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    U.S. Scrutinizes Swiss Currency Practices

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    The Treasury Department declined to label any country a currency manipulator, but singled out Switzerland as an offender in its semiannual foreign exchange report.WASHINGTON — The Treasury Department said on Friday that it was concerned that some of America’s trading partners were taking actions to weaken their currencies and gain unfair trade advantages against the United States — but declined to label any country a currency manipulator.In its semiannual foreign exchange report, the department singled out Switzerland, which in 2020 was deemed a manipulator, as a worst offender and said it was closely watching the foreign exchange practices of Taiwan and Vietnam. Department officials have been involved in “enhanced bilateral engagement” with all three countries in recent months.“The administration continues to strongly advocate for our major trading partners to carefully calibrate policy tools to support a strong and sustainable global recovery,” Treasury Secretary Janet L. Yellen said in a statement. “An uneven global recovery is not a resilient recovery.”The United States uses three sets of thresholds to determine if a country is weakening the value of its currency. It has broad discretion to determine if a country is manipulating the exchange rate between its currency and the dollar to gain a competitive advantage in international trade.A government can suppress the value of its currency by selling it in foreign exchange markets and stockpiling dollars. By depressing the value of its own currency, a country can make its exports cheaper and more competitive to sell on global markets.The Trump administration labeled Switzerland and Vietnam currency manipulators in 2020, but the Biden administration, seeking a more diplomatic approach, removed the designation.A Treasury official said the United States has had constructive talks with Switzerland over the last year, noting that its economy is facing unusual factors because it is a small and open European economy with a currency, the franc, that is considered a safe haven.Currency manipulation labels are supposed to set off talks with the United States and can involve input from the International Monetary Fund. If the concerns of the Treasury Department are not resolved, the United States can impose an array of penalties, including tariffs.Mark Sobel, the chairman of the Official Monetary and Financial Institutions Forum, noted that the more pressing issue in global currency markets was the strength of the dollar.“The real issue these days is the sharp dollar appreciation, which has clearly been generated by monetary policy divergences between a tightening Fed and others who are less aggressive,” Mr. Sobel said. “It would be hard to fault others.”The United States added Vietnam and Taiwan to its currency “monitoring lists,” a tally that includes China, Japan, South Korea, Germany, Italy, India, Malaysia, Singapore, Thailand and Mexico.The Treasury Department said it was closely watching the foreign exchange activities of China’s state-owned banks. It criticized China for providing “very limited transparency” over how it managed its currency. More

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    Biden to Pause New Solar Tariffs as White House Aims to Boost Adoption

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    WASHINGTON — The Biden administration on Monday announced a two-year pause on imposing any new tariffs on the solar industry, a decision that follows an outcry from importers who have complained the levies are threatening broader adoption of solar energy in the United States.The move is a victory for domestic solar installers, who said the tariffs would put at risk the Biden administration’s goal of significantly cutting carbon emissions by the end of the decade by reducing the flow of products into the United States. But it goes against the wishes of some American solar manufacturers and their defenders, who have been pushing the administration to erect tougher barriers on cheap imports to help revive the domestic industry.It was the latest example of President Biden’s being caught between competing impulses when it comes to trying to steer the United States away from planet-warming fossil fuels, as he has pledged to do. By limiting tariffs, Mr. Biden will ensure a sufficient and cheap supply of solar panels at a time of high inflation and attempt to put stalled solar projects back on track. But the decision will postpone other White House efforts that might have punished Chinese companies for trade violations and lessened Beijing’s role in global supply chains.To counteract complaints by the domestic solar industry, the administration said that Mr. Biden would attempt to speed U.S. manufacturing of solar components, including by invoking the authorities of the Defense Production Act, which gives the president expanded powers and funding to direct the activities of private businesses.The prospect of additional tariffs stemmed from an ongoing investigation by the Commerce Department, which is looking into whether Chinese solar firms — which are already subject to tariffs — tried to get around those levies by moving their operations out of China and into Southeast Asia.Auxin Solar, a small manufacturer of solar panels based in California, had requested the inquiry, which is examining imports from Vietnam, Malaysia, Thailand and Cambodia.In 2020, 89 percent of the solar modules used in the United States were imported, with Southeast Asian countries accounting for the bulk of the shipments.If the Commerce Department determines that the factories were set up to circumvent U.S. tariffs, the administration could retroactively impose tariffs on shipments to the United States. But under the tariff “pause” that Mr. Biden ordered on Monday, such levies could not be imposed for the next two years.The decision is the latest turn in a long game of whack-a-mole the U.S. government has played against low-priced imports in the solar industry.While U.S. companies were some of the first to introduce solar technology, China came to dominate global solar manufacturing in recent decades by subsidizing production and creating a vibrant domestic market for solar installation. In 2011, the United States imposed duties on Chinese products to counteract subsidies and unfairly low prices. U.S. installers then started buying more products from Taiwan, but in 2015 the United States imposed duties on Taiwan as well.Trade experts said that pausing the tariffs could undercut trade laws aimed at protecting American workers by allowing companies in China to continue flooding the United States with cheap imports.Auxin Solar, a California manufacturer of solar panels.Anastasiia Sapon for The New York TimesMamun Rashid, chief executive of Auxin Solar.Anastasiia Sapon for The New York TimesOn Monday, Auxin’s chief executive, Mamun Rashid, said President Biden was interfering with the investigation.“By taking this unprecedented — and potentially illegal — action, he has opened the door wide for Chinese-funded special interests to defeat the fair application of U.S. trade law,” Mr. Rashid said in a statement.To pause the tariffs, a Biden administration official said the administration was invoking a section of the 1930 Tariff Act, which allows the president to suspend certain import duties to address an emergency. Commerce Department officials said their investigation would continue and that any tariffs that resulted from their findings would begin after the 24-month pause expired.“The president’s emergency declaration ensures America’s families have access to reliable and clean electricity while also ensuring we have the ability to hold our trading partners accountable to their commitments,” Gina Raimondo, the Commerce secretary, said in a release.The possibility of tariffs has touched off an ugly battle in recent months over the future of the U.S. solar industry.American solar companies have said that the prospect of more — and retroactive — tariffs was already having a chilling effect on imports. Groups such as the Solar Energy Industries Association, whose members include several Chinese manufacturers with U.S. operations, have been lobbying the White House against the tariffs and on Monday welcomed news that the administration would pause any new levies.“Today’s actions protect existing solar jobs, will lead to increased employment in the solar industry and foster a robust solar manufacturing base here at home,” Abigail Ross Hopper, the president and chief executive of S.E.I.A., said in an emailed statement.“During the two-year tariff suspension window,” she said, “the U.S. solar industry can return to rapid deployment while the Defense Production Act helps grow American solar manufacturing.”Companies that rely on imported products — and U.S. officials who are prioritizing the transition to solar energy — have been complaining that the Commerce Department inquiry has injected uncertainty into future pricing for the solar market, slowing the transition away from fossil fuels. NextEra Energy, one of the largest renewable energy companies in the country, had said it expected to delay the installation of between two and three gigawatts worth of solar and storage construction — enough to power more than a million homes.“The last couple of months we have had to pause all construction efforts,” said Scott Buckley, president of Green Lantern Solar, a solar installer based in Vermont. Mr. Buckley said his company had been forced to put about 10 projects on hold, which would have resulted in the installation of about 50 acres of solar panels.Mr. Buckley said there was no easy solution to the country’s reliance on imported products in the short term and that the White House’s actions on Monday would allow companies like his to resume installations this year.“This is a get back to work order,” he said. “That’s the way I think about it. Let’s clear the logjams.”Solar panels made in China. Major industry groups, some of which include Chinese manufacturers, had been lobbying the Biden administration to take action against the tariffs.Adam Dean for The New York TimesBut domestic solar producers and U.S. labor unions have said that the recent surge in imports from Chinese companies doing their manufacturing in Southeast Asia clearly violates U.S. trade law, which forbids companies to try to avoid U.S. tariffs by moving production or assembly of a product to another country.The domestic producers have accused importers — who have close commercial ties with China — of exaggerating their industry’s hardships to try to sway the Biden administration and preserve profit margins that stem from unfairly priced imports.“If you have a supply chain that depends on dumped and subsidized imports, then you’ve got a problem with your supply chain,” said Scott Paul, the president of the Alliance for American Manufacturing.“We’re getting dependent on hostile countries without sufficient domestic production to ensure against price hikes and supply shocks,” said Michael Stumo, chief executive of Coalition for a Prosperous America, a nonprofit group that promotes domestic manufacturing. “Whether it’s medicine, or PPE, or solar panels, you’ve got to have domestic production.”Some critics also said the legal rationale for the White House’s moves was specious, arguing that the administration was effectively declaring a state of emergency because of the consequences of its own trade laws.Scott Lincicome, a trade policy expert at the Cato Institute, a libertarian think tank, said that the administration’s actions seemed to be “quite the stretch of the statute.”The trade law provision that Mr. Biden invoked allows the president to “declare an emergency to exist by reason of a state of war, or otherwise,” and during such a state of emergency to import “food, clothing, and medical, surgical, and other supplies for use in emergency relief work” duty free.He said critics of U.S. tariffs had long proposed a “public interest” test that would allow levies to be lifted to mitigate broader economic harm, but Congress had never approved such an action.In a letter late last month, Senators Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, complained that solar importers had spent “millions of dollars on advertising and lobbying to urge political interference in the trade enforcement process.” Biden administration officials had previously said that the Commerce Department’s inquiry was immune to political interference, describing it as “quasi-judicial” and “apolitical.”Solar tariffs have been a source of contention for decades, but they have taken on renewed importance in recent years as the consequences of climate change became more apparent. Chinese companies have expanded internationally, allowing them to continue to ship products to the United States, while American companies have struggled to compete.The global solar industry’s dependence on China has complicated the Biden administration’s efforts to ban products linked with forced labor in Xinjiang, the northwest region where U.S. officials say Chinese authorities have detained more than one million Uyghurs and other minorities. Xinjiang is a major producer of polysilicon, the raw material for solar panels.Solar importers complained that a ban last year on solar raw materials made with forced labor by Hoshine Silicon Industry temporarily halted billions of dollars of American projects, as companies struggled to produce documentation to customs officials to prove that neither they nor their suppliers were obtaining material from Hoshine.After the Russia invasion of Ukraine in February, high gasoline prices have also impeded a broader desire to push the country away from oil and left Mr. Biden asking oil-producing nations in the Middle East and beyond to ramp up production.White House officials said Monday that Mr. Biden would sign a suite of directives meant to increase the domestic development of low-emission energy technologies. He is set to make it easier for domestic suppliers to sell solar systems to the federal government. And he will order the Department of Energy to use the Defense Production Act to “rapidly expand American manufacturing” of solar panel parts, building insulation, heat pumps, power grid infrastructure and fuel cells, the administration said in a fact sheet. More

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    U.S. Technology, a Longtime Tool for Russia, Becomes a Vulnerability

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    Global restrictions on sending advanced technology to Russia are hampering the country’s military capacity, U.S. officials say, though Russia has stockpiled American equipment for years.WASHINGTON — With magnifying glasses, screwdrivers and a delicate touch from a soldering gun, two men from an investigative group that tracks weapons pried open Russian munitions and equipment that had been captured across Ukraine.Over a week’s visit to Ukraine last month, the investigators pulled apart every piece of advanced Russian hardware they could get their hands on, such as small laser range finders and guidance sections of cruise missiles. The researchers, who were invited by the Ukrainian security service to independently analyze advanced Russian gear, found that almost all of it included parts from companies based in the United States and the European Union: microchips, circuit boards, engines, antenna and other equipment.“Advanced Russian weapons and communications systems have been built around Western chips,” said Damien Spleeters, one of the investigators with Conflict Armament Research, which identifies and tracks weapons and ammunition. He added that Russian companies had enjoyed access to an “unabated supply” of Western technology for decades.U.S. officials have long been proud of their country’s ability to supply technology and munitions to the rest of the world. But since Russia invaded Ukraine in late February, the United States has faced an unfortunate reality: The tools that Russian forces are using to wage war are often powered by American innovation.Still, while the technology made by American and European companies has been turned against Ukraine, the situation has also given the United States and its allies an important source of leverage against Russia. The United States and dozens of countries have used export bans to cut off shipments of advanced technology, hobbling Russia’s ability to produce weapons to replace those that have been destroyed in the war, according to American and European officials.On Thursday, the Biden administration announced further sanctions and restrictions on Russia and Belarus, adding 71 organizations to a government list that prevents them from buying advanced technology. The Treasury Department also announced sanctions against a yacht-management company that caters to Russian oligarchs.While some analysts have urged caution about drawing early conclusions, saying the measures will take time to have a full effect, the Biden administration has called them a success. Since Western allies announced extensive restrictions on exports of semiconductors, computers, lasers, telecommunications equipment and other goods in February, Russia has had difficulty obtaining microchips to replenish its supply of precision-guided munitions, according to one senior U.S. official, who, along with most other officials interviewed for this article, spoke on the condition of anonymity to discuss matters based on intelligence.On Tuesday, when asked if a chip shortage was crippling the Russian military, Commerce Secretary Gina Raimondo, who oversees export controls, said the answer was “an unqualified yes.”“U.S. exports to Russia in the categories where we have export controls, including semiconductors, are down by over 90 percent since Feb. 24,” she said. “So that is crippling.”The restrictions halt direct technological exports from the United States and dozens of partner nations to Russia. But they also go beyond traditional wartime sanctions issued by the U.S. government by placing limitations on certain high-tech goods that are manufactured anywhere in the world using American machinery, software or blueprints. That means countries that are not in the sanctions coalition with the United States and Europe must also follow the rules or potentially face their own sanctions.Russia has stopped publishing monthly trade data since the invasion, but customs data from its major trading partners show that shipments of essential parts and components have fallen sharply. According to data compiled by Matthew C. Klein, an economics researcher who tracks the effect of the export controls, Russian imports of manufactured goods from nine major economies for which data is available were down 51 percent in April compared with the average from September 2021 to February 2022.The restrictions have rendered the old-school bombing runs on tank factories and shipyards of past wars unnecessary, Mr. Klein wrote. “The democracies can replicate the effect of well-targeted bombing runs with the right set of sanctions precisely because the Russian military depends on imported equipment.”Russia is one of the world’s largest arms exporters, especially to India, but its industry relies heavily on imported inputs. In 2018, Russian sources satisfied only about half of the military-related equipment and services the country needed, such as transportation equipment, computers, optical equipment, machinery and fabricated metal, according to data from the Organization for Economic Cooperation and Development compiled by Mr. Klein.The remainder of equipment and services used by Russia were imported, with about a third coming from the United States, Europe, Japan, Taiwan, Australia and other partner governments that imposed sanctions together on Moscow.A printed circuit board from a cruise missile internal computer collected by Conflict Armament Research during its investigation.via Conflict Armament ResearchU.S. officials say that in concert with a wide variety of other sanctions that ban or discourage commercial relations, the export controls have been highly effective. They have pointed to Russian tank factories that have furloughed workers and struggled with shortages of parts. The U.S. government has also received reports that the Russian military is scrambling to find parts for satellites, avionics and night vision goggles, officials say.Technology restrictions have harmed other Russian industries as well, U.S. officials say. Equipment for the oil and gas industry has been degraded, maintenance for tractors and heavy equipment made by Caterpillar and John Deere has halted, and up to 70 percent of the commercial airplanes operated by Russian airlines, which no longer receive spare parts and maintenance from Airbus and Boeing, are grounded, officials say.But some experts have sounded notes of caution. Michael Kofman, the director of Russia studies at CNA, a research institute in Arlington, Va., voiced skepticism about some claims that the export controls were forcing some tank factories and other defense companies in Russia to shutter.“There’s not been much evidence to substantiate reports of problems in Russia’s defense sector,” he said. It was still too early in the war to expect meaningful supply chain problems in Russia’s defense industry, he said, and the sourcing for those early claims was unclear.Maria Snegovaya, a visiting scholar at George Washington University who has studied sanctions on Russia, said the lack of critical technologies and maintenance was likely to start being felt widely across Russian industry in the fall, as companies run out of parts and supplies or need upkeep on equipment. She and other analysts said even the production of daily goods such as printer paper would be affected; Russian companies had bought the dye to turn the paper white from Western companies.“We expect random disruptions in Russia’s production chains to manifest themselves more frequently,” Ms. Snegovaya said. “The question is: Are Russian companies able to find substitutes?”U.S. officials say the Russian government and companies there have been looking for ways to get around the controls but have so far been largely unsuccessful. The Biden administration has threatened to penalize any company that helps Russia evade sanctions by cutting it off from access to U.S. technology.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Biden Administration Begins Trade Dialogue With Taiwan

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    WASHINGTON — The Biden administration on Wednesday said that it would pursue negotiations to strengthen trade and technology ties with Taiwan, a move that is aimed at countering China’s influence in the Asia-Pacific region and one that is likely to rankle Beijing.The announcement follows the Biden administration’s efforts to build an Asia-Pacific economic bloc, known as the Indo-Pacific Economic Framework, that includes 13 countries and excludes Taiwan.China claims the island, a self-governing democracy that is critical to global technology supply chains, as an incontestable part of its territory.While Taiwan expressed interest in becoming a full member of the Indo-Pacific framework, that prospect was deemed too controversial by many participating countries.The talks with Taiwan will cover many of the same issues as the framework, from digital trade to reducing red tape for importers and exporters. U.S. officials said the talks, the first of which will be held in Washington at the end of June, would focus on a variety of issues, including opening up trade in agriculture and aligning technological standards.Several topics of the discussion are clearly aimed at addressing mutual complaints over Chinese trade practices. U.S. officials said they would work with Taiwan to eliminate forced labor in global supply chains and develop provisions to compete with nonmarket practices from state-owned enterprises.Negotiations will happen along two tracks, with the United States trade representative handling trade issues and the Commerce Department in charge of technology and investment, including coordination on export controls and measures to secure semiconductor supply chains.“Taiwan is an incredibly important partner to us, especially as it relates to semiconductors,” Gina Raimondo, the commerce secretary, said in a briefing Tuesday, adding, “We look forward to continuing to deepen our economic ties with Taiwan.”Taiwan has long pushed for deeper trade ties with the United States. In 2020, it eased restrictions on imports of U.S. beef and pork in an effort to entice the United States into formal negotiations. The following year, the United States and Taiwan resumed some trade talks despite Beijing’s opposition.Since then, a global shortage of semiconductors, among Taiwan’s most valuable exports, has further increased the island’s strategic importance.Because the Biden administration’s negotiations with Taiwan would not include so-called market access provisions that require changes in U.S. law, the administration does not anticipate needing congressional approval for any agreement, senior officials said, though they added that they would continue to consult with Congress on the process.Given Taiwan’s contested status, the two sides will also meet unofficially and under the auspices of the American Institute in Taiwan, which is the de facto U.S. embassy in Taipei, and the Taipei Economic and Cultural Representative Office, which represents Taiwan in the United States in the absence of diplomatic recognition.Senior U.S. officials said in a call with reporters Tuesday that while they didn’t include Taiwan among the initial members negotiating the Indo-Pacific Economic Framework, going forward they intended to take a flexible approach to participation. More

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    Debate Over Tariffs Reveals Biden’s Difficulties on China Trade

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    Sixteen months into the Biden presidency, U.S. officials are still divided over what to do about a trade legacy left by President Donald J. Trump.WASHINGTON — President Biden’s decision on Monday to try to align with Asian partners to form an economic bloc against China comes at a moment of frustration over his administration’s economic approach to Beijing, with some White House advisers pushing the president to move away from the Trump-era policies he criticized and others arguing that Mr. Biden risks being seen as weak on China if he relents.Some officials have grown frustrated that U.S. trade relations with China are still defined by policies set by President Donald J. Trump, including tariffs imposed on more than $360 billion of products and trade commitments made during a deal the United States and China signed in early 2020.Concerns about the United States’ economic approach to China have taken on new urgency amid rapid inflation. Treasury Secretary Janet L. Yellen and other officials have argued that the full suite of tariffs served little strategic purpose and could be at least partly lifted to ease the financial burden on companies and consumers.But those ideas have met pushback from other senior administration officials, such as some top White House aides, the U.S. trade representative and labor groups. They argue that removing the tariffs — which were put in place to punish China over its economic practices — would constitute unilateral disarmament given that Beijing has yet to address many of the policies that prompted the measures. With the midterm elections looming, some administration officials are worried that removing tariffs would make Democrats vulnerable to political attacks, according to interviews with more than a dozen current and former officials.The business community is also losing patience with the absence of a clear trade strategy nearly a year and a half into Mr. Biden’s presidency. Executives have complained about a lack of clarity, which they say has made it difficult to determine whether to continue investing in China, a critical market.The challenges in figuring out how to confront Chinese trade practices have become harder amid Russia’s invasion of Ukraine. The United States was originally moving toward making changes to its trade relationship with China in early 2022, a senior administration official said, but with Beijing aligning with Moscow, Mr. Biden felt it was prudent to see how events unfolded in Ukraine with respect to the global economy and U.S. allies.Biden administration officials are conflicted over whether to remove tariffs on Chinese goods.Doug Mills/The New York TimesSome elements of the administration’s trade strategy are becoming clearer this week. Mr. Biden announced in Japan on Monday that the United States would begin talks with 12 countries to develop a new economic framework for the Indo-Pacific region. The countries would aim to form a bloc that would provide an early warning system for supply chain issues, encourage industries to decarbonize and offer U.S. businesses reliable Asian partners outside China.The framework would not contain the binding commitments for market access that are typical of most trade deals, which have proved to be a hard sell for many Democrats after the United States withdrew from the Trans-Pacific Partnership, President Barack Obama’s signature trade agreement.U.S. officials say their goals for the framework will be ambitious and include raising labor and environmental standards and creating new guidelines for how data flows between countries. But some analysts have questioned whether the framework can encourage those changes without offering Asian countries the U.S. market access that is typically the incentive in trade pacts. And U.S. labor groups are already wary that some commitments could lead to further outsourcing for American industries.The framework also does not try to directly shape trade with China. Many Biden administration officials have concluded that talks with China have proved largely fruitless, as have negotiations at the World Trade Organization. Instead, they have said they would try to confront China by changing the environment around it by rebuilding alliances and investing more in the United States, including through a $1 trillion infrastructure spending bill.Senior U.S. officials hold a similar view as their counterparts in the Trump administration that the world’s dependence on the Chinese economy has given Beijing enormous strategic leverage. A classified China strategy that was largely finished last fall argues that it is important for U.S. security to delink some industries and diversify supply chains, people familiar with the strategy say.The administration was supposed to offer a glimpse of the classified strategy in a major speech laying out economic and security goals for China, which Washington officials and China experts expected to occur last fall. The White House first considered having Mr. Biden deliver the speech but settled on Secretary of State Antony J. Blinken.Yet the speech — which revolves around the slogan “Invest, Align and Compete,” according to those familiar with it — has been delayed for several reasons, including the war in Ukraine and Mr. Blinken’s contracting Covid-19 this month. Some China experts in Washington have interpreted the delays as another sign of uncertainty on China policy, but U.S. officials insist that is not true.Katherine Tai, the U.S. trade representative, and other officials have argued against dropping the tariffs.Pete Marovich for The New York TimesMr. Blinken is expected to give the China speech shortly after he and Mr. Biden return from Japan, people familiar with the planning said.The speech avoids explicitly addressing how the administration will deal with Mr. Trump’s tariffs, they say. Businesses have long complained that they hurt U.S. companies and their consumers rather than China. That concern has been heightened by the fact that prices are rising at their fastest rate in 40 years, creating a political problem for the White House, which has struggled to explain how it can alleviate soaring costs other than relying on the Federal Reserve.But Republicans and Democrats who want more aggressive policies toward China — and toward some American companies that do business there — would try to draw blood if Mr. Biden eased the tariffs.“We need to rebuild American industry, not reward companies that keep their supply chains in China,” Senator Marco Rubio, Republican of Florida, said this month after voting against a legislative amendment allowing carve-outs to the tariffs.At a news conference in Japan on Monday, Mr. Biden said he would meet with Ms. Yellen when he returned from his trip to discuss her call to remove some of the China tariffs.“I am considering it,” the president said. “We did not impose any of those tariffs; they were imposed by the previous administration, and they are under consideration.”Public rifts among Biden officials have been rare, but when it comes to tariffs, the debate has spilled into the open.“There are definitely different views in the administration, and they’re surfacing,” said Wendy Cutler, the vice president at the Asia Society Policy Institute and a former U.S. trade negotiator. “There are those who think that the tariffs didn’t work and are contributing to inflation. Then you have the trade negotiator side that says: ‘Why would we give them up now? They’re good leverage.’”The discussion over how and when to adjust these tariffs mirrors a bigger debate over whether globalized trade has done more to help or harm Americans, and how the Democratic Party should approach trade.Katherine Tai, the United States trade representative; Tom Vilsack, the agriculture secretary; Jake Sullivan, the national security adviser; and others have argued against dropping the tariffs. Ms. Yellen, Commerce Secretary Gina Raimondo and other officials have pointed out the benefits to companies and consumers from adjusting them, people familiar with the discussions said.Ms. Yellen has long been a voice of skepticism regarding the tariffs and has grown more frustrated with the pace of progress on trade developments, people familiar with her thinking said. She made the case last week for removing some of the tariffs as a way to offset rising prices.“Some relief could come from cutting some of them,” Ms. Yellen said, explaining that the tariffs were harming consumers and businesses. “There are a variety of opinions, and we really haven’t sorted out yet or come to agreement on where to be on tariffs.”Daleep Singh, a deputy national security adviser, was more blunt in an April 21 webinar. “We inherited these tariffs,” he said, “and while they may have created negotiating leverage, they serve no strategic purpose.”For products that do not strengthen critical supply chains or support national security, “there’s not much of a case for those tariffs being in place,” Mr. Singh said. “Why do we have tariffs on bicycles or apparel or underwear?”Treasury Secretary Janet L. Yellen has grown more frustrated with the pace of progress on trade developments, according to people familiar with her thinking.Sarahbeth Maney/The New York TimesBut labor leaders, progressive Democrats and some industry representatives have made various arguments for maintaining tough tariffs, with several pointing to data showing that imports from China are not the main drivers of inflation.“For a Democratic president to get rid of tariffs imposed by a Republican and basically give a free handout to the Chinese Communist Party is not something that’s really politically wise in any form,” said Scott N. Paul, the president of the Alliance for American Manufacturing, which represents steel companies and workers.Economists also believe the impact from removing the tariffs would be modest. Jason Furman, an economist at Harvard University and a former chairman of Mr. Obama’s Council of Economic Advisers, estimates that removing all the China tariffs would shave half a percentage point off the Consumer Price Index, which grew 8.3 percent in April from a year earlier.Still, Mr. Furman said, when it comes to lowering inflation “tariff reduction is the single biggest tool the administration has.”Progressive Democrats like Representative Tim Ryan, Democrat of Ohio, have argued for maintaining tough tariffs on China.Dustin Franz for The New York TimesThe Office of the United States Trade Representative started a statutory review of the tariffs this month and says its approach to analyzing them is on track. “We need to make sure that whatever we do right now, first of all, is effective and, second of all, doesn’t undermine the medium-term design and strategy that we know we need to pursue,” Ms. Tai said in an interview on May 2.Some Biden administration officials appear to favor an outcome that would lift certain tariffs while increasing other trade penalties on China, a process that would take at least several months. That could happen through a separate investigation under the so-called Section 301 process into China’s use of industrial subsidies. More

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    Baby Formula Shortage Has an Aggravating Factor: Few Producers

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    With just a handful of companies making U.S. infant formula, a shutdown of Abbott’s plant had outsized impact on the supply.In the early 1990s, the nation’s biggest makers of baby formula were under fire.The three largest manufacturers, which controlled 90 percent of the U.S. market at the time, were hit with waves of state, federal and corporate lawsuits, accusing them of attempting to limit competition and using their control of the industry to fix prices. Most of the lawsuits were settled or, in some cases, won by the companies.Three decades later, the $2.1 billion industry is still controlled by a small number of manufacturers, who are again in the cross hairs over their outsized market share.The infant formula market was plunged into disarray when Abbott Laboratories voluntarily recalled some of its most popular powdered formulas in February and shut down its plant in Sturgis, Mich., after four babies who had consumed some of Abbott’s products became sick with bacterial infections.Abbott, which controls 48 percent of the market, has said there was no evidence its formula caused any known infant illnesses and that none of the tests performed by regulators have directly linked the cans of formula the babies consumed to the strains of bacteria, Cronobacter sakazakii, found at the plant.But the ripple effects from that single plant closing have been widespread, highlighting the market power of a single manufacturer and the lack of meaningful competition in an industry governed by rules and regulations designed to protect the incumbents.Stores are limiting purchases of baby formula, with shelves in many markets completely bare. Panicked parents of newborns are calling on friends and family to help locate food for their babies, with some resorting to making their own formula at home. And while the Abbott plant was given the green light this week to start manufacturing again — a move that will still take weeks to rebuild inventory on store shelves — there are growing calls from lawmakers for major changes to how the industry operates.“When something goes wrong, like it has here, you then have a major, serious crisis,” said Representative Rosa DeLauro, a Connecticut Democrat who released a scathing 34-page whistleblower report from a former Abbott employee detailing safety and cleanliness issues at the Sturgis plant. She argued that the industry should be broken up and efforts should be made to promote competition to avoid future shortages.Senator Tammy Duckworth, an Illinois Democrat, urged the Federal Trade Commission last week to conduct a broad study of the infant formula industry and whether market consolidation has led to the dire shortages. Top Biden administration officials have also lamented the power of a few players. On Sunday, Transportation Secretary Pete Buttigieg said the Biden administration should do more to address the industry’s “enormous market concentration.”“We’ve got four companies making about 90 percent of the formula in this country, which we should probably take a look at,” Mr. Buttigieg said on CBS’s “Face the Nation.”Read More on the Baby Formula Shortage A Desperate Search: As the United States faces a baby formula shortage, some parents are rationing supplies, or driving for hours in search of them. A Misleading Narrative: Amid the crisis, Republicans have suggested that the Biden administration is sending baby formula to immigrants at the expense of American families. An Emotional Toll: The shortage is forcing many new mothers to push themselves harder to breastfeed and look for ways to start again after having stopped. What Not to Do: As they struggle to cope, some parents have resorted to strategies like watering down their formula. But there are risks.Today, Abbott is the biggest player. Mead Johnson, which is owned by the conglomerate Reckitt Benckiser, and Perrigo, which makes generic formula for retailers, control another 31 percent. Nestlé controls less than 8 percent.In part, the lack of competition stems from simple math: Few companies or investors are eager to jump into the infant formula industry because its growth is tied to the nation’s birth rate, which held steady for decades until it began dropping in 2007.But the factors that long ago led to the creation of an industry controlled by a handful of manufacturers are primarily rooted in a tangled web of trade rules and regulations that have protected the biggest producers and made it challenging for others to enter the market.The United States, which produces 98 percent of formula consumed in the country, has strict regulations and tariffs as high as 17.5 percent on foreign formula. The Food and Drug Administration maintains a “red list” of international formulas, including several European brands that, if imported, are detained because they do not meet U.S. requirements. Those shortcomings could include labels that are not written in English or do not have all of the required nutrients listed. This week, the F.D.A. said it would relax some regulations to allow for more imports into the United States.Trade rules contained in the United States Mexico Canada Agreement, which replaced the North American Free Trade Agreement, also significantly discourage Canadian companies from exporting infant formula to the United States. The pact established low quotas that trigger export charges if exceeded. American dairy lobbying groups had urged officials to swiftly pass the agreement and supported the quotas at the time.But perhaps the biggest barrier to new entrants is the structure of a program that aims to help low-income families obtain formula. The Special Supplemental Nutrition Program for Women, Infants, and Children, better known as WIC, is a federally funded program that provides grants to states to ensure that low-income pregnant or postpartum women and their children have access to food.The program, which is administered by state agencies, purchases more than half of all infant formula supply in the United States, with about 1.2 million infants receiving formula through WIC.State WIC agencies cannot just buy formula from any manufacturer. They are required by law to competitively bid for contracts and select one company, which becomes the exclusive provider of formula for all WIC recipients in the state. In exchange for those exclusive rights, manufacturers must provide states significant discounts for the formula they purchase.David E. Davis, an economics professor at South Dakota State University, said that exclusive system could make it more difficult for smaller companies to break through. Although manufacturers may sell products to states below cost, Dr. Davis’s research found that brands that secure WIC contracts gain greater prominence on store shelves, creating a spillover effect and resulting in larger sales among families that are not WIC recipients. Doctors may also preferentially recommend those brands to mothers, his research found.The formula shortage is causing retailers to limit purchases, with shelves in many markets completely bare.Kaylee Greenlee Beal for The New York Times“If you don’t have the WIC contract, you’re pretty much a small player,” Dr. Davis said. “Because that locks you out of the WIC market and it pretty much locks you out of the non-WIC market. So firms bid very aggressively to get the WIC contract.”Only three companies have contracts to supply formula through the program: Abbott makes up the largest share, providing formula to about 47 percent of infants that receive WIC benefits, while Mead Johnson provides 40 percent and Gerber, which is manufactured by Nestlé, provides 12 percent, according to the National WIC Association.Navigating the Baby Formula Shortage in the U.S.Card 1 of 6A growing problem. More

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    A Weak Euro Heads to an Uncomfortable Milestone: Parity With the Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”Also in the dollar’s favor is the aggressive action of the Federal Reserve. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. Traders are betting that U.S. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Weakened Euro May Become Equal to the U.S. Dollar

    by

    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More