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    U.S. and China Agree to Broaden Talks in Bid to Ease Tensions

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    During a visit to Beijing, Gina Raimondo, the commerce secretary, said the two sides would meet to discuss export restrictions and intellectual property, among other issues.The United States and China agreed on Monday to hold regular conversations about commercial issues and restrictions on access to advanced technology, the latest step this summer toward reducing tensions between the world’s two largest economies.The announcement came during a visit to Beijing by Gina Raimondo, the U.S. commerce secretary, who is meeting with senior Chinese officials in Beijing and Shanghai this week.The agreement to hold regular discussions is the latest move toward rebuilding frayed links between the two countries, a process that had already begun during three trips in the past 10 weeks by senior American officials: Secretary of State Antony J. Blinken, Treasury Secretary Janet L. Yellen and John Kerry, the president’s climate envoy.“I think it’s a very good sign that we agreed to concrete dialogue, and I would say, more than just kind of nebulous commitments to continue to talk, this is an official channel,” Ms. Raimondo said in an interview after four hours of negotiations with China’s commerce minister, Wang Wentao.Ms. Raimondo said on Monday night in Beijing that she’d had an “open” and “pragmatic” discussion with Mr. Wang and had raised the American business community’s concerns about China’s recent actions against Intel and Micron Technology, two semiconductor companies in the United States. The Chinese government has scuttled a large acquisition planned by Intel and has blocked some sales in China by Micron this year.She said two separate dialogues would be established. One would be a working group that included business representatives and would focus on commercial issues. The other would be a governmental information exchange on export control issues.Bilateral talks about trade, technology and other economic issues were once the norm between the United States and China, but those discussions have atrophied in recent years. China halted eight bilateral discussion groups a year ago in retaliation for a visit to Taiwan by Representative Nancy Pelosi, the California Democrat who was House speaker at the time.The flight of a Chinese spy balloon that traveled across the United States last winter and was then shot down over the Atlantic Ocean only deepened divisions between China and the United States, and resulted in Mr. Blinken’s initially canceling a trip to Beijing.But relations have begun to thaw as both nations, whose economies are tied to each other, have opened the door to resuming diplomatic ties.In a readout after the meeting, the Chinese ministry of commerce said Mr. Wang had expressed serious concerns about U.S. tariffs on Chinese imports, as well as the Biden administration’s efforts to bolster the U.S. semiconductor industry by providing government subsidies. Mr. Wang criticized those new subsidy programs, which are designed to lure manufacturing to the United States, as “discriminatory,” and he expressed concerns about U.S. sanctions on Chinese companies.China is willing to work with the United States to create a sound policy environment for business cooperation between the countries, he told the U.S. side, according to the readout.Even before Ms. Raimondo traveled to China, Republican lawmakers criticized her for planning a “working group” of U.S. and Chinese officials to discuss American export controls. Four senior Republicans contended in a letter last week that it was “deeply inappropriate for our foremost adversary to have any influence over controls on sensitive U.S. national security technologies that the American people charged her to protect.”Ms. Raimondo announced the new dialogue not as a working group but as an “information exchange.” She said that it had been set up to share more information about U.S. export restrictions on advanced technology, but that the group’s creation did not mean the United States would be compromising on issues of national security. The first meeting of the export control group was scheduled to take place in Beijing on Tuesday.Ms. Raimondo also said she and the Chinese commerce minister had agreed to meet with each other at least annually.He Weiwen, a former Chinese commerce ministry official who is now a trade specialist at the Center for China and Globalization, a Beijing research group, said the bilateral agreement to have more discussions showed a mutual commitment to pragmatism.“It means that both sides share the approach to solve practical issues,” he said.But in a sign of how politically fraught relations with China remain, plans for a formal dialogue structure between the two countries drew criticism from some China hawks in the United States.Matt Turpin, visiting fellow at the Hoover Institution and former China director of the National Security Council, described the move as a “real head scratcher.” He pointed to China’s unwillingness to take action to stop the flow of fentanyl into the United States, its alliance with Russia and its hacking of Ms. Raimondo’s email account before the trip as reasons China did not deserve such outreach.“It seems that Raimondo gave a significant concession to Beijing and got nothing in return,” Mr. Turpin said.A senior Commerce Department official said the Chinese had raised concerns during the meetings Monday about a trend toward declining trade and investment between the two countries, as well as issues around government subsidies.U.S. officials conveyed the concerns of American businesses and investors, including unfair requirements faced by foreign businesses and a declining transparency in China’s economic statistics. China suspended the release of youth unemployment data this month after the figure reached a record high this summer.Ms. Raimondo said that she had spoken to nearly 150 business leaders in preparation for her trip and that they had given her a common message: We need more channels of communication.“A growing Chinese economy that plays by the rules is in all of our interests,” she said.As the Chinese economy has faltered this summer, Chinese officials have begun softening their stance on some issues. In the latest measure, the foreign ministry announced on Monday that starting on Wednesday, travelers to China would no longer need to test themselves first for Covid.Michael Hart, the president of the American Chamber of Commerce in China, said there had been a change in direction from Chinese officials this summer, with an increased willingness to hold discussions.“It used to be at every meeting I went to, the first five minutes were ‘Everything is America’s fault,’” Mr. Hart said. “It’s definitely toned down now. Government officials understand the importance of U.S.-China trade.” More

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    Biden Incentives for Foreign Investment Are Benefiting Factories

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    Early data suggest laws to increase semiconductor production and renewable energy technology have shifted the makeup of foreign direct investment — but not increased it.Lucrative new tax breaks and other incentives for advanced manufacturing that President Biden signed into law appear to be reshaping direct foreign investment in the American economy, according to a White House analysis, with a much greater share of spending on new and expanded businesses shifting toward the factory sector.Data that include the first months after the enactment of two pieces of that agenda show that a key measure of foreign investment fell slightly from 2021 to 2022, adjusted for inflation.The numbers suggest that, in the early months after the bills were signed, the hundreds of billions of taxpayer dollars that Mr. Biden is directing toward manufacturing have not increased the overall amount of foreign direct investment in the economy. Instead, the laws appear to have shifted where foreign investment is being directed.A new analysis by the White House Council of Economic Advisers shows the composition of what’s known as capacity-enhancing spending on new structures or expansions of existing ones shifted rapidly toward factories, in line with one of Mr. Biden’s top economic goals.The analysis shows that two-thirds of foreign direct investment, excluding corporate acquisitions, was in manufacturing in 2022. That was more than double the average share from 2014 to 2021.The surge is small in the context of the overall economy. But administration officials call it an encouraging sign that multinational companies are being enticed to America by Mr. Biden’s industrial policy agenda. In the last year, the analysis notes, construction spending on new manufacturing facilities in the United States has increased significantly faster than in England, continental Europe or other wealthy Group of 7 nations.Administration officials say a Commerce Department survey of new foreign investment suggests investors pouring money into America’s factories are largely concentrated in Britain and continental Europe, along with Canada, Japan and South Korea. Half of 1 percent of the investment appears to be associated with China.That foreign investment is flowing largely to computer and electronics manufacturing, particularly of semiconductors, which were the centerpiece of a bipartisan industrial policy bill that Mr. Biden signed into law last summer. He also signed a climate, health and tax bill later that summer that included large new subsidies for renewable energy technology manufacturing.Since those laws were signed, companies have announced a flurry of planned investments in the United States. The administration tallies them at more than $500 billion. They include semiconductor plants in Arizona, advanced battery facilities in Georgia and much more. Many of the announced projects are from foreign companies, like Taiwan Semiconductor Manufacturing Company.Administration officials say shifting investment toward factories — even if the overall level of investment does not change — can produce positive spillovers for the economy. The White House analysis cites higher wages in manufacturing jobs and potential increases to productivity from foreign firms sharing knowledge with existing domestic manufacturers.“Foreign direct investment in manufacturing doesn’t just help us build up this critical sector in key focal areas of Bidenomics, such as semiconductors and clean energy,” said Jared Bernstein, the chair of the Council of Economic Advisers. “It also allows us to learn valuable production lessons from international companies in these and other areas.” More

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    Biden to Restrict Investments in China, Citing National Security Threats

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    The measure to clamp down on investments in certain industries deemed to pose security risks, set to be issued Wednesday, appears likely to open a new front in the U.S.-China economic conflict.The Biden administration plans on Wednesday to issue new restrictions on American investments in certain advanced industries in China, according to people familiar with the deliberations, a move that supporters have described as necessary to protect national security but that will undoubtedly rankle Beijing.The measure would be one of the first significant steps the United States has taken amid an economic clash with China to clamp down on outgoing financial flows. It could set the stage for more restrictions on investments between the two countries in the years to come.The restrictions would bar private equity and venture capital firms from making investments in certain high-tech sectors, like quantum computing, artificial intelligence and advanced semiconductors, the people said, in a bid to stop the transfer of American dollars and expertise to China.It would also require firms making investments in a broader range of Chinese industries to report that activity, giving the government better visibility into financial exchanges between the United States and China.The White House declined to comment. But Biden officials have emphasized that outright restrictions on investment would narrowly target a few sectors that could aid the Chinese military or surveillance state as they seek to combat security threats but not disrupt legitimate business with China.“There is mounting evidence that U.S. capital is being used to advance Chinese military capabilities and that the U.S. lacks a sufficient means of combating this activity,” said Emily Benson, the director of project on trade and technology at the Center for Strategic and International Studies, a Washington think tank.The Biden administration has recently sought to calm relations with China, dispatching Treasury Secretary Janet L. Yellen and other top officials to talk with Chinese counterparts. In recent speeches, Biden officials have argued that targeted actions taken against China are aimed purely at protecting U.S. national security, not at damaging the Chinese economy.At the same time, the Biden administration has continued to push to “de-risk” critical supply chains by developing suppliers outside China, and it has steadily ramped up its restrictions on selling certain technologies to China, including semiconductors for advanced computing.The Chinese government has long restricted certain foreign investments by individuals and firms. Other governments, such as those of Taiwan and South Korea, also have restrictions on outgoing investments.But beyond screening Chinese investment into the United States for security risks, the U.S. government has left financial flows between the world’s two largest economies largely untouched. Just a few years ago, American policymakers were working to open up Chinese financial markets for U.S. firms.In the past few years, investments between the United States and China have fallen sharply as the countries severed other economic ties. But venture capital and private equity firms have continued to seek out lucrative opportunities for partnerships, as a way to gain access to China’s vibrant tech industry.The planned measure has already faced criticism from some congressional Republicans and others who say it has taken too long and does not go far enough to limit U.S. funding of Chinese technology. In July, a House committee on China sent letters to four U.S. venture capital firms expressing “serious concern” about their investments in Chinese companies in areas including artificial intelligence and semiconductors.Others have argued that the restriction would mainly put the U.S. economy at a disadvantage, because other countries continue to forge technology partnerships with China, and China has no shortage of capital.Nicholas R. Lardy, a nonresident senior fellow at the Peterson Institute for International Economics, said the United States was the source of less than 5 percent of China’s inbound direct investment in 2021 and 2022.“Unless other major investors in China adopt similar restrictions, I think this is a waste of time,” Mr. Lardy said. “Pushing this policy now simply plays into the hands of those in Beijing who believe that the U.S. seeks to contain China and are not interested in renewed dialogue or a ‘thaw.’”Biden officials have talked with allies in recent months to explain the measure and encourage other governments to adopt similar restrictions, including at the Group of 7 meetings in Japan in May. Since then, Ursula von der Leyen, the president of the European Commission, has urged the European Union to introduce its own measure.The administration is expected to give businesses and other organizations a chance to comment on the new rules before they are finalized in the months to come.Claire Chu, a senior China analyst at Janes, a defense intelligence company, said that communicating and enforcing the measure would be difficult, and that officials would need to engage closely with Silicon Valley and Wall Street.“For a long time, the U.S. national security community has been reticent to recognize the international financial system as a potential warfighting domain,” she said. “And the business community has pushed back against what it considers to be the politicization of private markets. And so this is not only an interagency effort, but an exercise in intersectoral coordination.” More

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    Yellow, the Freight-Trucking Company, Declares Bankruptcy

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    A pandemic-era lifeline that the Trump administration predicted would turn a profit for the federal government failed to keep Yellow afloat.Three years after receiving a $700 million pandemic-era lifeline from the federal government, the struggling freight trucking company Yellow is filing for bankruptcy.After monthslong negotiations between Yellow’s management and the Teamsters union broke down, the company shut its operations late last month, and said on Sunday that it was seeking bankruptcy protection so it can wind down its business in an “orderly” way.“It is with profound disappointment that Yellow announces that it is closing after nearly 100 years in business,” the company’s chief executive, Darren Hawkins, said in a statement. Yellow filed a so-called Chapter 11 petition in federal bankruptcy court in Delaware.The downfall of the 99-year-old company will lead to the loss of about 30,000 jobs and could have ripple effects across the nation’s supply chains. It also underscores the risks associated with government bailouts that are awarded during moments of economic panic.Yellow, which formerly went by the name YRC Worldwide, received the $700 million loan during the summer of 2020 as the pandemic was paralyzing the U.S. economy. The loan was awarded as part of the $2.2 trillion pandemic-relief legislation that Congress passed that year, and Yellow received it on the grounds that its business was critical to national security because it shipped supplies to military bases.Since then, Yellow changed its name and embarked on a restructuring plan to help revive its flagging business by consolidating its regional networks of trucking services under one brand. As of the end of March, Yellow’s outstanding debt was $1.5 billion, including about $730 million that it owes to the federal government. Yellow has paid approximately $66 million in interest on the loan, but it has repaid just $230 of the principal owed on the loan, which comes due next year.The fate of the loan is not yet clear. The federal government assumed a 30 percent equity stake in Yellow in exchange for the loan. It could end up assuming or trying to sell off much of the company’s fleet of trucks and terminals. Yellow aims to sell “all or substantially all” of its assets, according to court documents. Mr. Hawkins said the company intended to pay back the government loan “in full.”The White House did not immediately respond to a request for comment after the filing.Yellow estimated that it has more than 100,000 creditors and more than $1 billion in liabilities, per court documents. Some of its largest unsecured creditors include Amazon, with a claim of more than $2 million, and Home Depot, which is owed nearly $1.7 million.Yellow is the third-largest small-freight-trucking company in a part of the industry known as “less than truckload” shipping. The industry has been under pressure over the last year from rising interest rates and higher fuel costs, which customers have been unwilling to accept.Those forces collided with an ugly labor fight this year between Yellow and the Teamsters union over wages and other benefits. Those talks collapsed last month and union officials soon after warned workers that the company was shutting down.After its bankruptcy filing, company officials placed much of the blame on the union, saying its members caused “irreparable harm” by halting its restructuring plan. Yellow employed about 23,000 union employees.“We faced nine months of union intransigence, bullying and deliberately destructive tactics,” Mr. Hawkins said. The Teamsters union “was able to halt our business plan, literally driving our company out of business, despite every effort to work with them,” he added.In late June, the company filed a lawsuit against the union, asserting it had caused more than $137 million in damages by blocking the restructuring plan.The Teamsters union said in a statement last week that Yellow “has historically proven that it could not manage itself despite billions of dollars in worker concessions and hundreds of millions in bailout funding from the federal government.” The union did not immediately respond to a request for comment after Yellow’s bankruptcy filing.“I think that Yellow finds itself in a perfect storm, and they have not managed that perfect storm very well,” said David P. Leibowitz, a Chicago bankruptcy lawyer who represents several trucking companies.The bankruptcy could create temporary disruptions for companies that relied on Yellow and might prompt more consolidation in the industry. It could also lead to temporarily higher prices as businesses find new carriers for their freight.“Those inflationary prices will certainly hurt the shippers and hurt the consumer to a certain extent,” said Tom Nightingale, chief executive of AFS Logistics, who suggested that prices would likely normalize within a few months.In late July, Yellow began permanently laying off workers and ceased most of its operations in the United States and Canada, according to court documents. Yellow has retained a “core group” of about 1,650 employees to maintain limited operations and provide administrative work as it winds down. Yellow said it expected to pay about $3.4 million per week in employee wages to operate during bankruptcy, which “may decrease over time.” None of the remaining employees are union members, the company said.The company also sought the authority to pay an estimated $22 million in compensation and benefit costs for current and former employees, including roughly $8.7 million in unpaid wages as of the date of filing. Yellow had readily accessible funds of about $39 million when it filed for bankruptcy, which it said would be insufficient to cover its wind-down efforts, and it expected to receive special financing to help support the sale process and payment of wages.Jack Atkins, a transportation analyst at the financial services firm Stephens, said that Yellow’s troubles had been mounting for years. In the wake of the financial crisis, Yellow engaged in a spree of acquisitions that it failed to successfully integrate, Mr. Atkins said. The demands of repaying that debt made it difficult for Yellow to reinvest in the company, allowing rivals to become more profitable.“Yellow was struggling to keep its head above water and survive,” Mr. Atkins said. “It was harder and harder to be profitable enough to support the wage increases they needed.”The company’s financial problems fueled concerns about the Trump administration’s decision to rescue the firm.It lost more than $100 million in 2019 and was being sued by the Justice Department over claims that it defrauded the federal government during a seven-year period. Last year it agreed to pay $6.85 million to settle the lawsuit.Federal watchdogs and congressional oversight committees have scrutinized the company’s relationships with the Trump administration. President Donald J. Trump tapped Mr. Hawkins to serve on a coronavirus economic task force, and Yellow had financial backing from Apollo Global Management, a private equity firm with close ties to Trump administration officials.Democrats on the House Select Subcommittee on the Coronavirus Crisis wrote in a report last year that top Trump administration officials had awarded Yellow the money over the objections of career officials at the Defense Department. The report noted that Yellow had been in close touch with Trump administration officials throughout the loan process and had discussed how the company employed Teamsters as its drivers.In December 2020, Steven T. Mnuchin, then the Treasury secretary, defended the loan, arguing that had the company been shuttered, thousands of jobs would have been at risk and the military’s supply chain could have been disrupted. He predicted that the federal government would eventually turn a profit from the deal.“Yellow had longstanding financial problems before the pandemic, was not essential to national security and should never have received a $700 million taxpayer bailout from the Treasury Department,” Representative French Hill, a Republican from Arkansas and member of the Congressional Oversight Commission, said in a statement last week. “Years of poor financial management at Yellow has resulted in hard-working people losing their jobs.” More

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    Indiana Tests if the Heartland Can Transform Into a Chip Hub

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    Over the past 14 months, Indiana began converting 10,000 acres of corn and bean fields into an innovation park. State leaders met with the chief executives of semiconductor giants in South Korea, Taiwan and Japan. And they hosted top Biden administration officials to show off a $100 million expansion of chip research and development facilities at a local university.The actions were driven by one main goal: to turn Indiana into a microchip manufacturing and research hub, almost from scratch.“We’ve never done anything at this scale,” said Brad Chambers, who was Indiana’s commerce secretary in charge of economic development. “It’s a multibillion-dollar commitment by the state to be ready for the transitions that are happening in our global economy.”“We’ve never done anything at this scale,” said Brad Chambers, Indiana’s commerce secretary.Kaiti Sullivan for The New York TimesIndiana’s moves are a test of the Biden administration’s efforts to stimulate regional economies through the $52 billion CHIPS and Science Act, a landmark package of funding that is planned to begin going out the door in the next few months. The program is intended to bolster domestic manufacturing and research of semiconductors, which act as the brains of computers and other products and have become central to the U.S. battle with China for tech primacy.The Biden administration has promised that the CHIPS Act will seed high-paying tech jobs and start-ups even in places with little foundation in the tech industry. In a speech in May last year, Commerce Secretary Gina Raimondo, who oversees the chips program, said she was looking at how the program would help “different places in the heartland of America.”She added, “I think we will really unleash an unbelievable torrent of entrepreneurship and capital opportunity.”Gina Raimondo, the U.S. secretary of commerce, is overseeing the CHIPS Act program. Jared Soares for The New York TimesThat makes Indiana a prime case study for whether the administration’s efforts will pan out. Unlike Arizona and Texas, which have long had chip-making plants, Indiana has little experience with the complicated manufacturing processes underlying the components, beyond electric vehicle battery manufacturing and some defense technology projects that involve semiconductors.Indiana now wants to catch up to other places that have landed big chip manufacturing plants. The push is supported by Senator Todd Young, a Republican from Indiana, who was a co-author on the CHIPS Act and has been a leading voice on increasing funds for tech hubs. Companies and universities in Indiana have applied for multiple CHIPS Act grants, with the aim of winning awards not only for chip manufacturing but also for research and development.Some economists said the Biden administration’s goals of turning farmland into advanced chip factories might be overly ambitious. It took decades for Silicon Valley and the Boston tech corridor to thrive. Those regions succeeded because of their strong academic research universities, big anchor companies, skilled workers and investors.Many other areas don’t have that combination of assets. Indiana has for decades faced a brain drain among some of its more educated young people who flock to larger cities for work, according to the Indiana Chamber of Commerce. Some industrial policy proponents see the investments as a way to reverse that exodus, as well as a broader trend toward deindustrialization that hollowed out communities in the Rust Belt.But it’s unclear whether the program can achieve such ambitious goals — or whether the Biden administration will judge it to be more effective to spread out investments around the country or concentrate them in a few key hubs.“Many pieces have to come together,” said Mark Muro, a senior fellow at the Brookings Institution. He added that the federal government’s plan to initially put $500 million into tech hubs was too small and estimated it would take $100 billion in government aid to create 10 sustainable tech hubs.Indiana does have some advantages. The state has ample land and water — which are necessary for large chip factories that use water to cool equipment and rinse silicon wafers — and it has relatively stable weather for the highly sensitive production process. It also has Purdue University, with an engineering school that has promised to turn out the technicians and researchers needed for chip production.Yet the state faces stiff competition. In January 2022, Indiana lost a bidding war to Ohio over plans by Intel, the big U.S. chip-maker, to build two factories valued at $20 billion.“We learned a lot of lessons,” Mr. Chambers said about the failure. The biggest, he said, was to have a more attractive package of land, infrastructure and work force programs ready to offer big chip companies.A year later, Indiana won a $1.8 billion investment from SkyWater, a Minneapolis-based chip-maker, to build a factory with 750 jobs adjacent to Purdue’s campus.SkyWater, a Minneapolis-based chip maker, plans to invest $1.8 billion in a factory in Indiana. SkyWaterIndiana beat out four other states vying for SkyWater’s chip facility.SkyWaterState leaders acknowledge that any tech transformation could take years, especially if there is no anchor plant by even larger chip manufacturers such as TSMC, the world’s biggest maker of cutting-edge chips.Mr. Young said he and other state leaders were in talks with big chip makers for a contract that would compare to the $20 billion that Intel committed to Ohio. But “all net new job creation in my lifetime has been created by new firms and young firms,” he said.Indiana’s chip-making metamorphosis is now centered on a tech park, LEAP Innovation District, in the town of Lebanon near Interstate 65, which connects Indianapolis and Purdue in West Lafayette. The town is surrounded by 15,000 square miles of corn and bean farms.The park began taking shape along with the CHIPS Act. In 2019, Mr. Young was a co-author of the Endless Frontier Act with Senator Chuck Schumer, a Democrat of New York and then the Senate minority leader. The bill was the precursor to the CHIPS Act.As the bill wound through Congress, Mr. Young was in regular contact with Eric Holcomb, Indiana’s governor, and Mitch Daniels, then Purdue’s president, on details of the proposal. Mr. Young said Indiana’s manufacturing roots would be its asset, if the state’s factory sector could transition to making advanced chips.“I realized that Indiana and, more broadly, the heartland stood to disproportionately benefit from the investments that we would be making,” he said in an interview last month.Mr. Holcomb and Mr. Chambers then created a plan for a tech manufacturing park. Within months, they began buying corn and bean farms in Lebanon for what became the LEAP Innovation District.In September, Ms. Raimondo and Secretary of State Antony Blinken toured Purdue University’s clean rooms, seen here, for chip research.Kaiti Sullivan for The New York TimesPurdue is also working on a $100 million expansion of semiconductor research and development.Kaiti Sullivan for The New York TimesIn May 2022, Mr. Holcomb unveiled LEAP and began installing new water and power lines and a new road there. Mr. Holcomb, Mr. Chambers and Mr. Young also traveled to more than a dozen countries to meet with the executives of chip companies like SK Hynix and TSMC. They offered cheap rent in the LEAP district, tax incentives, access to labs and researchers at Purdue, and training programs at the local Ivy Tech Community College.Some of the work paid off. When Indiana beat out four other states for SkyWater’s $1.8 billion chip facility, the company said it was impressed by the coordination between state leaders and Purdue’s new president, Mung Chiang, who launched the nation’s first semiconductor degree programs to nurture workers for chip makers.Mung Chiang, Purdue University’s president, has rolled out a semiconductor degree program to nurture chip workers. Kaiti Sullivan for The New York TimesIn September, Mr. Chiang invited Ms. Raimondo and Secretary of State Antony J. Blinken to tour Purdue’s clean rooms for chip research and to see plans for a $100 million expansion of semiconductor research and development, including 50 new faculty to work on advanced chip science.“I think you have all the ingredients,” Ms. Raimondo said in a discussion with Mr. Holcomb and Mr. Chiang during the visit. Indiana officials now await word on how much CHIPS Act funding they may get. Some early results from the LEAP district initiative offer a mixed picture of where things might go.In May 2022, the park landed its first tenant — Eli Lilly, the pharmaceutical company, not a chip maker. More

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    Schumer Wields Political Heft in Bid for New York Chips Funds

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    The Senate majority leader helped deliver billions of dollars in federal funding for semiconductors. Now he’s pushing for his state to reap benefits.In a darkened hotel ballroom in San Jose, Calif., last November, the most powerful players in the semiconductor industry received a familiar sales pitch.Senator Chuck Schumer, the majority leader, appeared by video message to urge the industry titans at the Semiconductor Industry Association’s annual awards dinner to work together to strengthen American manufacturing of a critical technology — and to invest more in his home state of New York.“I ask that more of the industry consider investing in the Empire State, and if you do, you’ll find no greater champion in your corner than me, the Senate majority leader,” Mr. Schumer said, to cheers and laughs of recognition from a crowd accustomed to the senator’s solicitations.Amid growing fears about China’s dominance of technology and America’s loss of competitiveness, Mr. Schumer last year helped rally Congress to push through the biggest industrial policy programs the United States has seen a generation. The Biden administration is now preparing to invest tens of billions of dollars in the U.S. semiconductor industry in an effort to boost chip manufacturing across the country and lessen U.S. reliance on foreign factories.If Mr. Schumer gets his way, a substantial part of that funding will flow to New York.In his encounters with chip executives, Commerce Secretary Gina Raimondo and President Biden himself, Mr. Schumer has openly and aggressively drawn on his political capital as majority leader to try to channel investment to his home state. During the months where Congress was debating whether to approve that funding, industry executives who set foot in Mr. Schumer’s office or spoke to him on the flip phone he carries in his breast pocket were asked when, not if, they would invest in New York.Mr. Schumer, a longtime China critic, primarily views the investments as critical to reducing America’s reliance on Beijing for a technology that powers everything from cars and dishwashers to missiles and fighter jets. Most chip production has moved to Asia in recent decades, leaving the U.S. economy highly vulnerable to shortages, as became apparent during the pandemic.But he also saw the opportunity to fulfill a more personal goal: securing investment that could revive the factory towns of his home state, which had been hollowed out through decades of competition with China. The move would also augment his local political support, attract donations from chip companies to fill Democratic coffers and cement his legacy as a proponent of upstate New York.“I cared about upstate and I cared about competition with China,” Mr. Schumer said in an interview in Albany in June. “When I drafted the legislation, I did things with New York companies in mind.”Senate majority leaders and other legislators have long used their clout to drive federal funds back home. But Mr. Schumer is capitalizing on his position at an opportune moment, as the United States prepares to invest nearly $53 billion in the sector, including $11 billion for chip research and $39 billion in manufacturing grants.Still, some critics have cautioned that economic and strategic factors, not political influence, must determine the investment decisions that could shape the U.S. economy for decades to come.A silicone wafer at the GlobalFoundries facility.Cindy Schultz for The New York TimesIf the proposed investments are realized, New York could become one of the country’s busiest hubs for chip production. Chip makers like GlobalFoundries, IBM, Onsemi and Wolfspeed are applying for funds to build or expand facilities there. Micron Technology, a memory chip maker, is proposing to invest up to $100 billion near Syracuse over the next two decades to build what would be the largest high-tech chips facility proposed in the United States, employing up to 9,000 people.Mr. Schumer is also pushing for New York to play a leading role in semiconductor research, as the headquarters of a new federal chip research organization.Competition for federal funding is expected to be fierce. By late June, the Commerce Department — which will dole out the funds — had received nearly 400 statements of interest from companies that intended to apply for money.“I suspect there will be many disappointed companies who feel that they should have a certain amount of money,” Ms. Raimondo said in February.New York has already faced some setbacks. Taiwan Semiconductor Manufacturing Company, Samsung and Intel, makers of the most cutting-edge types of logic chips, passed over the state in recent years in favor of Arizona, Texas and Ohio, where they are now building large facilities that could absorb a significant portion of government funding.Chip industry executives say practical factors, like the cost of electricity, land and capital, the availability of workers and the proximity of their suppliers, weigh heaviest in their decisions about where to invest.But the pressure from Mr. Schumer — and from other influential lawmakers, university presidents and company executives who helped secure the funding — raises questions about the role powerful political figures will play in the next chapter of American industrial policy.“I think there is and ought to be a lot of skepticism about political players having a major say in decision making over where these funds are spent,” said Chris Miller, an associate professor at Tufts University and the author of “Chip War: The Fight for the World’s Most Critical Technology.”“If you want effective industrial policy, you have to keep it as far away as possible from pork barrel politics,” he said.The Commerce Department has been hiring experts in finance and semiconductors to review company applications, and it has set up a selection committee to chose the board for the new research center, called the National Semiconductor Technology Center. The department appears to be trying to avoid any undue influence or favoritism.“Our awards will be entirely dependent upon the strength of applications and which projects will advance U.S. economic and national security interests,” the Commerce Department said in a statement.Mr. Schumer insists that New York will win federal dollars on its own merits, but he is also explicit about the benefit his position brings. In June, as he walked the sunlit halls of the Albany NanoTech Complex, a long-running chip research and educational facility, Mr. Schumer said he “did not close out a single discussion” with a semiconductor company without encouraging them to invest in New York.GlobalFoundries is among the chip makers that stand to benefit from the CHIPS act.Cindy Schultz for The New York TimesNew York has five main advantages, he told executives: Skilled workers, stemming from New York’s history of manufacturing. Cheap and plentiful water. Cheap hydropower. Shovel-ready sites for companies to build on.“And fifth, they had the majority leader,” he said.In a yellow-lit clean room behind Mr. Schumer, workers in white protective suits were tending to hundreds of millions of dollars of advanced machinery. On tracks overhead, mechanized metal pails whizzed by carrying silicon wafers, each roughly the size of a record, to and from the machines, where they would be imprinted with layers of intricate circuitry.Mr. Schumer paused to peer over his reading glasses at a smooth, white box the size of a mobile home: an extreme ultraviolet lithography machine, made by the Dutch firm ASML, arguably the most advanced piece of machinery ever developed.Albany NanoTech is the only public research facility in the United States with such a machine. The facility is applying for federal funding to build a new clean room in an adjacent parking lot, and it hopes to become home to part of the government’s new research center.“This is the perfect place,” Mr. Schumer said. “When we wrote the CHIPS and Science bill to set up a National Semiconductor Technology Center, I had Albany in mind. And I’m pushing to get it.”Mr. Schumer said he had personally made that case to a parade of administration officials he brought through the state. That included Mr. Biden, who was pitched on New York’s potential as the two men rode in a motorcade to hear Micron’s investment announcement last October.By his telling, Mr. Schumer’s efforts on behalf of upstate New York are a personal mission, stemming in part from an early challenge from a political opponent who told voters they would never see Mr. Schumer, a Brooklyn native, west of the Hudson River. As Mr. Schumer watched companies like General Motors, General Electric and Carrier shutter their New York facilities, he said, he vowed to do something to stop the flow of young people out of the state.Mr. Schumer had also been one of Congress’ earliest China hawks, particularly on the issue of Chinese currency manipulation. During a workout in 2019 in the Senate gym, Mr. Schumer began forming a plan with Senator Todd Young, Republican of Indiana, to bolster the U.S. economy by dedicating over $100 billion to technology research.It took two years — and an aggressive, coordinated lobbying effort between government and industry — to amass the support and momentum to turn that bill into law. Mr. Schumer and other key Republican and Democratic lawmakers enlisted company executives, university presidents and state officials to talk publicly about the importance of the funding, and put pressure on reluctant members of Congress.Mr. Schumer also worked closely with Ms. Raimondo to push the bill forward. He called her frequently as obstacles arose, including during Sunday Mass and her daughter’s 18th birthday party, she said in an interview in July 2022.As the bill progressed, the prospect of funding for new U.S. factories touched off an elaborate game of courtship among legislators, state officials and companies.The number of chip lobbyists in Washington multiplied. Companies like GlobalFoundries and Intel, which stood to benefit enormously from the legislation, hosted or attended fund-raisers and virtual events for Mr. Schumer in the months before the CHIPS Act was passed. From the beginning of 2021 through June 2023, political action committees linked with Mr. Schumer received more than $350,000 in donations from executives at chip companies and their suppliers, including a $5,000 donation from Intel’s chief executive, Pat Gelsinger, data from the Federal Election Commission shows.Mr. Schumer, right, viewed a model of a Micron facility with President Biden in Syracuse, N.Y. Micron has projected that the facility will employ up to 9,000 people.Kenny Holston for The New York TimesNew York played host to a series of chip companies considering potential investments, particularly for the plot that Micron now plans to build on. TSMC looked at the site in 2019 before it chose Arizona, and Intel considered the same location but ultimately chose Ohio.Micron was ready to write off New York because the state did not have a big enough site, Ryan McMahon, the local county executive, said. To win the final bid, the county spent tens of millions of dollars acquiring land, including buying out a street of homeowners, and running gas and electricity to the site, he said.“If Schumer didn’t introduce us, it’s one of those things, you wonder if it ever would have happened,” Mr. McMahon, a Republican, said.Mr. Schumer, along with other proponents, secured an investment tax credit in the chips legislation that Micron saw as key to making the economics of the project work. And at the urging of Gov. Kathy Hochul, New York state lawmakers passed their own chips subsidy bill to complement the federal one, approving up to $500 million a year in tax abatements to chip manufacturers.Micron has said it plans to start construction next year and complete the first $20 billion phrase of the factory by 2030. New York State has promised to give Micron $5.5 billion in tax credits over the life of the project if the company meets certain employment targets.As the biggest maker of memory chips with headquarters in the United States, Micron is seen as a likely candidate for a federal grant. But other developments have thrown the project into question: Micron has recently become the subject of a crackdown in China that could cost the company an eighth of its global revenues, potentially undercutting its ability to make ambitious investments.The deal has also been met with skepticism from local government watchdogs, who fear that Micron will become the latest firm to be offered taxpayer subsidies but fail to deliver the promised economic impact.“It might be good geostrategic policy for the United States,” said John Kaehny, executive director of Reinvent Albany, a watchdog focused on the New York government. “But for New York, it’s an incredibly low return on the investment of subsidy dollars.”For both Mr. Schumer and Governor Hochul, the Micron investment became a centerpiece of their electoral strategy last fall. With Republicans on their way to the best statewide showing in two decades, both Democrats packaged clips of themselves with Micron’s chief executive into TV ads that blanketed parts of the state otherwise wary of Democrats’ economic agenda.“Transformational for upstate New York, transformational for America,” Mr. Schumer said in one.Nicholas Fandos More

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    White House Hits Back on Fitch Credit Downgrade, Protecting Biden

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    The president’s team has mobilized to counter the downgrade of Treasury debt by the Fitch Ratings agency, rushing to defend the story of an improving economic outlook.When the Fitch Ratings agency announced this week that it was downgrading its long-term credit rating of the United States from AAA to AA+, Biden administration officials were ready — and angry.Administration officials had been lobbying Fitch against the downgrade, which bewildered many economists but became immediate fodder for congressional Republicans and nonpartisan budget hawks to criticize the nation’s current fiscal direction.When the ratings agency went through with the move anyway, President Biden’s team mobilized a rapid response, with economic heavyweights inside and outside the administration criticizing the timing and substance of the announcement.The swift pushback was an effort to keep the downgrade from tarnishing Mr. Biden’s economic record amid a run of good news in key measures of the health of the American economy. And its aggressiveness reflected the critical importance of an improving economic outlook to Mr. Biden’s re-election campaign.“What was important to the president was to point out not only was the Fitch decision arbitrary and outdated, but his administration has taken action to accomplish things that go in the exact opposite of the markdown,” Jared Bernstein, the chairman of the White House Council of Economic Advisers, said in an interview, citing a bipartisan deal to raise the debt limit and modestly reduce federal spending.“One reason why we punched back hard is because Fitch completely ignored accomplishments under this president, both on fiscal policy and on economic growth,” he said.The White House got lucky in one respect. Coverage of the downgrade was immediately swamped by the third criminal indictment of former President Donald J. Trump.It was an extension of a trend that has both helped and hurt Mr. Biden so far this year: Over the past six months, according to a Stanford University database, television networks have focused as much on news about his predecessor as on news about Mr. Biden.Also helping Mr. Biden was that investors largely shrugged off the Fitch Ratings move. Researchers at Goldman Sachs wrote on Wednesday that “the downgrade should have little direct impact on financial markets.”The downgrade came just after 5 p.m. on Tuesday. Fitch released a statement that attributed the move to “the expected fiscal deterioration over the next three years, a high and growing general government debt burden and the erosion of governance” in the United States over the past two decades.Most notably, Fitch officials cited a series of high-stakes showdowns over raising the nation’s borrowing limit. “The repeated debt-limit political standoffs and last-minute resolutions have eroded confidence in fiscal management,” they wrote.The agency also expressed concerns over the rising costs of Medicare and Social Security benefits as more Americans retire, which are predicted to be the largest drivers of rising federal debt in the decade to come. Fitch predicted that the nation was headed for a mild recession by the end of the year. It was the second credit downgrade in American history, both directly linked to debt limit fights.Moments after the release, Biden administration officials hit back.Janet L. Yellen, the Treasury secretary, said in a statement that she strongly disagreed with a ratings change that she called “arbitrary and based on outdated data.”Soon after, administration officials organized a call with reporters to criticize the move in more detail. They questioned why Fitch had not downgraded the rating when Mr. Trump was president, based on Fitch’s own ratings models, and why it had done so now, soon after a compromise with Republicans in Congress that had averted a fiscal crisis.They rejected the agency’s recession prediction, citing strong recent economic data. They said the president was committed to further spending cuts — along with tax increases on corporations and the wealthy — to further reduce budget deficits in the future.Officials also pointed reporters to a range of outside economists and analysts who criticized the decision.Republicans quickly used the downgrade to criticize Mr. Biden.“With annual deficits projected to double and interest costs expected to triple in just 10 years, our nation’s financial health is rapidly deteriorating and our debt trajectory is completely unsustainable,” said Representative Jodey C. Arrington of Texas, the chairman of the House Budget Committee. “This is a wake-up call to get our fiscal house in order before it’s too late.”Fiscal hawks have been warning for more than a decade that America’s debt could grow unsustainable. Those calls grew as lawmakers borrowed trillions to help people, businesses and governments endure the Covid-19 pandemic. The cost of federal borrowing rose sharply over the past year as the Federal Reserve raised interest rates to combat inflation. More

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    Fitch’s Debt Downgrade Is Unlikely to Deter Borrowing, Investors Say

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    Fitch’s credit-rating decision stemmed from concerns about America’s ability to govern itself, along with the nation’s growing debt load.The downgrade of the United States’ debt by a major ratings firm is a damning indictment of the country’s fractious politics and a blot on its financial record that is unlikely to be quickly erased. But many investors and analysts say it won’t affect the government’s ability to keep borrowing money.On Tuesday, Fitch Ratings lowered the credit rating of the United States one notch to AA+ from a pristine AAA. The firm, citing a “deterioration in governance” along with America’s mounting debt load, suggested that it could be a long time before that decision was reversed.“Our base case is that deficits will remain high and the debt burden will continue to rise,” said Richard Francis, co-head of the Americas sovereign group at Fitch and its primary analyst for the United States, in an interview on Wednesday. “I think it is unlikely that there will be any meaningful changes.”The move — like the drop to AA+ in 2011 by S&P Global, which has kept its U.S. rating there — followed partisan brinkmanship over America’s debt ceiling, which caps how much money the government can borrow. The United States came within days of defaulting on its debt this spring as Republican lawmakers refused to lift the cap unless President Biden made concessions on spending. The two sides ultimately reached an agreement on May 27, just days before the Treasury Department projected that the government could run out of cash.With both Fitch and S&P now carrying a lower assessment, the United States’ credit rating, at least for most investors, will no longer be considered among the top tier, which includes Germany, Australia and Singapore.While the move is something of a black eye, market watchers expect the practical impact to be small. Analysts at Wells Fargo noted that the early feedback from their clients was that their appetite to keep lending to the government wasn’t likely to change much.That’s because the U.S. Treasury market is the largest sovereign debt market in the world, underpinning borrowing costs across the globe, with Treasuries owned by investors of all stripes. The U.S. rating remains among the highest in the world, backed by a strong and diverse economy and aided by the central global role of the country’s currency.“This is largely a symbolic move,” said Peter Tchir, head of macro strategy at Academy Securities.Stock markets slumped on Wednesday, and the yield on Treasuries — which indicates how much investors are demanding to be paid in exchange for lending to the government — rose. But analysts suggested that had more to do with rising government borrowing forecasts, resulting in higher interest rates and pointing to increased costs for companies, too.Fitch downgraded America’s debt on the day that former President Donald J. Trump was indicted on charges related to his efforts to overturn the 2020 election, which culminated in an attack on the Capitol on Jan. 6, 2021. The attack showcased deep distrust in the government and the rule of law.Despite the suspension of the debt limit in June, future fiscal fights — including a possible government shutdown this fall — are looming. The lack of comity between the political parties means the cap is likely to remain a political tool, with no guarantee that a compromise will always be reached.That increased polarization was central to Fitch’s decision. Mr. Francis said intense partisanship had inhibited decisions on better budgeting and the debt ceiling, with both Democrats and Republicans unmovable on policies that could improve the country’s fiscal position. These include, he added, changes to taxes, military spending, and Social Security and Medicare, which are expected to face ballooning costs as more baby boomers retire.“There is no willingness on any side to really tackle the underlying challenges,” Mr. Francis said.The ratings agency also cited the Jan. 6 attack as a concern that fed into the downgrade.“There’s the debt ceiling standoff, there is this painful budgeting process, there is political polarization that is ongoing and probably deteriorating — and then there is the Jan. 6 insurrection, but that is one factor among many,” Mr. Francis said.The Federal Reserve’s rapid interest rate increases have compounded some of those factors by raising borrowing costs, forcing the government to borrow even more money to account for higher interest and other payments to bondholders.On Wednesday, the Treasury Department detailed its plans to borrow over $1 trillion for the third quarter, which runs from July through September. The estimate, announced on Monday, is $274 billion more than the Treasury had forecast in May. The United States current debt is $32.5 trillion.More borrowing means more debt for investors to digest. A larger supply of Treasuries while investor demand stays the same, or even shrinks, means higher borrowing costs for the government. The 10-year Treasury yield rose 0.07 percentage points on Wednesday to 4.09 percent, its highest level since November.Treasury Secretary Janet L. Yellen continued to criticize the Fitch decision on Wednesday, describing it as “puzzling” and “entirely unwarranted.”“Its flawed assessment is based on outdated data and fails to reflect improvements across a range of indicators, including those related to governance, that we’ve seen over the past two and a half years,” Ms. Yellen said during an event in Virginia.Still, there does not seem to be any movement toward one solution that Fitch and many analysts have said would help the United States return to its higher rating: getting rid of the debt ceiling.Mr. Francis said it would “probably be helpful” to get rid of the debt limit if the United States ever wanted to regain a higher rating. Despite Mr. Biden’s desire to alter the process, there has been no indication that any changes are coming soon.Instead, Republicans and Democrats returned to the kind of partisan bickering that helped fuel the downgrade, with each side blaming the other for it.“The downgrade comes just months after Biden and congressional Democrats took the country to the brink of default and amid an increasingly unsteady economic path,” said Jake Schneider, director of rapid response for the Republican National Committee.The Democratic National Committee blamed the tax cuts and spending policies that were initiated by Republicans and Mr. Trump when he was president, saying the downgrade was “a direct result of Donald Trump and MAGA Republicans’ extreme and reckless agenda.” More