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    How The Trucker Protests Are Snarling the Auto Industry

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    Blockades of U.S.-Canada border crossings could hurt the auto industry, factory workers and the economy, which are still recovering from pandemic disruptions.After two years of the pandemic, semiconductor shortages and supply chain chaos, it seemed as if nothing else could go wrong for the auto industry and the millions of people it employs. But then came thousands of truckers who, angry about vaccine mandates, have been blocking major border crossings between Canada and the United States.With Canadian officials baffled about what to do, the main routes that handle the steel, aluminum and other parts that keep car factories running on both sides of the border were essentially shut down Wednesday and Thursday.Ford Motor, General Motors, Honda and Toyota have curtailed production at several factories in Michigan and Ontario, threatening paychecks and offering a fresh reminder of the fragility of global supply chains and of the deep interdependence of the U.S. and Canadian economies, which exchange $140 million in vehicles and parts every day.No one knows how this is going to end. The protests are expected to swell in the coming days and could spread, including to the United States. Canada’s transport minister has called the bridge blockades illegal. Marco Mendicino, Canada’s minister of public safety, said on Thursday that the Royal Canadian Mounted Police, the national force, was sending additional officers to the Canadian capital, Ottawa, and to Windsor, Ontario. The mayor of Windsor has threatened to remove the protesters. But those statements have seemed to have little impact. Gov. Gretchen Whitmer of Michigan pleaded with Canadian officials to quickly reopen traffic.“They must take all necessary and appropriate steps to immediately and safely reopen traffic so we can continue growing our economy,” Ms. Whitmer said in a statement on Thursday.The chaos is already starting to take an economic toll. The pain is likely to be most acute for smaller auto parts suppliers, for independent truckers and for workers who get paid based on their production. Many of these groups, unlike large automakers like G.M., Ford and Toyota, lack the clout to raise prices of their goods and services. Companies and workers in Canada are more likely to suffer because they are more dependent on the United States.The longer crossings between the countries remain blocked, the more severe the damage, not only to the auto industry but also to the communities that depend on manufacturing salaries. Workers at smaller firms typically receive no compensation for lost hours, said Dino Chiodo, the director of auto at the giant Canadian union Unifor. Workers who have been sent home early because of parts shortages will spend less at stores and restaurants.“People say, ‘I have $200 less this week, what do I do?’” Mr. Chiodo said. “It affects the Canadian and U.S. economy as a whole.”Auto factories and suppliers in the United States generally keep at least two weeks of raw materials on hand, said Carla Bailo, the president of the Center for Automotive Research in Ann Arbor, Mich. If the bridges remain blocked for longer than that, she said, “then you’re looking at layoffs.”The blockades came after a demonstration in Ottawa that started nearly two weeks ago. The protests began over a mandate that truck drivers coming from the United States be vaccinated against the coronavirus and have grown to include various pandemic restrictions. Some have demanded that Prime Minister Justin Trudeau resign. The truckers have been joined by various groups, including some displaying Nazi symbols and damaging public monuments. Police in Ottawa said on Thursday that the protesters and their supporters, including some in the United States, had almost overwhelmed the city’s 911 system with calls.The crossing that has the auto industry and government officials most concerned is the Ambassador Bridge, which connects Windsor and Detroit. It carries roughly a quarter of the trade between the two countries, which has been relatively unrestricted for decades. While food and other products are also affected, about a third of the cargo that uses the bridge is related to the auto industry, Ms. Bailo said.The blockade has been felt as far south as Kentucky, where production has been disrupted at a Toyota factory, the company said on Thursday. The shutdown at the border also will prevent manufacturing at Toyota’s three Canadian plants for the rest of the week, a spokesman for the automaker, Scott Vazin, said.Demonstrators blocking access to the Ambassador Bridge in Windsor. The bridge accounts for roughly a quarter of the trade between the United States and Canada.Nathan Denette/The Canadian Press, via Associated PressG.M. said it had canceled two shifts on Wednesday and Thursday at a factory in Lansing, Mich., that makes Buick Enclave and Chevrolet Traverse sport utility vehicles. The company also sent workers from the first shift at a plant in Flint, Mich., home early. Ford said Thursday that plants in Windsor and Oakville, also in Ontario, were running at reduced capacity.Shortages of semiconductors and other components have not been all bad for giant automakers, creating scarcity that has driven up prices of cars in the last year. Ford and G.M. both reported healthy profits for 2021. And the economic damage will not be severe if the bridge and other crossings reopen soon, industry experts said.But the last two years have shown that, because supply chains are so complex, problems at obscure parts makers can have far-reaching and unpredictable impact. Last year, Ford had to shut down plants for weeks at a time in part because of a fire at a chip factory in Japan.“If it stretches on for weeks it could be catastrophic,” said Peter Nagle, an analyst who covers the car industry at IHS Markit, a research firm.Mr. Nagle said the bridge blockade was worse than the semiconductor shortage for carmakers. They “were already running pretty tight because of other supply chain shortages,” he said. “This is just bad news on top of bad news.”The auto industry operates relatively seamlessly across Canada, the United States and Mexico. Some parts can travel back and forth across borders multiple times as raw materials are processed and are turned into components and, eventually, vehicles.An engine block, for example, might be cast in Canada, sent to Michigan to be machined for pistons, then sent back to Canada for assembly into a finished motor. The blockades have stranded some truckers on the wrong side of the border, creating a chain reaction of missed deliveries.The slowdown in Canadian trade will disproportionately affect New York, Michigan and Ohio, said Arthur Wheaton, the director of labor studies at Cornell’s School of Industrial and Labor Relations. At the same time, he added, the protests were “certainly raising concerns for all U.S. manufacturers.”“There is already a shortage of truck drivers in North America, so protests keeping truckers off their routes exacerbates problems for an already fragile supply chain,” Mr. Wheaton said.Carmakers had hoped that shortages of computer chips and other components would ease this year, allowing them to concentrate on the long-term: the transition to electric vehicles.A larger fear for many elected officials and business executives is that the scene at the Ambassador Bridge could inspire other protests. The Department of Homeland Security warned in an internal memo that a convoy of protesting truckers was planning to travel from California to Washington, D.C., potentially disrupting the Super Bowl and President Biden’s State of the Union address on March 1.“While there are currently no indications of planned violence,” the memo, which was dated Tuesday, said, “if hundreds of trucks converge in a major metropolitan city, the potential exists to severely disrupt transportation, federal government operations, commercial facilities and emergency services through gridlock and potential counter protests.”Mr. Chiodo, the Canadian union leader, said that “the people who are demonstrating are doing it for the wrong reasons. They want to get back to the way things were before the pandemic, and in reality they are shutting things down.”The scene in Ottawa remained a raucous party Thursday, with hundreds of people on the street, many wearing Canadian flags like capes. The song “Life Is a Highway,” by the Canadian musician Tom Cochrane, pumped from loudspeakers set up on the back of an empty trailer that had been converted into a stage.But there was a thinning out of protesters — with some empty spaces where trucks had been the day before.Johnny Neufeld, 39, a long-haul trucker from Windsor, Ontario, said the vaccine mandate would spell the end of his job transporting molds into the United States since he had chosen not to be inoculated out of fear the shots had been developed too quickly. He got his first ticket from the police Thursday morning, a fine of 130 Canadian dollars (about $100) for being in a no-stopping zone.“This is a souvenir,” he said.Dan Bilefsky More

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    Why Are Oil Prices So High and Will They Stay That Way?

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    HOUSTON — Oil prices are increasing, again, casting a shadow over the economy, driving up inflation and eroding consumer confidence.Crude prices rose more than 15 percent in January alone, with the global benchmark price crossing $90 a barrel for the first time in more than seven years, as fears of a Russian invasion of Ukraine grew.Though the summer driving season is still months away, the average price for regular gasoline is fast approaching $3.40 a gallon, roughly a dollar higher than it was a year ago, according to AAA.The Biden administration said in November that it would release 50 million barrels of oil from the nation’s strategic reserves to relieve the pressure on consumers, but the move hasn’t made much of a difference.Many energy analysts predict that oil could soon touch $100 a barrel, even as electric cars become more popular and the coronavirus pandemic persists. Exxon Mobil and other oil companies that only a year ago were considered endangered dinosaurs by some Wall Street analysts are thriving, raking in their biggest profits in years.Why are oil prices suddenly so high?The pandemic depressed energy prices in 2020, even sending the U.S. benchmark oil price below zero for the first time ever. But prices have snapped back faster and more than many analysts had expected in large part because supply has not kept up with demand.Oil prices are at their highest point since 2014.Price of a barrel of Brent crude, the global benchmark, and West Texas Intermediate, the U.S. standard

    Source: FactSetBy The New York TimesWestern oil companies, partly under pressure from investors and environmental activists, are drilling fewer wells than they did before the pandemic to restrain the increase in supply. Industry executives say they are trying not to make the same mistake they made in the past when they pumped too much oil when prices were high, leading to a collapse in prices.Elsewhere, in countries like Ecuador, Kazakhstan and Libya, natural disasters and political turbulence have curbed output in recent months.Understand Russia’s Relationship With the WestThe tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea. Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.“Unplanned outages have flipped what was thought to be a pivot towards surplus into a deep production gap,” said Louise Dickson, an oil markets analyst at Rystad Energy, a research and consulting firm.On the demand side, much of the world is learning to cope with the pandemic and people are eager to shop and make other trips. Wary of coming in contact with an infectious virus, many are choosing to drive rather than taking public transportation.But the most immediate and critical factor is geopolitical.A potential Russian invasion of Ukraine has “the oil market on edge,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington. “In a tight market, any significant disruptions could send prices well above $100 per barrel,” Mr. Cahill wrote in a report this week.Russia produces 10 million barrels of oil a day, or roughly one of every 10 barrels used around the world on any given day. Americans would not be directly hurt in a significant way if Russian exports stopped, because the country sends only about 700,000 barrels a day to the United States. That relatively modest amount could easily be replaced with oil from Canada and other countries.A Russian invasion of Ukraine could interrupt oil and gas shipments, which would increase prices further.Brendan Hoffman for The New York TimesBut any interruption of Russian shipments that transit through Ukraine, or the sabotage of other pipelines in northern Europe, would cripple much of the continent and distort the global energy supply chain. That’s because, traders say, the rest of the world does not have the spare capacity to replace Russian oil.Even if Russian oil shipments are not interrupted, the United States and its allies could impose sanctions or export controls on Russian companies, limiting their access to equipment, which could gradually reduce production in that country.In addition, interruptions of Russian natural gas exports to Europe could force some utilities to produce more electricity by burning oil rather than gas. That would raise demand and prices worldwide.What can the United States and its allies do if Russian production is disrupted?The United States, Japan, European countries and even China could release more crude from their strategic reserves. Such moves could help, especially if a crisis is short-lived. But the reserves would not be nearly enough if Russian oil supplies were interrupted for months or years.Western oil companies that have pledged not to produce too much oil would most likely change their approach if Russia was unable or unwilling to supply as much oil as it did. They would have big financial incentives — from a surging oil price — to drill more wells. That said, it would take those businesses months to ramp up production.What is OPEC doing?President Biden has been urging the Organization of the Petroleum Exporting Countries to pump more oil, but several members have been falling short of their monthly production quotas, and some may not have the capacity to quickly increase output. OPEC members and their allies, Russia among them, are meeting on Wednesday, and will probably agree to continue gradually increasing production.In addition, if Russian supplies are suddenly reduced, Washington will most likely put pressure on Saudi Arabia to raise production independently of the cartel. Analysts think that the kingdom has several million barrels of spare capacity that it could tap in a crisis.What impact would higher oil prices have on the U.S. economy?A big jump in oil prices would push gasoline prices even higher, and that would hurt consumers. Working-class and rural Americans would be hurt the most because they tend to drive more. They also drive older, less fuel-efficient vehicles. And energy costs tend to represent a larger percentage of their incomes, so price increases hit them harder than more affluent people or city dwellers who have access to trains and buses.Rising oil and gas prices would pinch consumers, especially the less affluent and rural residents.Jim Lo Scalzo/EPA, via ShutterstockBut the direct economic impact on the nation would be more modest than in previous decades because the United States produces more and imports less oil since drilling in shale fields exploded around 2010 because of hydraulic fracturing. The United States is now a net exporter of fossil fuels, and the economies of several states, particularly Texas and Louisiana, could benefit from higher prices.What would it take for oil prices to fall?Oil prices go up and down in cycles, and there are several reasons prices could fall in the next few months. The pandemic is far from over, and China has shut down several cities to stop the spread of the virus, slowing its economy and demand for energy. Russia and the West could reach an agreement — formal or tacit — that forestalls a full-scale invasion of Ukraine.And the United States and its allies could restore a 2015 nuclear agreement with Iran that former President Donald J. Trump abandoned. Such a deal would allow Iran to sell oil much more easily than now. Analysts think the country could export a million or more barrels daily if the nuclear deal is revived.Ultimately, high prices could depress demand for oil enough that prices begin to come down. One of the main financial incentives for buying electric cars, for example, is that electricity tends to be cheaper per mile than gasoline. Sales of electric cars are growing fast in Europe and China and increasingly also in the United States. More

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    As Broadway Struggles, Governor Hochul Proposes Expanded Tax Credit

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    With Omicron complicating Broadway’s return, Gov. Kathy Hochul proposed more assistance for commercial theater, which her budget director called “critical for the economy.”As Broadway continues to reel from the economic effects of the coronavirus pandemic, Gov. Kathy Hochul is proposing to expand and extend a pandemic tax credit intended to help the commercial theater industry rebound.Ms. Hochul on Tuesday proposed budgeting $200 million for the New York City Musical and Theatrical Production Tax Credit, which provides up to $3 million per show to help defray production costs.“They were starting to recover before Omicron, and then, as you have all seen, a lot of these performance venues had to shut down again, and those venues are critical for the economy,” the state budget director, Robert Mujica, told reporters.The tax credit program, which began last year under Gov. Andrew Cuomo, was initially capped at $100 million. Early indications are that interest is high: Nearly three dozen productions have told the state they expect to apply, said Matthew Gorton, a spokesman for Empire State Development, the state’s economic development agency.The Hochul administration decided to seek to expand the tax credit program — and to extend the initial application deadline, from Dec. 31, 2022 to June 30, 2023 — as it became clear that Broadway’s recovery from its lengthy pandemic shutdown would be bumpier than expected.Shows began resuming performances last summer, and many were drawing good audiences — Ms. Hochul visited “Chicago” and “Six” in October, while Mr. Gorton saw “The Lehman Trilogy” and “To Kill a Mockingbird.”But the industry is now struggling after a spike in coronavirus cases prompted multiple cancellations over the ordinarily lucrative holiday season, and then attendance plunged. Last week, 66 percent of Broadway seats were occupied, according to the Broadway League; that’s up from 62 percent the previous week, but down from 95 percent during the comparable week before the pandemic.“Clearly, we’re not out of the woods yet,” said Jeff Daniel, who is the chairman of the Broadway League’s Government Relations Committee, as well as co-chief executive of Broadway Across America, which presents touring shows in regional markets. Mr. Daniel, still recovering from his own recent bout of Covid, welcomed the governor’s proposal, and said the League would work to urge the Legislature to approve it.“Every show we can open drives jobs and economic impact,” said Mr. Daniel, who noted the close economic relationship between Broadway and other businesses, including hotels and restaurants. “If we can maximize Broadway, we maximize tourism.”Under the program, shows can receive tax credits to cover up to 25 percent of many production expenditures, including labor. As a condition of the credit, shows must have a state-approved diversity and arts job training program, and take steps to make their productions accessible to low-income New Yorkers. More

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    Mexico Is Buying a Texas Oil Refinery in a Quest for Energy Independence

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    President López Obrador wants to halt most oil exports and imports of gasoline and other fuels. Critics say he is reneging on Mexico’s climate change commitments.DEER PARK, Texas — Two giant murals, on storage tanks at an oil refinery here, depict the rebels led by Sam Houston who secured Texas’ independence from Mexico in the 1830s. This week those murals will become the property of the Mexican national oil company, which is acquiring full control of the refinery.The refinery purchase is part of President Andres Manuel López Obrador’s own bid for an independence of sorts. In an effort to achieve energy self-sufficiency, the president of Mexico is investing heavily in the state-owned oil company, placing a renewed emphasis on petroleum production and retreating from renewable energy even as some oil giants like BP and Royal Dutch Shell are investing more in that sector.Mr. López Obrador aims to eliminate most Mexican oil exports over the next two years so the country can process more of it domestically. He wants to replace the gasoline and diesel supplies the country currently buys from other refineries in the United States with fuel produced domestically or by the refinery in Deer Park, which would be made from crude oil it imports from Mexico. The shift would be an ambitious leap for Petroleos Mexicanos, the company commonly known as Pemex. The company’s oil production, comparable to Chevron’s in recent years, has been falling for more than a decade, and it shoulders more than $100 billion in debt, the largest of any oil company in the world.The decision to pay $596 million for a controlling interest in the Deer Park refinery, which sits on the Houston ship channel and would be the only major Pemex operation outside Mexico, is central to fulfilling Mr. López Obrador’s plans to rehabilitate the long-ailing oil sector and establishing eight productive refineries for Mexican use. Mexico also agreed to pay off $1.2 billion in debts that Pemex and Shell jointly owe as co-owners of the refinery, which is profitable.“It’s something historic,” Mr. López Obrador said last month. In a separate news conference last year, he said, “The most important thing is that in 2023 we will be self-sufficient in gasoline and diesel and there will be no increase in fuel prices.”While Mr. Lopez Obrador’s policies diverge from the rising global concern over climate change, they reflect a lasting temptation for leaders and lawmakers worldwide: replacing imported energy sources with domestically produced fuels. Further, the generally well-paying jobs the oil and other fossil fuel industries provide are politically popular across Latin America, Africa as well as industrialized countries like the United States.In the 1930s, the Mexican government took over Royal Dutch Shell’s operations south of the border as it nationalized the entire oil industry then dominated by foreigners. Now Mr. López Obrador is poised to go one step further, taking complete control of a big Shell oil refinery.The takeover is all the more pointed because it is happening in an industrial suburb that calls itself “the birthplace of Texas,” where rebels marched to the San Jacinto battlefield to defeat the Mexican Army — the event commemorated on the refinery murals. The battlefield is a five-mile drive from the refinery.It is hard to overestimate the connection between oil and politics in Mexico, where the day petroleum was nationalized, March 18, is a national holiday. Oil provides the Mexican government with a third of its revenues, and Pemex is one of the nation’s biggest employers, with about 120,000 workers. Mr. López Obrador hails from the oil-producing state of Tabasco, and the powerful Pemex labor union is a crucial part of his political base. He ran on a platform of rebuilding the company, and has raised its production budget, cut taxes it pays and reversed efforts by his predecessor to restructure its monopoly over oil production in the country.When he took office three years ago, Mr. López Obrador began undoing changes made in 2013 to the country’s Constitution intended to open the oil and gas industry to private and foreign investment. He is also pushing to reverse electricity reforms that his predecessor, Enrique Peña Nieto, put in place to increase the use of privately funded wind and solar farms and move away from state-run power plants fueled by oil and coal.Energy experts say Mexico is backtracking on a commitment it made a decade ago under President Felipe Calderón, to generate more than a third of its power from clean energy sources by 2024. Mexico now produces just over a quarter of its power from renewables.“They are going to heavier fuels rather than to lighter fuels,” said David Goldwyn, a top State Department energy official in the Obama administration. “Virtually every foreign company — Ford, Walmart, G.E., everybody who operates there — has their own net-zero target now. If they can’t get access to clean energy, Mexico becomes a liability.”Mr. López Obrador’s government has said it will combat climate change by investing in hydroelectric power and reforestation.Many of the Mexican president’s initiatives are being contested by opposition lawmakers and the business community. But Mr. López Obrador can do a lot on his own. He plans to spend $8 billion on a project to build an oil refinery in Tabasco state, and more than $3 billion more to modernize six refineries.President Andres Manuel López Obrador hails from the oil-producing state of Tabasco, and the powerful Pemex labor union is a crucial part of his political base.Gustavo Graf Maldonado/ReutersThe purchase of the Deer Park refinery is crucial to his plans because the Tabasco complex will not be completed until 2023 or 2024 and will not produce enough gasoline, diesel and other fuels to meet all of Mexico’s needs.Long a partner of Pemex, Shell, which operates the Deer Park refinery, is selling its stake in part to satisfy investors concerned about climate change who want the oil giant to invest more in renewable energy and hydrogen.Under Mexican ownership the refinery will continue its practice of using Mexican crude oil, but it will probably sell more of the gasoline and other fuels it produces to Mexico. In the future, some energy experts said, Pemex could also use the Deer Park refinery to process oil from other countries that also produce the kinds of heavy crude that Mexico does.“I think it’s a good deal and makes sense for Pemex,” said Tom Kloza, global head of energy analysis at Oil Price Information Service, who noted that Deer Park could perhaps process Venezuelan oil if the United States lifted sanctions against that country.The Mexican policy changes would have only a modest and temporary impact on American refineries, which can replace Mexican oil with crude from Colombia, Brazil, Saudi Arabia and Canada. Refiners could lose as much as a half-million barrels of transportation fuel sales a day to Mexico, but energy experts say refiners would be able to find other markets.Guy Hackwell, the general manager of the Deer Park complex, said, “Best practices will remain in place.” He said the “vast majority of the work force will report to the same job the day after the deal closes.”As for the murals, a Pemex spokeswoman, Jimena Alvarado, said, “We would never remove a historical mural.”Residents in Deer Park, in the heart of the Gulf of Mexico petrochemical complex, say they feel assured that locals will run the plant and Shell will continue to own an adjoining chemical plant. “The phone numbers will remain the same for who we contact in the event of an emergency and we will still have the same people and relationships, so I feel good about that,” Deer Park’s city manager, Jay Stokes, said.But some energy experts said Mr. López Obrador’s approach to energy, including the refinery purchase, would waste precious government resources that could be better used to reduce greenhouse gas emissions and local air pollution. There are also doubts that Mexico can build enough refining capacity to fulfill the president’s objectives.Shell, which operates the Deer Park refinery, is selling its stake in part to satisfy investors concerned about climate change who want the oil giant to invest more in renewable energy and hydrogen.Brandon Thibodeaux for The New York TimesJorge Piñon, a former president of Amoco Oil de Mexico, said Mexico most likely would not be able to immediately profit from slashing exports of crude and processing its own fuels since the refinery business typically has low profit margins, especially in Latin America.He said the Mexican refineries could not match American refineries in handling Mexico’s high-sulfur heavy crude. Mexican fuels made from heavy oil caused severe air pollution problems in many cities before the country began importing cleaner-burning American gasoline and diesel over the last 20 years.By exporting less oil, Mexico would also almost certainly use more of it for domestic power generation, potentially pushing out solar and wind generation and producing more air pollution and greenhouse gas emissions.“His nationalistic decisions will have a negative impact on climate change,” Mr. Piñon said. “He is marching back to the 1930s.”Mr. López Obrador is unapologetic. “Oil is the best business in the world,” he said at a news conference last May. More

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    China’s Economy Is Slowing, a Worrying Sign for the World

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    Economic output climbed 4 percent in the last quarter of 2021, slowing from the previous quarter. Growth has faltered as home buyers and consumers become cautious.BEIJING — Construction and property sales have slumped. Small businesses have shut because of rising costs and weak sales. Debt-laden local governments are cutting the pay of civil servants.China’s economy slowed markedly in the final months of last year as government measures to limit real estate speculation hurt other sectors as well. Lockdowns and travel restrictions to contain the coronavirus also dented consumer spending. Stringent regulations on everything from internet businesses to after-school tutoring companies have set off a wave of layoffs.China’s National Bureau of Statistics said Monday that economic output from October through December was only 4 percent higher than during the same period a year earlier. That represented a further deceleration from the 4.9 percent growth in the third quarter, July through September.The world’s demand for consumer electronics, furniture and other home comforts during the pandemic has produced record-setting exports for China, preventing its growth from stalling. Over all of last year, China’s economic output was 8.1 percent higher than in 2020, the government said. But much of the growth was in the first half of last year.A port in Qingdao, in China’s eastern Shandong Province, earlier this month. China’s exports have remained strong.CHINATOPIX, via Associated PressThe snapshot of China’s economy, the main locomotive of global growth in the last few years, adds to expectations that the broader world economic outlook is beginning to dim. Making matters worse, the Omicron variant of the coronavirus is now starting to spread in China, leading to more restrictions around the country and raising fears of renewed disruption of supply chains.The slowing economy poses a dilemma for China’s leaders. The measures they have imposed to address income inequality and rein in companies are part of a long-term plan to protect the economy and national security. But officials are wary of causing short-term economic instability, particularly in a year of unusual political importance.Next month, China hosts the Winter Olympics in Beijing, which will focus an international spotlight on the country’s performance. In the fall, Xi Jinping, China’s leader, is expected to claim a third five-year term at a Communist Party congress.Mr. Xi has sought to strike an optimistic note. “We have every confidence in the future of China’s economy,” he said in a speech on Monday to a virtual session of the World Economic Forum.But with growth in his country slowing, demand slackening and debt still at near-record levels, Mr. Xi could face some of the biggest economic challenges since Deng Xiaoping began lifting the country out of its Maoist straitjacket four decades ago.“I’m afraid that the operation and development of China’s economy in the next several years may be relatively difficult,” Li Daokui, a prominent economist and Chinese government adviser, said in a speech late last month. “Looking at the five years as a whole, it may be the most difficult period since our reform and opening up 40 years ago.”China also faces the problem of a rapidly aging population, which could create an even greater burden on China’s economy and its labor force. The National Bureau of Statistics said on Monday that China’s birthrate fell sharply last year and is now barely higher than the death rate. Private Sector StrugglesAs costs for many raw materials have risen and the pandemic has prompted some consumers to stay home, millions of private businesses have crumbled, most of them small and family owned.That is a big concern because private companies are the backbone of the Chinese economy, accounting for three-fifths of output and four-fifths of urban employment.Kang Shiqing invested much of his savings nearly three years ago to open a women’s clothing store in Nanping, a river town in Fujian Province in the southeast. But when the pandemic hit a year later, the number of customers dropped drastically and never recovered.As in many countries, there has been a broad shift in China toward online shopping, which can undercut stores by using less labor and operating from inexpensive warehouses. Mr. Kang was stuck paying high rent for his store despite the pandemic. He finally closed it in June.“We can hardly survive,” he said.Another persistent difficulty for small businesses in China is the high cost of borrowing, often at double-digit interest rates from private lenders.Chinese leaders are aware of the challenges private companies face. Premier Li Keqiang has promised further cuts in taxes and fees to help the country’s many struggling small businesses.On Monday, China’s central bank made a small move to reduce interest rates, which could help reduce slightly the interest costs of the country’s heavily indebted real estate developers. The central bank pushed down by about a tenth of a percentage point its interest rate benchmarks for one-week and one-year lending.Construction StallsThe building and fitting out of new homes has represented a quarter of China’s economy. Heavy lending and widespread speculation have helped the country erect the equivalent of 140 square feet of new housing for every urban resident in the past two decades.This autumn, the sector faltered. The government wants to limit speculation and deflate a bubble that had made new homes unaffordable for young families.China Evergrande Group is only the largest and most visible of a lengthening list of real estate developers in China that have run into severe financial difficulty lately. Kaisa Group, China Aoyuan Property Group and Fantasia are among other developers that have struggled to make payments as bond investors become more wary of lending money to China’s real estate sector.An idle construction site for a China Evergrande residential project in Taiyuan, in China’s northern Shanxi Province.Gilles Sabrié for The New York TimesAs real estate companies try to conserve cash, they are starting fewer construction projects. And that has been a big problem for the economy. The price of steel reinforcing bars for the concrete in apartment towers, for example, dropped by a quarter in October and November before stabilizing at a much lower level in December.Understand the Evergrande CrisisCard 1 of 6What is Evergrande? More

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    Critics Say I.M.F. Loan Fees Are Hurting Nations in Desperate Need

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    Democratic lawmakers say the global fund’s surcharges for emergency relief siphon away money that countries need to fight the pandemic.At a time when the coronavirus pandemic is fueling a rapid rise in inequality and debt, a growing number of policymakers and economists are pressuring the International Monetary Fund to eliminate extra fees it charges on loans to struggling nations because they siphon away scarce funds that could instead be used to battle Covid.The fund, which for decades has backstopped countries in financial distress, imposes these fees for loans that are unusually large or longstanding. They were designed to help protect against hefty losses from high-risk lending.But critics argue that the surcharges come at the worst possible moment, when countries are already in desperate need of funds to provide poverty aid and public health services. Some of the countries paying the fees, including Egypt, Ukraine and Armenia, have vaccinated only about a third of their populations. The result, the critics argue, is that the I.M.F. ends up undermining the financial welfare and stability of the very places it is trying to aid.In the latest critique, a letter this week to Treasury Secretary Janet L. Yellen from 18 Democrats in Congress, including Representatives Alexandria Ocasio-Cortez of New York and Pramila Jayapal of Washington, asked the United States to support ending the surcharge policy.The surcharge “discourages public health investment by developing countries,” the letter said. “This perverse outcome will undermine global economic recovery.” The letter echoed several other appeals from more than two dozen emerging nations, including Argentina, South Africa and Brazil, as well as economists.Volunteers at a soup kitchen in Buenos Aires last spring. The coronavirus pandemic has further strained Argentina’s poor.Sarah Pabst for The New York Times“Attempts to force excessive repayments are counterproductive because they lower the economy’s productive potential,” the Nobel Prize-winning economist Joseph E. Stiglitz and Kevin Gallagher, a professor of global development at Boston University, wrote in a recent analysis. “Both creditors and the country itself are worse off.”They added: “The I.M.F. should not be in the business of making a profit off of countries in dire straits.”The fund primarily serves as a lender of last resort, although recently it has expanded its mission to include reducing extreme inequality and combating climate change.In addition to building up a reserve, the surcharges were designed to encourage borrowers to repay on time. The poorest countries are exempt.The fees have become a major source of revenue for the I.M.F., which is funded primarily by its 190 member nations, with the United States paying the largest share. The fund estimates that by the end of this year, borrowers will have shelled out $4 billion in extra fees — on top of their regular interest payments — since the pandemic began in 2020.The debate over the surcharge is emblematic of larger contradictions at the heart of the I.M.F.’s structure and mission. The fund was created to provide a lifeline to troubled economies so that they recover “without resorting to measures destructive of national or international prosperity.”But the terms and conditions that accompany its loans have at times ratcheted up the economic pain. “They penalize countries at a time when they are in an adverse situation, forcing them to make greater cuts in order to repay debts,” according to an analysis from the liberal Center for Economic and Policy Research in Washington.“Demanding these surcharges during an ongoing recession caused by a pandemic goes even more against” the I.M.F.’s founding principles, the center argues.Voting power in the fund’s governance is based on the size of each country’s monetary contribution, with only the United States having veto power. That means that countries most in need have the least say in how the I.M.F. carries out its role.In a statement, the Treasury Department reiterated support for the surcharges: “As the I.M.F.’s major shareholder we have an obligation to protect the financial integrity of the I.M.F.” And it pointed out that the interest rates charged by the fund were often far below market rates.A review of the surcharges last month by the fund’s executive directors ended without any agreement to halt the charges. An I.M.F. statement explained that while “some directors were open to exploring temporary surcharge relief” to free up resources to deal with the pandemic, most others preferred a comprehensive review later on in the context of the fund’s “overall financial outlook.”Strapped countries that are subject to the surcharges like Argentina balked earlier at the extra payments, but their campaign has picked up momentum with the spread of Covid-19.“I think the pandemic makes a big difference,” said Martín Guzmán, Argentina’s minister of economy.He argues that the pandemic has turned what may have once been considered unusual circumstances into the commonplace, given the enormous debt that many countries have taken on to meet its rising costs. Government debt in emerging countries has hit its highest level in a half a century.The number of nations subject to surcharges increased to 21 last year from 15 in 2020, according to the I.M.F. Pakistan, Egypt, Ukraine, Georgia, Albania, Tunisia and Ecuador are among those paying.Argentina, which has long had a contentious and bitter relationship with the fund relating to a series of bailouts and defaults that date back decades, has been a leading opponent of the surcharges.The country is trying to work out a new repayment schedule for $45 billion that the previous government borrowed as part of a 2018 loan package. By the end of 2024, the government estimates, it will have run up a tab of more than $5 billion in surcharges alone. This year, 70 percent of Argentina’s nearly $1.6 billion bill from the I.M.F. is for surcharges.A protest against a possible new deal with the I.M.F. in Buenos Aires last month.Alejandro Pagni/Agence France-Presse — Getty Images“The charges will be undermining the mission of the I.M.F., which is to ensure global stability and balance of payments,” Mr. Guzmán said.According to World Bank estimates, 124 million people were pushed into poverty in 2020, with eight out of 10 of them in middle-income countries.Meanwhile, the costs of basic necessities like food, heating and electricity are surging, adding to political strains. This week, the I.M.F. warned in its blog that continuing Covid outbreaks, combined with rising inflation, debt and interest rates, mean emerging economies should “prepare for potential bouts of economic turbulence.” More

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    How Inflation Affects Turkey's Struggling Economy

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    Even before the pandemic, Turkey was trying to ward off financial meltdown. The crisis has accelerated as President Recep Tayyip Erdogan has doubled down on his unorthodox policies.The signs of Turkey’s disastrous economy are all around. Long lines snake outside discounted bread kiosks. The price of medicine, milk and toilet paper are soaring. Some gas stations have closed after exhausting their stock. Angry outbursts have erupted on the streets.“Unemployment, high living costs, price increases, and bills are breaking our backs,” the Confederation of Progressive Trade Unions said last month.Even before the coronavirus pandemic and supply chain bottlenecks began walloping the world’s economies nearly two years ago, Turkey was trying to ward off a recession as it struggled with mountainous debt, steep losses in the value of the Turkish lira, and rising inflation. But in recent weeks that slow-moving train wreck has sped up with a ferocious intensity. And the foot that’s pushing hardest on the accelerator belongs to the country’s authoritarian president, Recep Tayyip Erdogan.Why is this happening now?Turkey’s economic problems have deep roots but the most recent crisis was caused by Mr. Erdogan’s insistence on lowering interest rates in the face of galloping inflation — precisely the opposite tactic of what economists almost universally prescribe.Mr. Erdogan, who has ruled Turkey for 18 years, has long resisted that particularly painful prescription, but his determination to keep cutting interest rates even as the country’s inflation rate tops a staggering 21 percent appears to be pushing Turkey past a tipping point.Normally, investors and others look to a nation’s central bank to keep inflation in check and set interest rates. But Mr. Erdogan has repeatedly shown that if Turkey’s central bankers and finance ministers won’t do what he wants, he will get rid of them, having already fired three in two years.The value of the lira has nose-dived in recent weeks, and on Monday hit a record low — reaching 14.3 to a dollar, from about 7 to the dollar earlier this year — pushing some businesses and households that have borrowed money from abroad into bankruptcy. The currency’s steep decline means prices for imported goods keep rising. Shortages are common and people are struggling to afford food and fuel. The youth unemployment rate is 25 percent. The president’s popularity is sinking and his opponents have become emboldened.With an election coming up in 18 months, Mr. Erdogan seems convinced that his strategy will enable the Turkish economy to grow out of its problems. Most economists, however, say a crash is more likely.When did Turkey’s economic problems begin?“Interest rates make the rich richer, the poor poorer,” the Turkish President Recep Tayyip Erdogan said in a recent interview.Antonio Masiello/Getty ImagesMr. Erdogan’s aggressive pro-growth strategies have worked for him before. Since he began governing Turkey in 2003, he has undertaken expensive infrastructure projects, courted foreign investors and encouraged businesses and consumers to load up on debt. Growth took off.“Turkey was considered to be an economic miracle” during the first decade of Mr. Erdogan’s rule, said Kadri Tastan, a senior fellow at the German Marshall Fund based in Brussels. Poverty was sliced in half, millions of people swelled the ranks of the middle class, and foreign investors were eager to lend.But Mr. Erdogan’s relentless push to expand became unsustainable. Rather than pull back, however, the giddy borrowing continued.The increasingly unstable economy was caught in a bind. High interest rates attracted foreign investors to accept the risk and keep lending, but they would stunt growth. Mr. Erdogan was unwilling to accept that trade-off, and continued to support cheap borrowing as inflation took off and the currency’s value declined.And he insists that high interest rates cause inflation — even though it is low interest rates that put more money into circulation, encourage people to borrow and spend more, and tend to drive up the prices.“Erdogan has his own economic philosophy,” said Henri Barkey, a fellow at the Council on Foreign Relations.The economy seesawed between these conflicting goals until 2018 when growing political tensions between Turkey and the United States caused the value of the lira to topple.The political standoff eased, but the underlying economic problems remained. Mr. Erdogan kept pushing state banks to offer cheap loans to households and businesses and the borrowing frenzy continued. “Things never really normalized,” said Selva Demiralp, an economist at Koc University in Istanbul.When the chief of the central bank resisted pressure from the president to lower the 24 percent interest rate in 2019, Mr. Erdogan fired him, the beginning of a pattern.To prop up the lira, Turkish banks began selling off their reserves of dollars. Those stocks of dollars are now running low.The global economic slowdown caused by the coronavirus pandemic has added to the strains by limiting the sales of Turkish goods around the world. Tourism, which was one of Turkey’s most dynamic sectors, has also been badly hit.What is President Erdogan’s approach to interest rates and what do economists say?A protest against the economic policies of the government in Istanbul on Sunday.Murad Sezer/ReutersBy keeping interest rates low, Mr. Erdogan argues that consumers will be more eager to keep shopping and businesses will be more inclined to borrow, invest money in the economy and hire workers.And if the lira loses value against the dollar, he says, Turkey’s exports will simply become cheaper and foreign consumers will want to buy even more.That is true to some degree — but it comes at a heavy price. Turkey is quite dependent on imports like automobile parts and medicine, as well as fuel and fertilizer and other raw materials. When the lira depreciates, those products cost more to buy.At the same time, Mr. Erdogan’s disdain for conventional economic theory has scared off some foreign investors, who had been eager to loan Turkish businesses hundreds of millions of dollars but now are losing faith in the currency.And the lower rates go, the faster inflation rises. Over the past year, the lira has lost more than 45 percent of its value, and the official inflation rate has surged past 20 percent, although many analysts believe the rate on the streets is much higher.By comparison, an inflation rate of 6.8 percent so far this year in the United States (the highest in nearly four decades) and a 4.9 percent rate in the eurozone are enough to set off alarms.In Turkey, skyrocketing prices are causing misery among the poor and impoverishing the middle class.“We can’t make a living,” said Mihriban Aslan, as she waited on a long line to buy bread in Istanbul’s Sultangazi district. “My husband is 60 years old, he can’t work much now.” He has a small pension of 1,800 lira — which at the moment is worth about $125. “I sometimes do needle work at home to bring in extra money,” she said.Businesses would rather hoard goods than sell them because they don’t think they will be able to afford to replace them.Ismail Arslanturk, a 22-year-old cashier at a neighborhood grocery shop, complained that the price of green lentils has nearly doubled. “I don’t believe the economy will be fixed after this point,” said Mr. Arslanturk, who added he was forced to leave high school to help support his family. “I am hopeless.’’A currency exchange office in Turkey. Over the past year, the lira has lost more than 45 percent of its value.Emrah Gurel/Associated PressWhat has Erdogan’s response been to the intensifying crisis?The president has doubled down on his approach, asserting he will “never compromise” on his opposition to higher interest rates. “Interest rates make the rich richer, the poor poorer,” he said in an interview on national television last month. “We have prevented our country from being crushed in such a way.”The president has invoked Islamic precepts against usury and referred to interest charges on loans as the “mother and father of all evil,” and blamed foreign interference for rising prices. Analysts like Mr. Barkey of the Council on Foreign Relations said that such comments are primarily aimed at appealing to more conservative religious segments of the country that represent the core of Mr. Erdogan’s support.Turkey’s fundamental problem, Mr. Barkey maintains, is that it has an overly confident ruler who has been in power for a long time. “He believes in his omnipotence and he’s making mistakes,” Mr. Barkey said, “but he’s so surrounded by yes men that nobody can challenge him.” More

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    Charles R. Morris, Iconoclastic Author on Economics, Dies at 82

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    Resisting ideological labels, experienced in government and banking, he critiqued policymakers’ “good intentions” and the costs of health care and forecast the 2008 financial crisis.Charles R. Morris, a former government official, banker and self-taught historian of economics who as a prolific, iconoclastic author challenged conventional political and economic pieties, died on Monday in Hampton, N.H. He was 82.The cause was complications of dementia, his daughter, Kathleen Morris, said.Mr. Morris wrote his signature first book, “The Cost of Good Intentions: New York City and the Liberal Experiment” (1980), after serving as director of welfare programs under Mayor John V. Lindsay and as secretary of social and health services in Washington State.The book was a trenchant Emperor’s New Clothes analysis of how the Lindsay administration’s unfettered investment in social welfare programs to ward off civil unrest had delivered the city to the brink of bankruptcy, and it pigeonholed Mr. Morris as a neoconservative.But as a law school graduate with no formal training in economics, he defied facile labeling.While his 15 nonfiction books often revisited well-trodden topics — including the Great Depression, the nation’s tycoons, the cost of health care, the Cold War arms race and the political evolution of the Roman Catholic church — he injected them with revealing details, provocative insights and fluid narratives.“The Cost of Good Intentions” (1981) was less a screed about liberal profligacy as it was an expression of disappointment that benevolent officials had become wedded to programs that didn’t work. He concluded that the best and the brightest in the government, as well as complicit players on the outside, had figured that if a day of reckoning ever came, it would not be on their watch.Steven R. Weisman wrote in The New York Times Book Review that Mr. Morris, as a former city budget official and, at the time, as a vice president for international finance at Chase Manhattan Bank, was more intent on adding perspective than affixing blame.“He exonerates neither his current nor his former employer,” Mr. Weisman wrote.In the book, Mr. Morris quoted Peter Goldmark Jr., then the state budget director, as saying: “Remember the 14th century and the advent of the plague? Was it possible for those people to stand on the docks in Genoa or Venice, watch the rats pouring off the ships, and not understand?”“Yes,” Mr. Morris wrote dubiously, “it was possible.”He would also belie Thomas Carlyle’s characterization of economics as “the dismal science” by injecting tantalizing nuggets.Reviewing Mr. Morris’s “A Time of Passion: America 1960-1980” (1984) for The Times Book Review, Michael Kinsley wrote that “some of the most vivid moments in this book come when he stops the rush of history to describe incidents from his own time as a poverty-program and prison administrator.”“He truly has been ‘mugged by reality,’ in Irving Kristol’s famous definition of a neoconservative,” Mr. Kinsley added, but concluded, “Overall, his book radiates a generosity and good will that set it apart from the typically sour neoconservative creed.”Charles Richard Morris was born on Oct. 23, 1939, in Oakland, Calif., to Charles B. and Mildred (Reid) Morris. His father was a technician for a printing ink manufacturer; his mother was a homemaker.After attending Mother of the Savior Seminary in Blackwood, N.J., Mr. Morris graduated from the University of Pennsylvania with a degree in journalism in 1963. He was director of the New Jersey Office of Economic Opportunity from 1965 to 1969.He earned a degree from the university’s law school in 1972 while working for New York City government. He was recruited by Washington State on the basis of his reputation as the city’s assistant budget director and welfare director.Praising Mr. Morris’s service to the city and his proficiency as an author, Edward K. Hamilton, first deputy mayor during the Lindsay administration, said that he nonetheless differed with some of the conclusions and recommendations in “The Cost of Good Intentions.”“Many of its stated or implied remedial nostrums, even if desirable in theory, were simply infeasible in the real-world circumstances,” Mr. Hamilton said, “given the complex web of intersecting state, local and federal authorities and the politics overshadowing all of it.”Mr. Morris later served as director of the Vera Institute of Justice in London.He is survived by his wife, Beverly Gilligan Morris, along with their sons, Michael and Matthew; their daughter, Kathleen Morris; and four grandchildren. A sister, Marianne Donovan, also died on Monday. Mr. Morris lived in Hampton.Among his other books were “A Rabble of Dead Money: The Great Crash and the Global Depression: 1929-1939 (2017); “Comeback: America’s New Economic Boom” (2013); “The Sages: Warren Buffett, George Soros, Paul Volcker, and the Maelstrom of Markets” (2009); “The Trillion Dollar Meltdown” (2008); “The Surgeons: Life and Death in a Top Heart Center (2007),” which dissects the cost of care to the public and to practitioners; “American Catholic: The Saints and Sinners Who Built America’s Most Powerful Church” (1997); and “The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy” (2005).Assessing “The Tycoons” in The Times Book Review, Todd G. Buchholz, a former economics adviser to President George H.W. Bush, wrote of Mr. Morris, “I admired his drive to delve into competing theories of the Great Depression, sleeves rolled up, digging evenhandedly into the muck of academic research and the tumbleweed of the Dust Bowl.”Rarely allowing himself to be typecast, Mr. Morris would debunk what he called the conservative conventional wisdom that raising the minimum wage costs jobs. He complained in the Jesuit magazine America that the nation’s existing health care system benefits the wealthiest Americans. In an interview on the business blog bobmorris.biz in 2012, he criticized graduate schools of business.“Business schools tend to focus on topics that are suitable to blackboards, so they overemphasize organization and finance,” Mr. Morris said. “Until very recently, they virtually ignored manufacturing. I think a lot of the troubles of the 1970s and 1980s, and now more recently the 2000s, can be traced pretty directly to the biases of the business schools.”In “The Trillion Dollar Meltdown: Easy Money, High Rollers and the Great Credit Crash” (2008), which won the Gerald Loeb Award for business reporting, Mr. Morris precisely predicted the collapse of the investment bank Bear Stearns and the ensuing global recession.He wrote the book in 2007, when most experts were still expressing optimism about the economy. He also appeared in the Oscar-winning documentary “Inside Job” (2010) about the 2008 financial crisis.“I think we’re heading for the mother of all crashes,” Mr. Morris wrote his publisher, Peter Osnos, the founder of Public Affairs books, early in 2007, adding, “It will happen in summer of 2008, I think.”Mr. Osnos recalled that after the book was published, “George Soros and Paul Volcker called me and asked, ‘Who is this Morris, and how did he get this so right, so early?’” More