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    U.S. Solar Makers Criticize Biden’s Tax Credits as Too Lax on China

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    U.S.-based manufacturers of solar products say rules issued by the Biden administration on Friday will “cement China’s dominance” over the solar industryBiden administration rules released on Friday that will determine which companies and manufacturers can benefit from new solar industry tax credits are being criticized by U.S.-based makers of solar products, who say the guidelines do not go far enough to try to lure manufacturing back from China.The rules stem from President Biden’s sweeping clean energy bill, which offers a mix of tax credits and other incentives to try and spur the construction of more solar factories in the United States and reduce the country’s reliance on China for clean energy goods needed to mitigate climate change.The Treasury Department, in guidance issued on Friday, said it would offer a 10 percent additional tax credit for facilities assembling solar panels in the United States, even if they import the silicon wafers used to make those panels from foreign countries. Under the Biden administration’s new climate legislation, solar and wind farms can apply for a 30 percent tax credit on the costs of their facilities.Senior administration officials told reporters on Thursday that they were trying to take a balanced approach, one that leaned toward forcing supply chains to return to the United States. But China’s dominance of the global solar industry has created a tricky calculus for the Biden administration, which wants to promote U.S. manufacturing of solar products but also ensure a plentiful supply of low-cost solar panels to reduce carbon emissions.The officials said that the Biden administration would have the leeway to change the rules when American supply chains become stronger.“The domestic content bonus under the Inflation Reduction Act will boost American manufacturing, including in iron and steel, so America’s workers and companies continue to benefit from President Biden’s Investing in America agenda,” Treasury Secretary Janet L. Yellen said in a statement. “These tax credits are key to driving investment and ensuring all Americans share in the growth of the clean energy economy.”Critics said the new rules would not go far enough to give companies incentives to move the solar supply chain out of China.Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition, which includes solar companies with U.S. operations like Hemlock Semiconductor, Wacker Chemie, Qcells and First Solar, called the move “a missed opportunity to build a domestic solar manufacturing supply chain.”“The simple fact is today’s announcement will likely result in the scaling back of planned investments in the critical areas of solar wafer, ingot, and polysilicon production,” he said in a statement. “China is producing 97 percent of the world’s solar wafers — giving them substantial control over both polysilicon and cell production. We fear that this guidance will cement their dominance over these critical pieces of the solar supply chain.”A four-acre solar rooftop in Los Angeles. The Biden administration wants 100 percent of the nation’s electricity to come from carbon-free energy sources by 2035.Mario Tama/Getty ImagesThe Biden administration has set an ambitious goal of generating 100 percent of the nation’s electricity from carbon-free energy sources by 2035, a goal that may require more than doubling the annual pace of solar installations.The United States still relies heavily on Chinese manufacturers for low-cost solar modules, although many Chinese-owned factories now make these goods in Vietnam, Malaysia and Thailand.China also supplies many of the key components in solar panels, including more than 80 percent of the world’s polysilicon, which most solar panels use to absorb energy from sunlight. And a significant portion of Chinese polysilicon comes from the Xinjiang region, where the U.S. government has banned imports because of concerns over forced labor.Other companies in the solar supply chain, which rely on imported components, were more positive about the Treasury Department’s guidance.Abigail Ross Hopper, the chief executive of the Solar Energy Industries Association, said the guidance was an important step forward that would “spark a flood of investment in American-made clean energy equipment and components.”“The U.S. solar and storage industry strongly supports onshoring a domestic clean energy supply chain, and today’s guidance will supplement the manufacturing renaissance that began when the historic Inflation Reduction Act passed last summer,” she said.Congressional Republicans have already targeted the Biden administration’s climate legislation, saying that it fails to set tough guidelines against manufacturing in China and that it may funnel federal dollars to Chinese-owned companies that have set up in the United States.The Biden administration is also dispensing funding to build up the semiconductor and electric vehicle battery industries. Guidelines for that money include limits on access to so-called foreign entities of concern, like Chinese-owned companies. But the Inflation Reduction Act does not contain guardrails against federal dollars going to the U.S. operations of Chinese solar companies.In a congressional hearing on April 25, Representative Jason Smith, chairman of the House Ways and Means Committee, pointed to the Florida facilities of JinkoSolar, a Chinese-owned manufacturer, as being eligible for federal tax credits.“Work at the plant involves robots placing strings of solar cells — which are largely sourced from China — onto a solar panel base,” a fact sheet released by Mr. Smith said.Mr. Biden has also clashed with domestic solar manufacturers over a separate trade case that would see tariffs imposed on solar products imported from Chinese companies based in Southeast Asia.Mr. Biden’s decision to waive the tariffs for two years angered Republicans and some Democrats in Congress, who said U.S.-based manufacturers deserved more protection. In recent weeks, the House and Senate approved a measure to reverse the president’s decision, which Mr. Biden is expected to veto. More

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    Russia Is Importing Western Weapons Technology, Bypassing Sanctions

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

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    How AI and DNA Are Unlocking the Mysteries of Global Supply Chains

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    At a cotton gin in the San Joaquin Valley, in California, a boxy machine helps to spray a fine mist containing billions of molecules of DNA onto freshly cleaned Pima cotton.That DNA will act as a kind of minuscule bar code, nestling amid the puffy fibers as they are shuttled to factories in India. There, the cotton will be spun into yarn and woven into bedsheets, before landing on the shelves of Costco stores in the United States. At any time, Costco can test for the DNA’s presence to ensure that its American-grown cotton hasn’t been replaced with cheaper materials — like cotton from the Xinjiang region of China, which is banned in the United States because of its ties to forced labor.Amid growing concern about opacity and abuses in global supply chains, companies and government officials are increasingly turning to technologies like DNA tracking, artificial intelligence and blockchains to try to trace raw materials from the source to the store.Companies in the United States are now subject to new rules that require firms to prove their goods are made without forced labor, or face having them seized at the border. U.S. customs officials said in March that they had already detained nearly a billion dollars’ worth of shipments coming into the United States that were suspected of having some ties to Xinjiang. Products from the region have been banned since last June.Customers are also demanding proof that expensive, high-end products — like conflict-free diamonds, organic cotton, sushi-grade tuna or Manuka honey — are genuine, and produced in ethically and environmentally sustainable ways.That has forced a new reality on companies that have long relied on a tangle of global factories to source their goods. More than ever before, companies must be able to explain where their products really come from.A technician at Applied DNA Sciences testing samples to trace the raw materials.Johnny Milano for The New York TimesCotton samples that are being processed at the lab.Johnny Milano for The New York TimesThe task may seem straightforward, but it can be surprisingly tricky. That’s because the international supply chains that companies have built in recent decades to cut costs and diversify their product offerings have grown astonishingly complex. Since 2000, the value of intermediate goods used to make products that are traded internationally has tripled, driven partly by China’s booming factories.A large, multinational company may buy parts, materials or services from thousands of suppliers around the world. One of the largest such companies, Procter & Gamble, which owns brands like Tide, Crest and Pampers, has nearly 50,000 direct suppliers. Each of those suppliers may, in turn, rely on hundreds of other companies for the parts used to make its product — and so on, for many levels up the supply chain.To make a pair of jeans, for example, various companies must farm and clean cotton, spin it into thread, dye it, weave it into fabric, cut the fabric into patterns and stitch the jeans together. Other webs of companies mine, smelt or process the brass, nickel or aluminum that is crafted into the zipper, or make the chemicals that are used to manufacture synthetic indigo dye.“Supply chains are like a bowl of spaghetti,” said James McGregor, the chairman of the greater China region for APCO Worldwide, an advisory firm. “They get mixed all over. You don’t know where that stuff comes from.”Harvesting cotton in Xinjiang. Cotton from the region in China is banned in the United States because of its ties to forced labor.Getty ImagesGiven these challenges, some companies are turning to alternative methods, not all proven, to try to inspect their supply chains.Some companies — like the one that sprays the DNA mist onto cotton, Applied DNA Sciences — are using scientific processes to tag or test a physical attribute of the good itself, to figure out where it has traveled on its path from factories to consumer.Applied DNA has used its synthetic DNA tags, each just a billionth of the size of a grain of sugar, to track microcircuits produced for the Department of Defense, trace cannabis supply chains to ensure the product’s purity and even to mist robbers in Sweden who attempted to steal cash from A.T.M.s, leading to multiple arrests.MeiLin Wan, the vice president for textiles at Applied DNA, said the new regulations were creating a “tipping point for real transparency.”“There definitely is a lot more interest,” she added.The cotton industry was one of the earliest adopters of tracing technologies, in part because of previous transgressions. In the mid-2010s, Target, Walmart and Bed Bath & Beyond faced expensive product recalls or lawsuits after the “Egyptian cotton” sheets they sold turned out to have been made with cotton from elsewhere. A New York Times investigation last year documented that the “organic cotton” industry was also rife with fraud.In addition to the DNA mist it applies as a marker, Applied DNA can figure out where cotton comes from by sequencing the DNA of the cotton itself, or analyzing its isotopes, which are variations in the carbon, oxygen and hydrogen atoms in the cotton. Differences in rainfall, latitude, temperature and soil conditions mean these atoms vary slightly across regions of the world, allowing researchers to map where the cotton in a pair of socks or bath towel has come from.Other companies are turning to digital technology to map supply chains, by creating and analyzing complex databases of corporate ownership and trade.Farmers in India auction their cotton.Saumya Khandelwal for The New York TimesSome firms, for example, are using blockchain technology to create a digital token for every product that a factory produces. As that product — a can of caviar, say, or a batch of coffee — moves through the supply chain, its digital twin gets encoded with information about how it has been transported and processed, providing a transparent log for companies and consumers.Other companies are using databases or artificial intelligence to comb through vast supplier networks for distant links to banned entities, or to detect unusual trade patterns that indicate fraud — investigations that could take years to carry out without computing power.Sayari, a corporate risk intelligence provider that has developed a platform combining data from billions of public records issued globally, is one of those companies. The service is now used by U.S. customs agents as well as private companies. On a recent Tuesday, Jessica Abell, the vice president of solutions at Sayari, ran the supplier list of a major U.S. retailer through the platform and watched as dozens of tiny red flags appeared next to the names of distant companies.“We’re flagging not only the Chinese companies that are in Xinjiang, but then we’re also automatically exploring their commercial networks and flagging the companies that are directly connected to it,” Ms. Abell said. It is up to the companies to decide what, if anything, to do about their exposure.Studies have found that most companies have surprisingly little visibility into the upper reaches of their supply chains, because they lack either the resources or the incentives to investigate. In a 2022 survey by McKinsey & Company, 45 percent of respondents said they had no visibility at all into their supply chain beyond their immediate suppliers.But staying in the dark is no longer feasible for companies, particularly those in the United States, after the congressionally imposed ban on importing products from Xinjiang — where 100,000 ethnic minorities are presumed by the U.S. government to be working in conditions of forced labor — went into effect last year.Uyghur workers at a garment factory in the Xinjiang region of China in 2019.Gilles Sabrie for The New York TimesXinjiang’s links to certain products are already well known. Experts have estimated that roughly one in five cotton garments sold globally contains cotton or yarn from Xinjiang. The region is also responsible for more than 40 percent of the world’s polysilicon, which is used in solar panels, and a quarter of its tomato paste.But other industries, like cars, vinyl flooring and aluminum, also appear to have connections to suppliers in the region and are coming under more scrutiny from regulators.Having a full picture of their supply chains can offer companies other benefits, like helping them recall faulty products or reduce costs. The information is increasingly needed to estimate how much carbon dioxide is actually emitted in the production of a good, or to satisfy other government rules that require products to be sourced from particular places — such as the Biden administration’s new rules on electric vehicle tax credits.Executives at these technology companies say they envision a future, perhaps within the next decade, in which most supply chains are fully traceable, an outgrowth of both tougher government regulations and the wider adoption of technologies.“It’s eminently doable,” said Leonardo Bonanni, the chief executive of Sourcemap, which has helped companies like the chocolate maker Mars map out their supply chains. “If you want access to the U.S. market for your goods, it’s a small price to pay, frankly.”Others express skepticism about the limitations of these technologies, including their cost. While Applied DNA’s technology, for example, adds only 5 to 7 cents to the price of a finished piece of apparel, that may be significant for retailers competing on thin margins.And some express concerns about accuracy, including, for example, databases that may flag companies incorrectly. Investigators still need to be on the ground locally, they say, speaking with workers and remaining alert for signs of forced or child labor that may not show up in digital records.Justin Dillon, the chief executive of FRDM, a nonprofit organization dedicated to ending forced labor, said there was “a lot of angst, a lot of confusion” among companies trying to satisfy the government’s new requirements.Importers are “looking for boxes to check,” he said. “And transparency in supply chains is as much an art as it is a science. It’s kind of never done.” More

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    Biden Highlights Economic Investments Ahead of Expected 2024 Announcement

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    The president has warned that a strong economy could be weakened under Republican leadership, a point he and a host of advisers will make at 20 events across the country in the coming weeks.DURHAM, N.C. — President Biden visited North Carolina on Tuesday and said Republicans would undermine his administration’s gains on American manufacturing, as the president began to sharpen his political message ahead of an expected re-election announcement.Mr. Biden spoke at Wolfspeed, a semiconductor manufacturer that recently announced a $5 billion investment to expand operations in the state, a move that would create about 1,800 jobs, according to the White House. The company, based in North Carolina, has deals to supply the material to General Motors, among other buyers.But Mr. Biden’s visit was less about semiconductors than it was about making an argument that he sees as key to a re-election bid — essentially, that the American economy has recovered since the coronavirus pandemic, his administration has helped keep it strong and Republican policies would undo that progress.“I’ve got news for you and for MAGA Republicans in Congress: Not on my watch,” Mr. Biden said, referring to the far-right wing of the party that is loyal to former President Donald J. Trump.The White House has argued for months that Mr. Biden has presided over a steady economy and strong job growth, but the data presents a more complicated reality: The high pace of job creation is undercut by a continued deceleration in wage increases, and there are growing concerns that the Federal Reserve may move to raise interest rates. The Biden administration has also tried to assuage fears of instability after the collapse of Silicon Valley Bank this month.Mr. Biden’s visit to North Carolina was the start of three weeks of related events to be held across the country by the president and Vice President Kamala Harris, plus their spouses and a host of cabinet officials. The group plans to visit 20 states and will highlight investments in American manufacturing, supply chains and job-creation efforts, according to a summary of efforts sent by the White House.During his trip to Durham, Mr. Biden highlighted legislation passed last year, including the CHIPS and Science Act, which contains $52 billion in subsidies and tax credits for companies that manufacture chips in the United States. More than half of the amount is dedicated to helping companies build facilities for making, assembling and packaging some of the world’s more advanced chips. In his remarks, the president said that over $435 billion had been invested in American companies since he took office.“America’s coming back,” Mr. Biden said, standing beside Gina Raimondo, the commerce secretary, who traveled with him to Durham. “We are determined to lead the world in manufacturing semiconductors.”Ms. Raimondo, who is expected to participate in the tour over the coming weeks, told a crowd gathered at Wolfspeed that the pandemic had “opened all of our eyes” to the importance of maintaining the global supply chain and protecting competitive advantages in technology.“The truth of it is the United States was for a long time a manufacturing powerhouse,” she said. “Still is, but for a long time we took our eye off the ball, and we watched manufacturing leave our shores in search of cheap labor in Asia.”.css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.The president spoke directly to people he said might feel “left behind” by technological changes, but said his administration would focus on programs that could train workers to produce technological projects without a college degree. Mr. Biden said the “vast majority” of jobs created by Wolfspeed would not require college degrees and could pay around $80,000.Events like the one held on Tuesday will provide Mr. Biden and his surrogates with an opportunity to hone his argument against Republicans.At the same time, a collision course looms in Washington over the debt ceiling.On Tuesday, Speaker Kevin McCarthy, Republican of California, wrote a letter urging the president to negotiate on the federal debt limit. “With each passing day,” Mr. McCarthy wrote, “I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out-of-control government spending.”Mr. Biden has said he will refuse to negotiate on the debt limit, pointing out that Republicans voted to raise the ceiling several times under his predecessor, Mr. Trump.“It’s time for Republicans to stop playing games, pass a clean debt ceiling bill and quit threatening our economic recovery,” Karine Jean-Pierre said in a statement responding to Mr. McCarthy’s letter.In his own letter sent on Tuesday evening, Mr. Biden urged Mr. McCarthy and congressional Republicans to present a full budget proposal before Congress leaves for Easter recess.The president and his advisers have signaled that the situation would be worse under Republican leadership, a point he underscored in North Carolina. The White House says that companies have made $16 billion in private sector investment commitments since Mr. Biden took office, a development they have attributed to corporations taking advantage of tax breaks and federal funding that bolsters innovation.Mr. Biden has argued that the flow of money would be at stake if Republicans tried to repeal policies passed under his administration, including the Inflation Reduction Act. He has also said that individual Americans are at risk of losing access to lower health care, energy and internet costs that are provided for in the bills that were passed by a Democratic-majority Congress.“We’re not going to let them undo all the progress,” Mr. Biden said. More

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    U.S. and Japan Reach Deal on Battery Minerals

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    While the terms of the deal are limited, the agreement appears to provide a model for resolving recent trade spats between the United States and some of its closest allies.WASHINGTON — The United States and Japan have reached an agreement over supplies of the critical minerals used to make car batteries, a deal that will likely put to rest a contentious issue in the relationship with Japan and could be a model for resolving similar disputes with other trading partners.The agreement provides a potential workaround for the Biden administration in its disagreement not only with Japan, but with the European Union and other allies over the terms of its new climate legislation. The Inflation Reduction Act, which invests $370 billion to transition the United States to cleaner cars and energy sources, has angered some allies who were excluded from its benefits.While the scope of the agreement is limited, the Biden administration has also promoted the deal as the beginning of a new framework that the United States and its allies hope to build with like-minded countries to develop more stable supply chains for electric vehicles that do not rely as heavily on China. American officials have argued that China’s dominance of the global car battery industry, including the processing of the minerals needed to make the batteries, leaves the United States highly vulnerable.According to a fact sheet distributed by the Office of the United States Trade Representative late Monday, the United States and Japan promised to encourage higher labor and environmental standards for minerals that are key to powering electric vehicles, like lithium, cobalt and nickel. The countries said they would also promote more efficient use of resources and confer on how they reviewed investments from foreign entities in the sector, among other pledges.Katherine Tai, the United States trade representative, was expected to sign the agreement Tuesday alongside Koji Tomita, the Japanese ambassador to the United States. The United States and Europe are separately negotiating a similar agreement..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.Ms. Tai said the announcement was “proof of President Biden’s commitment to building resilient and secure supply chains.” She added that “Japan is one of our most valued trading partners, and this agreement will enable us to deepen our existing bilateral relationship.”The deal appears to be aimed at expanding certain provisions of the climate legislation, which offers generous tax incentives for electric vehicles that are built in North America or source the material for their batteries from the United States or countries with which the United States has a free-trade agreement. The United States has free-trade agreements with 20 countries but not the European Union or Japan, and foreign allies have complained that the legislation will disadvantage their companies and lure investment away from them.But since the Inflation Reduction Act does not technically define what constitutes a “free-trade agreement,” American officials have found what they believe to be a workaround. They are arguing that countries will be able to meet the requirement by signing a more limited trade deal instead. Later this week, the Treasury Department is expected to issue a proposed rule clarifying the law’s provisions.President Biden and the European Commission president, Ursula von der Leyen, announced after a meeting earlier this month that their governments were pursuing a similar deal. But European officials said that arrangement could take more time to finalize, since the European Union must submit such agreements to its member states for their approval.While the administration argued that key members of Congress always intended American allies to be included in the law’s benefits, some lawmakers have protested these arrangements, saying the Biden administration is sidestepping Congress’s authority over new trade deals.“The executive branch, in my view, has begun to embrace a go-it-alone trade policy,” Senator Ron Wyden of Oregon, the Democratic chairman of the Senate Finance Committee, said last week, as Ms. Tai testified before the committee. Congress’s role in U.S. trade policy “is black-letter law, colleagues, and it’s unacceptable to even offer the argument otherwise,” he added. More

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    Republicans Say Spending Is Fueling Inflation. The Fed Chair Disagrees.

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    Jerome H. Powell has said that snarled supply chains, an oil shock following Russia’s invasion of Ukraine and shifts among American consumers are primarily behind rapid price growth.WASHINGTON — The chair of the Federal Reserve, Jerome H. Powell, has repeatedly undercut a central claim Republicans make as they seek sharp cuts in federal spending: Government spending is driving the nation’s still-hot inflation rate.Republican lawmakers say spending programs signed into law by President Biden are pumping too much money into the economy and fueling an annual inflation rate that was 6 percent in February — a decline from last year’s highs, but still well above historical norms. Mr. Powell disputed those claims in congressional testimony earlier this month and in a news conference on Wednesday, after the Fed announced it would once again raise interest rates in an effort to bring inflation back toward normal levels.Asked whether federal tax and spending policies were contributing to price growth, Mr. Powell pointed to a decline in federal spending from the height of the Covid-19 pandemic.“You have to look at the fiscal impulse from spending,” Mr. Powell said on Wednesday, referring to a measure of how much tax and spending policies are adding or subtracting to economic growth. “Fiscal impulse is actually not what’s driving inflation right now. It was at the beginning perhaps, but that’s not the story right now.”Instead, Mr. Powell — along with Mr. Biden and his advisers — says rapid price growth is primarily being driven by factors like snarled supply chains, an oil shock following Russia’s invasion of Ukraine and a shift among American consumers from spending money on services like travel and dining out to goods like furniture.Mr. Powell has also said the low unemployment rate was playing a role: “Some part of the high inflation that we’re experiencing is very likely related to an extremely tight labor market,” he told a House committee earlier this month.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists said this week.Gabby Jones for The New York TimesBut the Fed chair’s position has not swayed congressional Republicans, who continue to press Mr. Biden to accept sharp spending reductions in exchange for raising the legal limit on how much the federal government can borrow.“Over the last two years, this administration’s reckless spending and failed economic policies have resulted in continued record inflation, soaring interest rates and an economy in a recessionary tailspin,” Representative Jodey C. Arrington, Republican of Texas and the chairman of the Budget Committee, said at a hearing on Thursday.Republicans have attacked Mr. Biden over inflation since he took office. They denounced the $1.9 trillion economic aid package he signed into law early in 2021 and warned it would stoke damaging inflation. Mr. Biden’s advisers largely dismissed those warnings. So did Mr. Powell and Fed officials, who were holding interest rates near zero and taking other steps at the time to stoke a faster recovery from the pandemic recession.Economists generally agree that those stimulus efforts — carried out by the Fed, by Mr. Biden and in trillions of dollars of pandemic spending signed by Mr. Trump in 2020 — helped push the inflation rate to its highest level in 40 years last year. But researchers disagree on how large that effect was, and over how to divide the blame between federal government stimulus and Fed stimulus..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.One recent model, from researchers at the Federal Reserve Bank of New York, the University of Maryland and Harvard University, estimates that about a third of the inflation from December 2019 through June 2022 was caused by fiscal stimulus measures.Much of that stimulus has already made its way through the economy. Spending on pandemic aid to people, businesses and state and local governments fell sharply over the last year, as emergency programs signed into law by Mr. Biden and former President Donald J. Trump expired. The federal budget deficit fell to about $1.4 trillion in the 2022 fiscal year from about $2.8 trillion in 2021.House Speaker Kevin McCarthy and Representative Jodey Arrington have attacked the Biden administration’s spending policies.Haiyun Jiang/The New York TimesThe Hutchins Center at the Brookings Institution in Washington estimates that in the first quarter of 2021, when Mr. Biden’s economic aid bill delivered direct payments, enhanced unemployment checks and other benefits to millions of Americans, government fiscal policy added 8 percentage points to economic growth. At the end of last year, the center estimates, declining government spending was actually reducing economic growth by 1 percentage point.Still, even Biden administration officials say some effects of Mr. Biden’s — and Mr. Trump’s — stimulus bills could still be contributing to higher prices. That’s because Americans did not immediately spend all the money they got from the government in 2020 and 2021. They saved some of it, and now, some consumers are drawing on those savings to buy things.Increased consumer spending from savings could be pushing the cost of goods and services higher, White House economists conceded this week in their annual “Economic Report of the President,” which includes summaries of the past year’s developments in the economy.“If the drawdown of excess savings, together with current income, boosted aggregate demand, it could have contributed to high inflation in 2021 and 2022,” the report says.Some liberal economists contend consumer demand is currently playing little if any role in price growth — placing the blame on supply challenges or on companies taking advantage of their market power and the economic moment to extract higher prices from consumers.High prices “are not being driven by excess demand, but are actually being driven by things like a supply chain crisis or war in Ukraine or corporate profiteering,” said Rakeen Mabud, chief economist for the Groundwork Collaborative, a liberal policy organization in Washington.Other economists, though, say Mr. Biden and Congress could help the Fed’s inflation-fighting efforts by doing even more to reduce consumer demand and cool growth, either by raising taxes or reducing spending.Mr. Biden proposed a budget this month that would cut projected budget deficits by $3 trillion over the next decade, largely by raising taxes on high earners and corporations. Republicans refuse to raise taxes but are pushing for immediate cuts in government spending on health care, antipoverty measures and more, though they have not released a formal budget proposal yet. The Republican-controlled House voted this year to repeal some tax increases Mr. Biden signed into law last year, a move that could add modestly to inflation.Republican lawmakers have pushed Mr. Powell on whether he would welcome more congressional efforts to reduce the deficit and help bring inflation down. Mr. Powell rebuffed them.“We take fiscal policy as it comes to our front door, stick it in our model along with a million other things,” he said on Wednesday. “And we have responsibility for price stability. The Federal Reserve has the responsibility for that, and nothing is going to change that.” More

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

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    American and European officials are trying to reach agreement on the outlines of a limited trade deal that could help resolve a major rift over America’s new climate legislation.WASHINGTON — American and European officials meeting in Washington this week are trying to agree on the outlines of a limited trade deal that would allow European companies to qualify for some of the benefits of the Biden administration’s new climate legislation, in a bid to assuage a major source of tension between the allies.The governments hope to announce their intention to begin negotiations over such an agreement as soon as Friday, when President Biden is set to meet with Ursula von der Leyen, the president of the European Commission, at the White House.American officials have also been carrying out similar conversations with the governments of Japan and the United Kingdom to see if some type of limited new agreement could be struck that would also offer Japanese and British companies certain benefits under the law.At the center of the debate is the Inflation Reduction Act, a $370 billion bill that President Biden signed last year to try to mitigate climate change by transforming U.S. power generation and the car industry. The bill offers generous tax credits to American consumers to purchase new and used electric vehicles, but it imposes tough restrictions on the types of vehicles that can benefit from these rules, in ways that disadvantage foreign carmakers.The law specifies that, to receive a tax credit, cars must be assembled in North America and source the material for their batteries from North America, or from countries with which the United States has a free-trade agreement. Despite close ties, the United States does not have a free-trade agreement with the European Union, Japan or the United Kingdom.The passage of the law has prompted harsh criticism from allies, who say companies in their countries will be penalized. European officials have been particularly outspoken, arguing that the bill comes at a delicate time for a European economy that is already contending with disruptions from the war in Ukraine and skyrocketing energy prices.The dispute has raised the prospect of a subsidy war between the United States and the European Union, and threatened to strain relations at a time when both sides are trying to maintain a united front against Russia.“I don’t think U.S. government officials anticipated this level of pushback and this level of disdain against this massive climate bill,” said Olga Khakova, the deputy director for European energy security at the Atlantic Council’s Global Energy Center. But she said emotions had now subsided a bit. “We are in this mode right now where we want to find a solution.”An electric Volkswagen at a factory in Germany. Despite close ties, the United States and the European Union do not have a free-trade agreement.Jens Schlueter/Agence France-Presse — Getty ImagesThe rift has set off a scramble within the U.S. government to try to scrape together some type of new trade deal that could be signed with allied governments to allow their companies to benefit from some of the law’s tax credits. With such an agreement, for example, a company based in the European Union could help to supply lithium, nickel or other battery materials for electric vehicles made in North America.A Treasury official said that any new trade agreements would be evaluated during a rule-making process to ensure that they comply with the critical mineral requirements in the legislation. The official pointed to Chinese control over critical mineral extraction as a reason for the need to make the supply chains of the United States and like-minded partners strong.A U.S. official said that the administration had been engaged in ongoing consultations with Congress, and that those briefings, and conversations with unions and private industry, would continue in the coming weeks.The Treasury Department, in a white paper published in December, said that the Inflation Reduction Act did not define the term “free trade agreement,” and that the Treasury secretary could identify additional free-trade agreements for the purposes of the critical-minerals requirement going forward.Treasury Secretary Janet L. Yellen said last month that the Biden administration was considering limited trade deals focused on critical minerals as a solution, and she suggested that these could be done without the approval of Congress. She emphasized that the intent of the law was not for the United States to steal jobs from Europe and that the law was meant to be aligned with the administration’s “friend-shoring” agenda..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-1hvpcve{font-size:17px;font-weight:300;line-height:25px;}.css-1hvpcve em{font-style:italic;}.css-1hvpcve strong{font-weight:bold;}.css-1hvpcve a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}How Times reporters cover politics. We rely on our journalists to be independent observers. So while Times staff members may vote, they are not allowed to endorse or campaign for candidates or political causes. This includes participating in marches or rallies in support of a movement or giving money to, or raising money for, any political candidate or election cause.Learn more about our process.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Ms. Yellen said on the sidelines of the Group of 20 finance ministers meetings in India last month. “We’ve been very clear with Europe that this is not a subsidy war.”With input from the Office of the United States Trade Representative, officials from the Treasury Department have prepared a document spelling out what kind of deal would constitute a “free-trade agreement” for the purposes of the legislation, according to people familiar with the plans.It is not clear how quickly the solution could be completed, however, as the white paper said the Treasury Department and the Internal Revenue Service would seek public comment on “what criteria should be used to identify free-trade agreements for the purposes of the critical-minerals requirement.”In a briefing on Friday, a European official said Europe and the United States could announce by the end of this week a commitment to forge a new limited trade deal, most likely focused on supply chains for critical minerals. Unlike a traditional free-trade agreement, which entails reducing barriers to trade between partners, this agreement would not involve lowering tariffs on either side, and the parties would aim to flesh out the agreement in days or weeks, rather than months, the European official said.“I think the word ‘free trade’ was meant to mean reliable friends and partners with whom we can feel we have secure supply chains,” Treasury Secretary Janet L. Yellen said at the Group of 20 meeting last month.Aijaz Rahi/Associated PressThe official added that the agreement would need to be legally binding, and would still involve seeking some type of approval from European Union member states. In the United States, the agreement could come in the form of an executive order from the Biden administration, and without requiring the approval of Congress, the official suggested.One irony is that neither the European Union nor the United States is a major source of the critical minerals needed for electric vehicle batteries. But some officials have suggested that the partnership would form a foundation for a group that could be expanded over time to include countries with larger supplies of lithium, cobalt, nickel and other minerals.While analysts said a new deal with Europe could in practice satisfy the requirements of the law, it would not really resemble a free-trade agreement, as such agreements have come to be understood.Free-trade deals are legal agreements that the World Trade Organization defines as covering “substantially all trade” between countries, including a broad range of goods and, typically, services. They usually take years to negotiate and, in the United States, require the approval of Congress.Scott Lincicome, the director of general economics at the Cato Institute, said that the Biden administration’s authority to strike such trade pacts was questionable but that it was unlikely that anyone would try to mount a legal challenge to them.“Everyone in the room knows that this is not kosher, but there’s not really anything anybody can do about it,” Mr. Lincicome said.Political appetite for striking new free-trade deals has diminished in the United States in recent years, in part because of a perception that such pacts have helped multinational corporations move factories and jobs offshore.Efforts to strike expansive trade deals with Europe and a group of Asian countries during the Obama administration fizzled, in part because of that political opposition. During the Trump administration, the United States signed a series of limited trade deals with South Korea, Japan and China that were carried out through executive orders, not by congressional approval.Edward Alden, a senior fellow at the Council on Foreign Relations, said that the limited deal would mollify the Europeans, and that U.S.-E.U. economic relations were too important “to not allow the Europeans under the tent in some way or another.” But it could escalate complaints from other trading partners, like South Korea, that don’t feel as though their concerns have been taken care of, he said.South Korea already has a comprehensive free-trade agreement with the United States, but it has other criticisms of the climate law, centering on how the current terms exclude electric vehicles made by Hyundai from receiving tax credits. “Once you make accommodations for one, the pressure grows to make accommodations for others,” he said.It remains unclear how Congress will respond. Lawmakers have expressed concerns that the administration is not adhering to the law’s original intent of promoting U.S. manufacturing. Many also disapprove of efforts by the executive branch to bypass congressional authority in approving trade deals.But Democrats may also be sympathetic to the effort to smooth over relations with Europeans, and reluctant to reopen debate over their signature climate legislation. And at least one key lawmaker, Senator Joe Manchin III, Democrat of West Virginia, has said he didn’t realize that the European Union lacked a free-trade agreement with the United States in the first place.Still, the dispute has elicited some criticism that American officials are going to great lengths to mollify Europeans, especially given that the European Union imposes some trade barriers on the United States, like a relatively high tariff on imported U.S. cars.John G. Murphy, the senior vice president for international policy at the U.S. Chamber of Commerce, said it was his group’s view that the Biden administration should fight against various E.U. policies that discriminate against American companies “with the same doggedness European officials have brought to their complaints about the I.R.A.” More

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    How One Ukrainian Company Survived, and Thrived, Through a Year of War

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    It was exactly a year ago, and the Ukrainian pet food maker Kormotech had concluded its annual meeting. The mood was buoyant. Business was booming, the factory was running 24/7, and sales were projected to grow by double digits. “We had a beautiful budget,” Rostyslav Vovk, the company’s chief executive and founder, recalled almost dreamily.The next morning, air sirens sounded.Russia had invaded. Mr. Vovk called his top managers to meet at a nearby hotel, avoiding the company’s windowed seventh-floor headquarters in Lviv. They had a plan for what had been considered a very unlikely risk — Russian aggression — but it soon proved wholly inadequate.“We were not ready,” Mr. Vovk said. He closed the plant. Raw materials couldn’t get into the country, and deliveries headed abroad couldn’t get out. Staff from the besieged eastern part of the country needed to be evacuated. Employees were joining the military. And the company’s biggest export market, Belarus, was a close ally of Vladimir V. Putin, the Russian president.“We would make decisions,” Mr. Vovk said of that first week after the invasion, “and then the next morning, we would change all the information.”Like leaders at tens of thousands of companies throughout Ukraine, Mr. Vovk and his team were suddenly confronted with a new and bewildering responsibility: keeping a business going through the chaos and danger of war.For many, the task has proved impossible. Before the war, Ukraine’s private sector, including its huge steel and agricultural industries, accounted for 70 percent of the country’s gross domestic product, said Elena Voloshina, head of the International Finance Corporation in Ukraine. Eighty-three percent of businesses experienced losses related to the war, she said. Forty percent suffered direct damage, like a factory or store decimated by a missile, while 25 percent were in what is now occupied territory.Kormotech employs 1,300 people, some of whom had to be evacuated from the eastern part of Ukraine.Maciek Nabrdalik for The New York TimesLast year, Ukraine’s overall output plunged by nearly a third, wrecking the country’s economy and hampering its ability to battle Russian forces.Kormotech, a family-owned business with 1,300 employees worldwide, does not produce weapons or drones. It isn’t involved in supplying critically needed electricity, transport or fresh water to ravaged cities. But it employs people, produces income, earns foreign currency from exports, and contributes tax revenue that the government in Kyiv desperately needs to pay soldiers, repair power lines and buy medical equipment.A year later, Mr. Vovk and his management team have found reason to again celebrate. Mr. Vovk was back in his offices getting ready for the latest annual meeting with his staff — and some of their dogs, which are fixtures around the office and often serve as product taste testers. Despite the odds, business grew more than expected.The State of the WarBiden’s Kyiv Visit: President Biden traveled covertly to the besieged Ukrainian capital, hoping to demonstrate American resolve and boost shellshocked Ukrainians. But the trip was also the first of several direct challenges to President Vladimir V. Putin of Russia.Contrasting Narratives: In sharply opposed speeches, Mr. Biden said Mr. Putin bore sole responsibility for the war, while Mr. Putin said Russia had invaded in self-defense. But they agreed the war would not end soon.Nuclear Treaty: Mr. Putin announced that Russia would suspend its participation in the New START nuclear arms control treaty — the last major such agreement remaining with the United States.In the North: A different sort of war game is playing out in northern Ukraine, where Russian shelling is tying up thousands of Ukrainian troops that might otherwise defend against attacks farther south.Kormotech had a few things going for it. The company’s plant was outside Lviv in the westernmost part of the country, near the Polish border, one of the safest parts of Ukraine. The two factories in Prylbychi were able to reopen less than two weeks after the war began.An earlier decision to start an additional factory in Lithuania, which opened in 2020 and was operating around the clock, turned out to be a boon. It could continue smoothly producing and delivering tons of Kormotech’s Club 4 Paws, Optimeal, Miau and Gav brands.After a helter-skelter start, Mr. Vovk and his top managers reorganized. The company, which sells its products in 35 countries including the United States and Europe, had a little wiggle room because they had avoided just-in-time practices that eliminated backup inventory — a cost-cutting approach that had stymied so many companies worldwide during the pandemic. Kormotech routinely kept stock in its warehouses — at least a month and a half’s worth in Ukraine, two months in other countries in Europe and two and a half in the United States.Kormotech was able to recover from supply chain turmoil in part because it had routinely stocked its warehouses with up to two months of ingredients for its pet food.Maciek Nabrdalik for The New York TimesStill, Kormotech’s supply chain was disrupted. Before the war, roughly half its raw materials, like meat and chicken meal, came from abroad. Now border crossing delays and rising import prices had prompted a search for domestic producers. It found two that had never produced pet meal before and taught them what to do.Kateryna Kovaliuk, Kormotech’s chief reputation officer, emphasized that pet food standards could often be more exacting than food produced for people. During a recent tour of the Lviv plant, she picked up a few kibble-size bits chopped up from long ropelike strands of cat food fresh off the production line.“Try it,” she urged, before popping a couple of pieces in her mouth and smiling. “It’s good. It tastes like meat without salt.”As it turned out, the local producers, less than 40 miles from the plant, were not only cheaper but also didn’t have to be paid in precious foreign currency. Instead of buying 500 tons of meal from abroad, the company now buys 100 tons.Kormotech stepped up its purchase of Ukrainian grains and corn as well. The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.Manufacturing the product was one hurdle; getting it delivered abroad was another. At a time when Ukraine has barred men under 60 from leaving the country, the trade ministry provided exemptions for delivery drivers.“We would make decisions, and then the next morning, we would change all the information,” Rostyslav Vovk, the chief executive of Kormotech, said of the first week after the invasion.Maciek Nabrdalik for The New York TimesBut the wait at the borders could extend from a few days to a few weeks. And with seaports mostly blocked, exporting remained an expensive and tricky problem.“No one knew where to go or how,” Mr. Vovk said. The first truck sent to Azerbaijan, he said, cost more than $8,000 — before the war, it was roughly $2,000.Domestic demand for its products stayed steady, but finding new export markets was another challenge. Belarus, which has allowed Russia to stage attacks from inside its border, represented 25 percent of Kormotech’s export market. The management team decided to pull out but needed to replace those customers.Supermarket chains, particularly in the Baltic countries and Poland, were eager to step in and replace Russian-made goods with Ukrainian ones.“For the first time in my life, ‘Made in Ukraine’ was a premium,” Mr. Vovk said. Previously, when the company appeared at international pet supply exhibitions, he said with a laugh, people were so unfamiliar with the country’s products, they would ask if the letters “u” and “k” referred to “the U.K.,” for the United Kingdom.Even so, good will extended only so far. Buyers wanted assurances that Kormotech’s products would keep flowing. So the company provided guarantees, setting up a warehouse in Poland with backup stocks of its 650 different products, outsourcing some production to facilities in Germany and Poland, and drawing up last-resort plans to move production out of Ukraine.The enormous growth in both the European and American markets means that the company’s sales are expected to increase to $155 million this year from $124 million. The main obstacle to expanding even more is capacity.Its growth in Europe and the United States is expected to propel Kormotech to a big revenue increase in 2023, an unlikely development after a year of war.Maciek Nabrdalik for The New York TimesKormotech scrapped plans for a new 92 million-euro factory because of uncertainty and the difficulty in getting financing. But it invested €5 million ($5.34 million) in the Prylbychi plant and €7 million ($7.5 million) in Lithuania.Of course, many businesses have not been as successful as Kormotech, either because their facilities were damaged or demand for their products was eviscerated when people fled the country, as well as by ravenous inflation and shrunken incomes. Mr. Vovk said the exodus of millions of mothers and children had left a friend’s diaper manufacturing business in tatters.A new report from the American Chamber of Commerce in Ukraine and McKinsey & Company found that only 15 percent of companies grew last year, while nearly half saw a decline in sales.Others have adapted by relocating to places like Lviv, or changing their output to fill new wartime demands, like the lingerie seamstresses who have switched to sewing cloth vests to fit body armor plates. Ukraine’s large and mobile information technology sector has also remained strong.Businesses are still struggling to adapt. Russian attacks on Ukraine’s power grids compelled Kormotech to buy two generators at €150,000 apiece, supersize versions of the small colorful units that noisily hum outside nearly every shop and cafe on Lviv’s streets.Now, the Russians are stepping up missile strikes. On a recent weekday, air raid alerts caused 200 plant workers to spend more than half of their 12-hour shift in a tunnel-like storage area about three paces wide that doubles as a bomb shelter.Vira Protsyk, who normally would be packing boxes, sat on one of the wooden benches that lined the 100-foot-long wall. “It’s a bit boring,” she said of the forced breaks. This was the second alert of the day. “I didn’t want to go to the shelter. I’d rather work.”Russia has stepped up its missile strikes, and on a recent weekday, plant workers had to seek safety in a storage area.Maciek Nabrdalik for The New York TimesYurii Shyvala contributed reporting. More