global supply chains. The Federal Reserve in March raised interest rates for the first time since the pandemic began, and several more rate increases are expected this year as policymakers seek to tame the fastest inflation in four decades.“We are watching a bunch of seismic changes in real time,” said Wendy Edelberg, director of the Hamilton Project, an economic policy arm of the Brookings Institution.The biggest challenge facing the economy is inflation. Consumer prices rose at a 7 percent annual rate in the first quarter, and Americans’ after-tax incomes, adjusted for inflation, fell for the fourth quarter in a row. So far, higher prices have done little to dampen consumers’ willingness to spend, but that will change if inflation keeps outpacing income gains, said Beth Ann Bovino, chief U.S. economist for S&P Global.“There’s a tipping point,” she said. Sometime this year, she added, “I’m expecting to see households starting to respond either by trading down, looking for deals, being less willing to pay higher prices.” More

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    The prospect of lockdowns in Beijing fuels more concerns about supply chain disruptions.

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    The prospect of further lockdowns in China prompted a fresh wave of economic anxiety on Monday as investors and companies whose supply chains run through China contemplated the impact of 70 new virus cases that the Beijing government said it had detected over the weekend.The city government ordered one of its districts to test all 3.5 million of its residents for coronavirus in the coming days, a move that may be a prelude to a larger lockdown in China’s capital city. Shanghai, a major port and business center, has been locked down for roughly a month, part of China’s “zero Covid” strategy. Other Chinese cities both large and small have announced their own restrictions on the movement of residents in a bid to keep the virus from spreading.The lockdowns present yet another challenge for global supply chains that have been stressed by pandemic shutdowns and the war in Ukraine, leading to greater competition for goods and higher prices that are fueling inflation worldwide.While the Chinese authorities have sought to keep factories and especially ports operating by keeping workers on the premises in so-called closed-loop systems, the lockdowns have interrupted shipments and lengthened delivery times for many of the global companies that depend on Chinese factories.Phil Levy, the chief economist at Flexport, a freight forwarder, said in an email that while Beijing is an important city, “it is not at the heart of factory production or supply chain operations.” He said lockdowns there would have a more limited impact than previous restrictions in Shanghai and Guangdong, where ports continued to mostly operate.But the effects would depend on where outbreaks occurred — for example whether they shut down a port — and how long lockdowns persisted, Mr. Levy added. “This is a relatively slow part of the year, but there is plenty of catch-up to be done, and things will soon be due to build. The costs will mount the longer this lasts.”The disruptions that are still unfolding in Shanghai and other Chinese cities are likely to reverberate along global supply chains in the coming months. Andrea Huang, a senior director at Overhaul, which monitors company supply chains, said with lockdowns not expected to ease until early or mid-May, the ripple effects for industries like auto and consumer electronics would extend into June or July.In Shanghai, the local authorities on Friday selected some companies in the automotive, semiconductor and other key industries to restart production, but the vast majority of enterprises remain shuttered.Activity at the port has also slowed. According to data from Project44, a logistics platform, the number of vessels that were berthing at the Shanghai port last week had dropped by about half since the lockdown began, while the number of vessels seeking to call at the nearby port of Ningbo jumped as shipping companies tried to get around restrictions. The time that imported containers were spending in the port had also risen sharply, from 4.6 days on March 28 to 14 days on April 23, the company said, as coronavirus testing requirements for truck drivers limited the ability to get containers in and out of the port.Fears of broader lockdowns weighed on global stocks on Monday, while oil and other commodities also fell in anticipation of lower demand.Elisabeth Waelbroeck-Rocha, chief international economist at S&P Global Market Intelligence, said that, in addition to disrupting global supply chains and fueling inflation, coronavirus outbreaks and accompanying lockdowns had undermined Chinese economic growth in March and April, making China unlikely to reach its target of 5.5 percent growth in gross domestic product in 2022.The epicenter of the outbreak shifted from Jilin Province in the northeast to Shanghai, a manufacturing base for high-end auto components, but smaller-scale outbreaks in other regions have largely been brought under control, she wrote in a note. More

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    World Economic Outlook Dims as War and Pandemic Cast a Pall

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    The International Monetary Fund’s new World Economic Outlook expects growth to slow to 3.6 percent this year. The group is one of many to slash their forecasts recently.WASHINGTON — The world economy has entered a period of intense uncertainty as a capricious pandemic and the fallout from Russia’s war in Ukraine combine to fuel rapid inflation and weigh on an already fragile global recovery.These colliding challenges are confronting policymakers and central bankers in the United States and Europe as they seek to bring down inflation without slowing growth so much that their economies tip into recession.In the last week, international organizations and think tanks have begun slashing their forecasts for growth and trade as they assess the war’s disruptions to global energy, food and commodity supplies, as well as China’s sweeping lockdowns to contain a renewed coronavirus outbreak.The pall over the world economy was underscored on Tuesday by the International Monetary Fund, which said in its World Economic Outlook that global output was expected to slow this year to 3.6 percent, from 6.1 percent in 2021. That is a downgrade from a January forecast of 4.4 percent growth this year.“Global economic prospects have been severely set back, largely because of Russia’s invasion of Ukraine,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist, said at a news briefing on Tuesday. “This crisis unfolds as the global economy has not yet fully recovered from the pandemic.”The impact of Russia’s war on the global economy will be a central topic for policymakers convening in Washington this week for the spring meetings of the International Monetary Fund and the World Bank.As the meetings got underway, policymakers grappled with how to maintain pressure on Russia while keeping the economic recovery on track and protecting the world’s poor from rising prices. While some countries that export commodities will benefit from a period of higher fuel and food prices, for most economies the disruptions weigh heavily.“The war has made an already dire situation worse,” Treasury Secretary Janet L. Yellen said in a speech about rising food insecurity on Tuesday. “Price and supply shocks are already materializing, adding to global inflationary pressures, creating risks to external balances, and undermining the recovery from the pandemic.”On Wednesday, Ms. Yellen plans to attend an opening session that will include Ukraine’s finance minister as the United States looks to stand with allies in opposition to Russia’s invasion, a Treasury official said. However, Ms. Yellen will not attend some Group of 20 sessions, such as those on international financial architecture and sustainable finance, if Russians are participating.Against that backdrop, the I.M.F.’s new data revealed a daunting set of economic headwinds. Mr. Gourinchas said the war was slowing growth and spurring inflation, which he described as a “clear and present danger” for many countries. He added that disruptions to Russian supplies of oil, gas and metals, along with Ukrainian exports of wheat and corn, will ripple through commodities markets and across the global economy “like seismic waves.”He acknowledged that the trajectory of the global economy would depend on how the war proceeded and the ultimate breadth of the sanctions that the United States and its allies in Europe and Asia imposed on Russia.“Uncertainty around these projections is considerable, well beyond the usual range,” Mr. Gourinchas said. “Growth could slow down further while inflation could exceed our projections if, for instance, sanctions extend to Russian energy exports.”Ukraine and Russia are facing the most dire economic consequences from the war. The I.M.F. expects the Ukrainian economy to contract by 35 percent this year, while Russia’s economy is projected to shrink 8.5 percent. Mr. Gourinchas noted that the Russian authorities had so far managed to prevent a collapse of their financial system and avoided bank failures but said further sanctions targeting Russia’s energy industry could have a significant impact on its economy.The sweeping sanctions that America and its allies have already imposed on Russia are the main factor contributing to the downward revision of the I.M.F.’s global growth outlook, Mr. Gourinchas said. He added that a tightening of restrictions on Russian energy exports would be an “adverse scenario” that would further slow output around the world.Rising prices around the world show no signs of abating, the I.M.F. said, even if supply chain problems ease. It expects inflation to remain elevated throughout the year, projecting it at 5.7 percent in advanced economies and 8.7 percent in emerging markets. Inflation hit 8.5 percent in the United States last month, the fastest 12-month pace since 1981.An empty street in Shanghai this week. The World Bank warned that the lingering pandemic and Covid-19 lockdowns in China could amplify income inequality and poverty rates.Aly Song/ReutersOther international organizations and research groups have also pared back their global growth forecasts. Economists at the Peterson Institute for International Economics, a Washington think tank, expect global growth to decline from a rapid 5.8 percent in 2021 to 3.3 percent annually in 2022 and 2023.The World Bank also expressed alarm this week about the state of the global economy, warning that the lingering pandemic, Covid-19 lockdowns in China and higher inflation could amplify income inequality and poverty rates. It lowered its 2022 growth forecast to 3.2 percent from 4.1 percent.“I’m deeply concerned about developing countries,” David Malpass, the World Bank president, said on Monday. “They’re facing sudden price increases for energy, fertilizer and food, and the likelihood of interest rate increases. Each one hits them hard.”According to the Bank of International Settlements, more than half of emerging economies have inflation rates above 7 percent. And 60 percent of “advanced economies,” including the United States and the euro area, have inflation over 5 percent, the largest share since the 1980s, the bank said.In Britain, inflation climbed to 7 percent in March, the highest level in 30 years.An April 12 survey of global investors by BofA Securities found that more than two-thirds were pessimistic about global growth prospects in the months ahead.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Fuel Prices Send Airfares Higher, but Travelers Seem Ready to Pay

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    Supplies are not keeping up with demand, and costs may go higher, experts say.A stunning rise in the cost of jet fuel has sent airfares soaring, and industry experts say they are likely to go higher. For now, though, travel-starved consumers seem more than willing to pay up.Jet fuel prices have settled somewhat since Russia’s invasion of Ukraine sent them skyrocketing last month, but the market remains extremely volatile. The problem is particularly severe in New York, where the cost of the fuel rose about fourfold to just over $7.50 a gallon before dipping back to $5.30 in recent days.Supply is broadly constrained and prices have spiked across the country. The Energy Department this week said that the inventory level for East Coast jet fuel stood at 6.5 million barrels, the lowest since the agency began keeping track in 1990.“Jet fuel has made the most parabolic move I’ve ever seen for any transportation fuel,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “It’s just insane.”The surge in prices has implications not only for airfares but also for the already high costs of global shipping. On Wednesday, for example, Amazon announced plans to impose its first “fuel and inflation surcharge” for sellers whose goods it stores and delivers.Airlines have been able to pass on some of their added fuel expense to consumers, many of whom are more than eager to travel after being denied the opportunity for two years.At the start of this year, the average cost of a round-trip domestic flight was $235, according to Hopper, an airfare-tracking app. Since then, ticket prices have risen 40 percent, to $330. Adit Damodaran, an economist at Hopper, which tracks prices for flights and hotels, said the company expects another 10 percent rise, to $360, by the end of May, before prices drop again in the summer.“Not only are the current prices that travelers are paying extremely high compared to historic price data, but the rate of increase has also been particularly steep since January,” he said.In addition to the rising cost of jet fuel, Mr. Damodaran said, the surge in airfares can also be attributed to typical seasonal patterns and the fact that demand was suppressed at the start of the year as the Omicron coronavirus variant spread.Some airlines have also cut flights in response to persistent staff shortages, creating greater competition and driving up fares for the flights that remain.Carriers typically pass on to consumers as much as 60 percent of a volatile rise in the price of fuel, experts said, a process that usually takes months. This time, however, the industry has been able to pass along costs more quickly, in large part because of high demand and a shift in consumer behavior during the pandemic toward buying tickets closer to the date of travel.“We are successfully recapturing a significant portion of the run-up in fuel,” Ed Bastian, the chief executive of Delta Air Lines, told investment analysts and reporters on a call on Wednesday. “This is occurring almost in real time, given the strong demand environment.”Mr. Bastian said that Delta, the first major carrier to report financial results for the first three months of this year, had seen a strong rebound so far and that it was preparing for a robust spring and summer.Delta paid an average price of $2.79 per gallon of jet fuel in the quarter, up 33 percent from the last quarter of last year. The price included a saving of 7 cents per gallon from the airline’s oil refinery outside Philadelphia. Delta said it expected the price of fuel to rise another 15 to 20 percent over the next three months, to between $3.20 and $3.35 per gallon, a range that includes an approximately 20-cent savings attributable to the refinery.Prices for jet fuel, like gasoline and diesel, generally go up and down with crude oil.In February, American Airlines reported that the price it paid per gallon of jet fuel had risen more than a third over the past year, from $1.48 in 2020 to $2.04 in 2021. At the time, it said that each sustained one-cent rise in the per-gallon price would increase its fuel expense for 2022 by about $40 million. This week, American estimated that it had paid $2.80 to $2.85 per gallon in the first quarter of the year.Rising fuel costs and fares seem to be doing little to dissuade consumers. Mr. Bastian said Wednesday that March was Delta’s best sales month ever, beating a record set in 2019, despite having 10 percent fewer seats available. That comes as fares for domestic flights were up about 20 percent across the board between March 2019 and March 2022, according to an analysis by the Adobe Digital Economy Index, which draws on online sales from six of the top 10 U.S. airlines.Refueling at San Francisco International Airport. Some jet fuel shipments were diverted from the East Coast to the West as California prices began to climb.Justin Sullivan/Getty Images“We’ve all been stuck at home for two years, and I think now that we have the opportunity to get out, there’s going to be a lot of willingness to pay,” said Joe Rohlena, lead airline analyst for Fitch Ratings. “If it remains expensive to travel further out, then you may see that kind of willingness to pay higher ticket prices back off.”The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Supply Chain Hurdles Will Outlast Covid Pandemic, White House Says

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    The administration’s economic advisers see climate change and other factors complicating global trade patterns for years to come.The coronavirus pandemic and its ripple effects have snarled supply chains around the world, contributing to shipping backlogs, product shortages and the fastest inflation in decades.But in a report released Thursday, White House economists argue that while the pandemic exposed vulnerabilities in the supply chain, it didn’t create them — and they warned that the problems won’t go away when the pandemic ends.“Though modern supply chains have driven down consumer prices for many goods, they can also easily break,” the Council of Economic Advisers wrote. Climate change, and the increasing frequency of natural disasters that comes with it, will make future disruptions inevitable, the group said.White House economists analyzed the supply chain as part of the Economic Report of the President. The annual document, which this year runs more than 400 pages, typically offers few new policy proposals, but it outlines the administration’s thinking on key economic issues facing the country, and on how the president hopes to address them.This year’s report focuses on the role of government in the economy, and calls for the government to do more to combat slowing productivity growth, declining labor force participation, rising inequality and other trends that long predated the pandemic.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“The U.S. is among and remains one of the strongest economies in the world, but if we look at trends over the last several decades, some of those trends threaten to undermine that standing,” Cecilia Rouse, chair of the Council of Economic Advisers, said in an interview. The problem is in part that “the public sector has retreated from its role.”The report dedicates one of its seven chapters to supply chains, noting that the once-esoteric subject “entered dinner-table conversations” in 2021. In recent decades, Ms. Rouse and the report’s other authors write, U.S. manufacturers have increasingly relied on parts produced in low-cost countries, especially China, a practice known as offshoring. At the same time, companies have adopted just-in-time production strategies that minimize the parts and materials they keep in inventory.The result, the authors argue, are supply chains that are efficient but brittle — vulnerable to breaking down in the face of a pandemic, a war or a natural disaster.“Because of outsourcing, offshoring and insufficient investment in resilience, many supply chains have become complex and fragile,” they write, adding: “This evolution has also been driven by shortsighted assumptions about cost reduction that have ignored important costs that are hard to turn into financial measures, or that spilled over to affect others.”But some economists noted that making supply chains more resilient could carry its own costs, making products more expensive when inflation is already a major concern.Adam S. Posen, the president of the Peterson Institute for International Economics in Washington, said the pandemic and Russia’s invasion of Ukraine might lead companies to locate at least some of their supply chains in places that were more politically stable and less strategically vulnerable. But pushing companies to duplicate production could waste taxpayer dollars and introduce inefficiencies, raising prices for consumers and lowering growth.“At best you’re paying an insurance premium,” he said. “At worst you’re doing something for completely political reasons that’s very economically inefficient.”Other economists have emphasized that global supply chains are not always a source of fragility — sometimes they can be a source of resilience, too.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Treasury Aims for Economic Pain on Russia, but Critics Question Effectiveness

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    The Treasury Department’s deputy secretary, Wally Adeyemo, has been leading the effort to crack down on evasion and to coordinate with Europe.WASHINGTON — When Russia imposed retaliatory sanctions on top American officials last month, its government targeted President Biden and his top national security advisers, along with Wally Adeyemo, the deputy Treasury secretary, whose agency has been crafting the punitive measures aimed at crippling Russia’s economy.Russia’s move, while wholly symbolic, underscored the central role that the Treasury Department has been playing in designing and enforcing the most expansive financial restrictions that the United States has ever imposed on a major economic power.Those restrictions amount to an economic war against Russia, which is entering a critical phase as the toll of fighting in Ukraine continues to escalate and as the Russian government tries to find ways to evade or mitigate fallout from Western sanctions.In an attempt to prevent Russia from skirting the penalties, Mr. Adeyemo, a 40-year-old former Obama administration official, spent last week crisscrossing Europe to coordinate a crackdown on Russia’s evasion tactics and to plot future sanctions. In meetings with counterparts, Mr. Adeyemo discussed plans by European governments to target the supply chains of Russian defense companies, some of which the U.S. placed under sanctions last week, and he talked about ways the United States could help provide more energy to Europe so European countries could scale back purchases of Russian oil and gas, a Treasury official said.On Wednesday, five days after Mr. Adeyemo returned, the Biden administration announced additional sanctions on Russian banks, state-owned enterprises and the adult daughters of President Vladimir V. Putin.Still, it remains to be seen whether the sweeping penalties aimed at neutering Russia’s economic power are working.Over the past six weeks, the United States and its allies in Europe and Asia have imposed sanctions on large financial institutions in Russia, its central bank, its military-industrial supply chain and Mr. Putin’s allies, seizing their yachts and planes. Imports of Russian oil to the United States have been banned, and Europe is developing plans to wean itself off Russian gas and coal, albeit slowly. This week, the Treasury Department prohibited Russia from making sovereign debt payments with dollars held at American banks, potentially pushing Russia toward its first foreign currency debt default in a century.But thus far Russia has kept paying its debts. Currency controls imposed by Mr. Putin’s central bank, which restricted Russians from using rubles to buy dollars or other hard currencies, along with continuing energy exports to Europe and elsewhere have allowed the ruble to stabilize and are replenishing Russia’s coffers with more dollars and euros. That has raised questions about whether the measures have been effective.“I think we’re grappling with the aftershocks of the shock and awe of the sanctions that were put in place and the recognition that sanctions take time to fully impact an economy,” said Juan C. Zarate, a former assistant secretary of the Treasury for terrorist financing and financial crimes. “It’s asking too much of sanctions to actually turn back the tanks, especially when sanctions have been implemented after the invasion.”At a speech in London last week, Mr. Adeyemo promoted the ability of sanctions to change behavior, describing the measures as a part of the equation that adversaries such as Russia need to consider when they violate international norms.“The idea that you can violate the sovereignty of another country and enjoy the privileges of integration into the global economy is one our allies and partners will not tolerate,” Mr. Adeyemo said at Chatham House, a think tank.Yet even the United States, which is not reliant on Russian energy, has wrestled with how far to go with its penalties.Within the Treasury Department, officials have been in a debate about how far to push the sanctions without creating unintended consequences that would rattle the financial system and inflame inflation, which is soaring across much of the world.The impact on the U.S. economy has been a top priority, and Janet L. Yellen, the Treasury secretary, has expressed concern about measures that would amplify inflation. The sanctions on Russia have already led to higher prices for gasoline, and officials are wary that they could bring spikes in food and car prices as Russian wheat and mineral exports are disrupted.“Our goal from the outset has been to impose maximum pain on Russia, while to the best of our ability shielding the United States and our partners from undue economic harm,” Ms. Yellen told lawmakers on Wednesday.As officials considered how to target the ruble, Ms. Yellen, a former Federal Reserve chair, argued against just imposing a ban on foreign exchange transactions, which would prevent Russia from buying dollars. She suggested instead that immobilizing Russia’s foreign reserves — savings that are held in U.S. dollars, euros and other liquid assets — while creating exemptions for Russia to accept payment for certain energy transactions would be the most effective way to inflict pain on Russia’s economy while minimizing the impact on the United States and its allies.At a congressional hearing this week, Republicans criticized those carve-outs for being giant loopholes that allow Russia to earn hundreds of millions of dollars per day through oil and gas sales.Treasury Department officials have been tracking measures that Russia has been using to prop up its economy, such as buying stocks and bonds, and monitoring signs of a growing black market for rubles, which indicates the currency’s actual diminished value. The Biden administration has watched with concern as the value of the ruble has rebounded in recent weeks, undercutting pronouncements made by Mr. Biden that sanctions reduced the Russian currency to “rubble.”“Of course that means that, having said that, when the ruble rebounds for reasons that do not necessarily indicate weakness of sanctions, people will say, ‘Well, see, they failed,’” said Daniel Fried, a former U.S. ambassador to Poland and assistant secretary of state for Europe.A Treasury official said the United States was also keeping a private list of oligarchs whose financial transactions were under surveillance in preparation for sanctions so they could gain a better understanding of the networks of people that helped those individuals conceal their money. The United States has yet to impose sanctions on Roman Abramovich, a Russian billionaire who is already subject to European Union sanctions.Economists at the Institute of International Finance wrote in a research note this week that Russia’s domestic markets appeared to be stabilizing as a result of tight monetary policy, severe capital controls and its current account surplus.Russia-Ukraine War: Key DevelopmentsCard 1 of 4Missile attack. More

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    Supply Chains Tainted by Forced Labor in China, Panel Told

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    Human rights activists and others urged the Biden administration to cast a wide net to stop imports of products made with forced labor in Xinjiang.WASHINGTON — Human rights activists, labor leaders and others urged the Biden administration on Friday to put its weight behind a coming ban on products made with forced labor in the Xinjiang region of China, saying slavery and coercion taint company supply chains that run through the region and China more broadly.The law, the Uyghur Forced Labor Prevention Act, was signed by President Biden in December and is set to go into effect in June. It bans all goods made in Xinjiang or with ties to certain entities or programs that are under sanctions and transfer minority workers to job sites, unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.It remains to be seen how stringently the law is applied, and if it ends up affecting a handful of companies or far more. A broad interpretation of the law could cast scrutiny on many products that the United States imports from China, which is home to more than a quarter of the world’s manufacturing. That could lead to more detentions of goods at the U.S. border, most likely delaying product deliveries and further fueling inflation.The law requires that a task force of Biden administration officials produce several lists of entities and products of concern in the coming months. It is unclear how many organizations the government will name, but trade experts said many businesses that relied on Chinese factories might realize that at least some part or raw material in their supply chains could be traced to Xinjiang.“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.The State Department estimates that the Chinese government has detained more than one million people in Xinjiang in the last five years — Uyghurs, Kazakhs, Hui and other groups — under the guise of combating terrorism.China denounces these claims as “the lie of the century.” But human rights groups, former detainees, participating companies and the Chinese government itself provide ample documentation showing that some minorities are forced or coerced into working in fields, factories and mines, in an attempt to subdue the population and bring about economic growth that the Chinese government sees as key to stability.Rushan Abbas, the founder and executive director of the nonprofit Campaign for Uyghurs, who has written about the detention of her sister in Xinjiang, said at a virtual hearing convened by the task force on Friday that forced labor had become a “profitable venture” for the Chinese Communist Party, and was meant to reduce the overall population in Xinjiang’s villages and towns.“The pervasiveness of the issue cannot be understated,” she said, adding that forced labor was made possible by “the complicity of industry.”Gulzira Auelkhan, an ethnic Kazakh who fled Xinjiang for Texas, said in the hearing that she had been imprisoned for 11 months in Xinjiang alongside ethnic Kazakhs and Uyghurs who were subject to torture and forced sterilization. She also spent two and a half months working in a textile factory making school uniforms for children and gloves, which her supervisors said were destined for the United States, Europe and Kazakhstan, she said through a translator.It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.Supply chains for solar products, textiles and tomatoes have already received much scrutiny, and companies in those sectors have been working for months to eliminate any exposure to forced labor. By some estimates, Xinjiang is the source of one-fifth of the world’s cotton and 45 percent of its polysilicon, a key material for solar panels.But Xinjiang is also a major provider of other products and raw materials, including coal, petroleum, gold and electronics, and other companies could face a reckoning as the law goes into effect.In the hearing on Friday, researchers and human rights activists presented allegations of links to forced labor programs for Chinese manufacturers of gloves, aluminum, car batteries, hot sauce and other goods.Horizon Advisory, a consultancy in Washington, claimed in a recent report based on open-source documents that the Chinese aluminum sector had numerous “indicators of forced labor,” like ties to labor transfer programs and the Xinjiang Production and Construction Corps, which has been a target of U.S. government sanctions for its role in Xinjiang abuses.Xinjiang accounts for about 9 percent of the global production of aluminum, which is used to produce electronics, automobiles, planes and packaging in other parts of China.The State Department estimates that China has detained more than one million people in Xinjiang in the last five years. The Urumqi No. 3 Detention Center has room for at least 10,000 people. Mark Schiefelbein/Associated Press“China is an industrial hub for the world,” Emily de La Bruyère, a co-founder of Horizon Advisory, said at the hearing.The Latest on China: Key Things to KnowCard 1 of 4Marriages and divorces. More

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    Amid Sanctions, Putin Reminds the World of His Own Economic Weapons

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    The Russian leader has stabilized the ruble and kept Europe’s leaders guessing by threatening to cut off energy. But he has left the country financially isolated.LONDON — In the five weeks since Russia invaded Ukraine, the United States, the European Union and their allies began an economic counteroffensive that has cut off Russia’s access to hundreds of billions of dollars of its own money and halted a large chunk of its international commerce. More than 1,000 companies, organizations and individuals, including members of President Vladimir V. Putin’s inner circle, have been sanctioned and relegated to a financial limbo.But Mr. Putin reminded the world this past week that he has economic weapons of his own that he could use to inflict some pain or fend off attacks.Through a series of aggressive measures taken by the Russian government and its central bank, the ruble, which had lost nearly half of its value, clawed its way back to near where it was before the invasion.And then there was the threat to stop the flow of gas from Russia to Europe — which was set off by Mr. Putin’s demand that 48 “unfriendly countries” violate their own sanctions and pay for natural gas in rubles. It sent leaders in the capitals of Germany, Italy and other allied nations scrambling and showcased in the most visible way since the war began how much they need Russian energy to power their economies.It was that dependency that caused the United States and Europe to exempt fuel purchases from the stringent sanctions they imposed on Russia at the start of the war. The European Union gets 40 percent of its gas and a quarter of its oil from Russia. A cutoff from one day to the next, Chancellor Olaf Scholz of Germany warned this past week, would plunge “our country and the whole of Europe into a recession.”President Vladimir V. Putin has taken steps to insulate Russia’s economy from the impact of sanctions and to prop up the ruble.Pool photo by Mikhail KlimentyevFor the time being, it appears that the prospect of an imminent stoppage of gas has been averted. But Mr. Putin’s sudden demand for rubles helped prompt Germany and Austria to prepare their citizens for what might come. They took the first official steps toward rationing, with Berlin starting the “early warning” phase of planning for a natural gas emergency.Although President Biden has announced plans to release 180 million barrels of oil from the U.S. reserve supply over the next six months and diverted more liquefied natural gas to Europe, that still would not be enough to replace all of what Russia supplies. Russian oil exports normally represent more than one of every 10 barrels the world consumes.Europe’s ongoing energy purchases send as much as $850 million each day into Russia’s coffers, according to Bruegel, an economics institute in Brussels. That money helps Russia to fund its war efforts and blunts the impact of sanctions. Because of soaring energy prices, gas export revenues from Gazprom, the Russian energy giant, injected $9.3 billion into the country’s economy in March alone, according an estimate by Oxford Economics, a global advisory firm.“The lesson for the West is that the effectiveness of financial sanctions can only go so far absent trade sanctions,” the firm said in a research briefing.Mr. Putin’s feints and jabs — at one point this past week he promised to stop and continue gas deliveries in the same statement — have also kept European leaders off-balance as they try to divine his strategy and motivations.The war has prompted democracies to move away from relying on Russian exports. They’ve proposed cutting natural gas deliveries by two-thirds before next winter and to end them altogether by 2027. Those goals may be overly ambitious, experts say.In any case, the transition to other suppliers and eventually to more renewable energy sources will be expensive and painful. On the whole, Europeans may be poorer and colder at least for a few years because of spiraling prices and dampened economic activity caused by energy shortages.And unlike in Russia, governments in these countries have to answer to voters.“Putin has already demonstrated he’s willing to sacrifice civilians — his and Ukrainians — to score a win,” said Meg Jacobs, a historian at Princeton University. For European democracies, turning down thermostats, reducing speed limits and driving less is a choice, she said. “It only works with mass cooperation.”A liquefied natural gas facility in Italy. President Biden has diverted more gas to Europe, but that will still not be enough to replace what Russia supplies.Clara Vannucci for The New York TimesBut leverage, like gas, is a limited resource. And Mr. Putin’s willingness to use it now means that he will have less of it in the future. It will not be an easy transition for Russia either. Most analysts believe that Europe’s aggressive moves to reduce its reliance on Russian energy will have far-reaching consequences, however.“They are done with Russian gas,” David L. Goldwyn, who served as a State Department special envoy on energy in the Obama administration, said of Europe. “I think even if this war would end, and even if you had a new government in Russia, I think there’s no going back.”The European Commission president, Ursula von der Leyen, said as much when she announced the new energy plan last month: “We simply cannot rely on a supplier who explicitly threatens us.”Security concerns aren’t the only development that has undermined Russia’s standing as a long-term energy supplier. What seemed surprising to economists, lawyers and policymakers about Mr. Putin’s demand to be paid in rubles was that it would have violated sacrosanct negotiated contracts and revealed Russia’s willingness to be an unreliable business partner.As he has tried to wield his energy clout externally, Mr. Putin has taken steps to insulate Russia’s economy from the impact of sanctions and to prop up the ruble. Few things can undermine a country as systemically as an abruptly weakened currency.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More