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    What Germany’s Election Result Means for Its Economy

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    The next German government faces calls to loosen borrowing rules, slash energy costs and spur innovation. It won’t be easy.Friedrich Merz and his center-right Christian Democrats emerged victorious in Germany’s election on Sunday, but the celebrations may be short. The next government, almost certainly led by Mr. Merz as chancellor, faces a stagnant economy, President Trump’s threat to put tariffs on the country’s crucial export industries and a fourth year of war in Ukraine.What’s more, the ability to address these issues is hamstrung by strict limits on government debt and deficits, making it difficult to finance higher military spending, update crumbling infrastructure and carry out other initiatives that economists say are crucial to spur growth.A dispute over this rule, known as the debt brake, brought down the government of Chancellor Olaf Scholz of the center-left Social Democrats, paving the way for Sunday’s early election. But relaxing the rule would require a two-thirds majority in Parliament to amend the Constitution, and the election outcome suggests it would be difficult to muster that much support.Already on Monday, Mr. Merz was facing calls from other politicians, economists and even the traditionally conservative central bank for the new government to find a way to adjust the spending limits to fit the country’s urgent economic demands.“In principle,” the Bundesbank wrote in a report on Monday, “it is entirely justifiable to adapt the debt brake’s borrowing limit to changing conditions when the public debt ratio is low.” German government debt is just over 60 percent of gross domestic product, far lower than in countries like Britain, France and the United States, where debt is near or above 100 percent of G.D.P.But after Sunday’s election, the two-party coalition that Mr. Merz hopes to form between his Christian Democrats, which won 208 seats, and the Social Democrats, with 120, will have to rely on other parties to achieve the two-thirds majority in Parliament necessary to change the Constitution.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    What Is IEEPA, the Law Trump Used to Impose Tariffs?

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    President Trump said on Saturday that he would impose tariffs on Mexico, Canada and China using a decades-old law that gives the president sweeping economic powers during a national emergency.“This was done through the International Emergency Economic Powers Act (IEEPA) because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Mr. Trump wrote in a social media post on Saturday. “We need to protect Americans, and it is my duty as President to ensure the safety of all.”On his first day back in office, Mr. Trump declared a national emergency at the southern border. On Saturday, he said he would expand the scope of the emergency and hit the country’s three largest trading partners with tariffs because they had “failed” to do more to stop the flow of migrants or illegal fentanyl into the United States.In recent weeks, Mr. Trump had threatened to use the law to impose steep tariffs on other countries like Colombia, which eventually agreed to allow U.S. military planes to fly deportees into the country after Mr. Trump said he would seek tariffs on all Colombian imports.“This is a very broad tool that affords the president a lot of latitude to impose potentially really substantial economic costs on partners,” said Philip Luck, the economics program director at the Center for Strategic and International Studies and a former deputy chief economist at the State Department during the Biden administration. “This is a pretty big stick you can use.”What is IEEPA?The International Emergency Economic Powers Act of 1977 gives the president broad powers to regulate various financial transactions upon declaring a national emergency. Under the law, presidents can take a wide variety of economic actions “to deal with any unusual and extraordinary threat, which has its source in whole or substantial part outside the United States, to the national security, foreign policy or economy” of the country.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Trumps Threatens Tariffs Feb. 1 on Canada, Mexico and China

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    When President Trump did not follow through with his promise to immediately impose new tariffs on his first day in office, business executives and others who support international trade breathed a sigh of relief.That relief was short-lived. On Monday night, just hours after his inauguration speech, Mr. Trump said he planned to put a 25 percent tariff on products from Canada and Mexico beginning on Feb. 1, claiming that the countries were allowing “mass numbers of people and fentanyl” to come to the United States.On Tuesday evening, Mr. Trump said he would also put an additional 10 percent tariff on Chinese products by the same date, accusing China of sending fentanyl to Mexico and Canada, which was then crossing into the United States.Mr. Trump’s threats leave just 10 days before significant levies could go into effect on the United States’ three largest trading partners, a move that could throw American diplomatic relationships and global supply chains into disarray.Mexico, China and Canada account for more than a third of the goods and services that are imported to or bought from the United States, supporting tens of millions of American jobs. Together, the countries purchased more than $1 trillion of U.S. exports and provided nearly $1.5 trillion of goods and services to the United States in 2023, the last year government data is available.While tariffs have long been used by the United States as punishment for unfair trading practices, Mr. Trump’s first use of them is aimed at an entirely different outcome: tightening American borders against immigrants and illegal drugs.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    California’s Insurance System Faces Crucial Test as Wildfire Losses Mount

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    It’s too soon to know how the Los Angeles fires will change life in California, but it may heavily depend on the answer to a single question: Will a once-obscure insurance program run out of money?That program, the California FAIR Plan, was created by state lawmakers in 1968 to cover people who couldn’t get standard home insurance for various reasons. But as climate change makes wildfires more frequent and intense, causing commercial insurance companies to pull back from the state, the rapidly growing FAIR Plan has become the linchpin holding together California’s increasingly fragile insurance market.Because of the fires that started last week, that linchpin may be about to break, with consequences that would reverberate throughout California’s economy.As of last Friday, the FAIR Plan had just $377 million available to pay claims, according to the office of Senator Alex Padilla, Democrat of California. It’s not yet known how much in claims the plan will face but the total insured losses from the fires so far has been estimated at as much as $30 billion. Because the fires are still burning, that number could grow.Unlike regular insurance companies, the FAIR Plan can’t refuse to cover homes just because they’re in vulnerable areas. As a result, as the risk of wildfires grows, homes deemed too dangerous by major insurers have been piling up on the FAIR Plan’s books.Between 2020 and 2024, the number of homes covered by the plan more than doubled, to almost half a million properties with a value that tripled to about half a trillion dollars.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Canadian Ministers Meet Trump Aides at Mar-a-Lago to Discuss Border, and Tariffs

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    President-elect Donald J. Trump has threatened to impose tariffs on Canadian exports unless the country stops the flow of migrants and fentanyl to the U.S.Two top Canadian ministers met on Friday with members of President-elect Donald J. Trump’s circle in Florida about a border security plan that Canada hopes will ward off Mr. Trump’s threats to impose economically damaging tariffs on imports from the country. But the ministers returned home without any assurances.The meeting was characterized in advance as an attempt to build on a dinner Prime Minister Justin Trudeau had with Mr. Trump at Mar-a-Lago over the Thanksgiving weekend as well as on a recent telephone conversation between members of Mr. Trudeau’s cabinet and Thomas D. Homan, Mr. Trump’s designated border czar.Mélanie Joly, Canada’s foreign minister, and Dominic LeBlanc, its finance minister, arrived in Florida on Thursday evening for the session with Howard Lutnick, Mr. Trump’s choice for commerce secretary, and former Gov. Doug Burgum of North Dakota, the president-elect’s pick to run the Interior Department who would also coordinate energy policy.Mr. Trump has said he will impose 25 percent tariffs on imports from Canada when he takes office in January if the country does not reduce the flow of migrants and fentanyl into the United States. Such a move could be devastating for Canada, whose economy depends heavily on exports to the United States. But on at least one occasion, Mr. Trump has suggested that his tariff plan may have less to do with border security than with his desire to eliminate the $50 billion trade deficit with Canada. Oil and gas exports from Canada account for most of that trade imbalance. Without them, the U.S. generally has a trade surplus with Canada.Jean-Sébastien Comeau, a spokesman for Mr. LeBlanc, described the Mar-a-Lago session as a “positive, productive meeting” and said that the two nominees “agreed to relay information to President Trump.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Why Mergers of Carmakers Like Honda and Nissan Often Falter

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    The Japanese companies are considering joining forces to survive in a rapidly changing auto industry, but auto history is filled with troubled and failed marriages.The Japanese automakers Honda and Nissan are discussing a possible merger, in a bid to share costs and help themselves compete in a fast-changing and increasingly competitive industry.But a merger, even of two companies from the same country, is no guarantee of success, and the history of automotive deals is littered with failures and disappointments.Combining two large, global manufacturing operations is an incredibly difficult feat that involves reconciling different technologies, models and approaches to doing business. A merger’s success rests on getting ambitious managers and engineers who have spent decades competing with one another to cooperate. Teams and projects have to be scrapped or changed, and executives must cede power to others. In some cases, the merging companies are hamstrung by elected leaders who force them to keep operating money-losing factories.Thomas Stallkamp, an automotive consultant based in Michigan, was involved in the struggles of one of the biggest auto mergers, the 1998 merger of Chrysler and the German company Daimler. Mr. Stallkamp spent years in senior roles at Chrysler and DaimlerChrysler.“Car companies are big, complicated organizations, with large engineering staffs, manufacturing plants all over the world, hundreds of thousands of employees, in a capital-intensive business,” Mr. Stallkamp said. “You try to put two of them together and you run into a lot of egos and infighting, so it’s very, very difficult to make it work.”Honda and Nissan announced plans this year to work together on electric vehicles, and on Monday they formally began talks about extending that cooperation to a merger that could also include Mitsubishi Motors, a smaller manufacturer that works closely with Nissan. A pairing would unite Japan’s second- and third-biggest automakers, after Toyota, and create a company that would be the third largest in the world by number of cars produced, after Toyota and Volkswagen.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Takes Aim at China’s Production of Essential Chips

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    The older-style chips are crucial for a wide array of appliances and other machinery, including weaponry.The Biden administration on Monday initiated a trade investigation into China’s production of older types of computer chips that are integral for cars, dishwashers, telecom networks and military weaponry.The probe could ultimately result in tariffs or other measures to block Chinese chips from entering U.S. markets, though the decision of which, if any approach to take would fall to the incoming Trump administration.In industry after industry — from steel and ships to solar panels and electric vehicles — China has pumped money into building world-class manufacturing facilities, creating a surge of low-cost products that ultimately flood global markets. American companies, along with firms in many other countries, finding themselves unable to compete, have shut down, leaving Chinese firms largely in control of the global market.United States officials have been worrying that the semiconductor industry could be next. Chinese companies have been massively ramping up their production of chips, particularly the older types of semiconductors that continue to power a wide array of machinery and appliances. China is building more new semiconductor factories than any other country, a development that American officials argue threatens the viability of chip plants in Europe and the United States.Katherine Tai, the United States Trade Representative, said in a call on Sunday that China’s policies were enabling its companies to rapidly expand and to “offer artificially lower-priced chips that threaten to significantly harm, and potentially eliminate, their market-oriented competition.”That resulted in supply chains that “are more vulnerable and subject to supply chain choke points that can be used to economically coerce other countries,” she said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Biden Prepares to Target Chinese Legacy Chips With Trade Investigation

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    The investigation could result in tariffs on older types of chips from China, though the decision would ultimately fall to Trump.The Biden administration is preparing a trade investigation into China’s production of older-model semiconductors, in response to fears that the United States’ growing dependence on these products could pose a national security threat, according to people familiar with the matter and government and industry documents reviewed by The New York Times.The investigation could ultimately result in tariffs, import bans or other actions on certain Chinese chips and the products that contain them. But the decision about what course to take would fall to the incoming Trump administration. The Biden administration may initiate its investigation in the coming weeks, but it would most likely take at least six months to conclude.The U.S. government has already tried to clamp down on China’s access to the most advanced types of semiconductors due to national security concerns. But it has largely left untouched China’s production of older types of chips, which are still vital for powering a huge swath of products including smartphones, cars, dishwashers, refrigerators and weaponry, along with American telecommunications networks.But with Chinese companies and the government now investing heavily in new factories, or fabs, to make those “legacy” or “foundational” chips, U.S. officials are concerned that Chinese production could put chip factories in the United States or allied countries out of business. That could increase U.S. supply chain dependence on China and potentially pose cybersecurity threats as those chips are integrated into American infrastructure or weaponry.“China is subsidizing those chips in these new fabs, dumping them into the global market and tanking the price,” Gina Raimondo, the commerce secretary, said at the Reagan National Defense Forum in Simi Valley, Calif., on Dec. 7. “That isn’t fair. And there may be a case for tariffs on that.”The Biden administration has been weighing whether to proceed with a trade investigation under two different laws. One is Section 232 of the Trade Expansion Act, which focuses on threats to national security and falls to the Commerce Department. The other option is Section 301 of the Trade Act of 1974, which applies to acts that are “unjustifiable” or “unreasonable” and burden U.S. commerce, and is carried out by the Office of the United States Trade Representative.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More