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    U.S. Signals Little Thaw in Trade Relations With China

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    The Biden administration said it would not immediately remove the Trump administration’s tariffs and would require that Beijing uphold its trade commitments.WASHINGTON — The Biden administration offered its strongest signal yet that the United States’ combative economic approach toward China would continue, with senior administration officials saying that President Biden would not immediately lift tariffs on Chinese goods and that he would hold Beijing accountable for trade commitments agreed to during the Trump administration.The comments, in a call with reporters on Sunday, provided one of the first looks at how the Biden administration plans to deal with a rising economic and security threat from China. They indicated that while Mr. Biden may have criticized the Trump administration’s aggressive approach, his White House will continue trying to counter China’s economic threats with trade barriers and other punitive measures.That includes requiring China to uphold commitments it agreed to as part of the Phase 1 trade deal that it signed with the United States in January 2020. So far, China is on pace to fall short of its 2021 purchasing commitments by more than 30 percent, after falling short by more than 40 percent last year, according to Chad P. Bown, a senior fellow at the Peterson Institute for International Economics, who tracks the purchases.However, in a move that would offer some relief to businesses that import Chinese products, the administration said it would re-establish an expired process that gives some companies a reprieve by excluding them from the tariffs. Trade officials would make those decisions based on the priorities of the Biden administration, officials said, without elaborating further.Katherine Tai, the United States trade representative, is expected to begin talking with her Chinese counterparts in the coming days about the country’s failure to live up to its agreements, senior administration officials said. Officials did not rule out the possibility of imposing further tariffs on China if talks with did not produce the desired results, warning Beijing that they would use all available tools to defend the United States from state-directed industrial policies that harm its workers.China denies that it has failed to live up to the Phase 1 agreement, contending that the pandemic has created unique circumstances.The Biden administration has been drawing up an investigation into China’s use of subsidies under Section 301 of U.S. trade law. If it is carried out, that inquiry could result in additional tariffs on China, according to people familiar with the plans.In excerpts that were released on Monday morning in Washington from a planned speech later in the morning, Ms. Tai said that, “For too long, China’s lack of adherence to global trading norms has undercut the prosperity of Americans and others around the world.”“We continue to have serious concerns with China’s state-centered and nonmarket trade practices that were not addressed in the Phase 1 deal,” she added.Last week, Gina Raimondo, the commerce secretary, pointed to China’s blocking of its airlines from buying “tens of billions of dollars” of products from Boeing.“The Chinese need to play by the rules,” Ms. Raimondo said in an interview with NPR last week. “We need to hold their feet to the fire and hold them accountable.”The Biden administration has given no indication that it plans to lower the hefty tariffs that President Donald J. Trump placed on Chinese goods anytime soon, despite protests by economists and some businesses that they have dragged on the U.S. economy.Mr. Biden has frequently criticized Mr. Trump’s 18-month trade war with China as erratic and counterproductive. But more than eight months into his presidency, Mr. Biden has announced few policies that differentiate his approach. In addition to the tariffs on Chinese goods, the president has maintained restrictions on the ability of Chinese companies to access U.S. technology and expanded the list of Chinese officials under sanctions by the United States for their role in undermining Hong Kong’s democratic institutions.Mr. Biden’s hard-line approach to China comes at a moment of extraordinary tension between the world’s largest and second largest economies, and remarkably little interchange between their governments.President Biden met with the leaders of Australia, India and Japan at the White House last month, aiming to put the major democracies of the region in agreement on how to deal with China.Sarahbeth Maney/The New York TimesIn the past month, the United States has announced a new deal to provide nuclear-powered submarines to Australia, an effort to push back on Beijing’s military modernization and its claims of territory in the South China Sea. Mr. Biden also met at the White House with the leaders of Japan, Australia and India, aiming to put the major democracies of the region in accord on how to deal with China’s influence and authoritarianism. And the United States and China are both seeking technological advantage, even if it means cutting off each other’s access to key goods.China, having repressed dissent in Hong Kong and essentially wiped away its guarantees to Britain about keeping its hands off the territory for decades, is now regularly threatening Taiwan. The United States formally protested some of China’s actions on Sunday, after dozens of military aircraft flew on Friday and Saturday into Taiwan’s air defense identification zone, although not over the island itself. While U.S. officials do not expect Beijing to move against Taiwan, they are increasingly concerned about the possibility of an accidental conflict.Trade was one area — along with climate — where mutual interest might steer the two countries to some agreements, even as they compete in other areas. But it is unclear whether they can find a way to reach an accord amid other tensions.Mr. Trump’s deal halted the trade war, but it did not put an end to economic hostilities. China still maintains tariffs on 58.3 percent of its exports from the United States; the United States imposes tariffs on 66.4 percent of the products it brings in from China, according to Mr. Bown.Some Biden officials, like many economists, have made clear that they see the tariffs as counterproductive and taking a toll on American consumers and manufacturers as well as Chinese businesses. Treasury Secretary Janet L. Yellen said in July that the China deal had “hurt American consumers.”Asked if they would consider additional tariffs on China, officials said the Biden administration would not be taking any tools off the table. The administration planned to use the enforcement mechanism established in the trade deal, they said, which would allow the United States to resort to further tariffs if consultations were unsuccessful.In a planned speech on Monday at the Center for Strategic and International Studies, a Washington think tank, Ms. Tai is set to highlight how some of Beijing’s unfair practices have affected U.S. workers and how the United States is building global coalitions to counter them.The Biden administration could face an even more difficult task in reaching any trade agreement with China than the Trump administration did four years ago. Republican lawmakers are ready to pounce on any perceived weakness on China from Mr. Biden, and diplomatic and economic relations between the two countries have deteriorated.“Against the backdrop of worldwide opposition against Cold War and division, the United States blatantly violated its policy statement of not seeking a new Cold War and ganged up to form an Anglo-Saxon clique,” Wang Yi, the Chinese foreign minister, said on Sept. 28 in response to the Australian submarine deal.The U.S. release of Meng Wanzhou, a Huawei executive who had been detained in Canada at the request of the United States, and China’s subsequent release of two Canadians and two Americans, have done little to cool tensions.Mr. Trump’s tariffs have discouraged imports of some Chinese goods, but exports to the United States have grown strongly through the coronavirus pandemic, as Americans purchased workout equipment, furniture, toys and other products during lockdown.China’s leaders have also doubled down on the kinds of domestic industrial subsidies that the United States has long objected to. They have greatly expanded programs, started more than a decade ago, aimed at eliminating their need to buy computer chips and passenger jets — two of the United States’ main exports to China — among other industrial products.The Biden administration has been exploring ways to persuade China to limit its broad industrial subsidies, but that will be difficult. The George W. Bush, Obama and Trump administrations all tried with little success for ways to coax China to abandon its long-running use of subsidies to domestic producers as a tool to wean itself from any reliance on imports.China’s leader, Xi Jinping, has called for making sure that other countries remain dependent on China for key goods, so that they will not threaten to halt their own sales to China. The United States has done so over issues like surveillance, forced labor and the crackdown on democracy advocates in Hong Kong.“The dependence of the international industrial chain on our country has formed a powerful countermeasure and deterrent capability for foreign parties to artificially cut off supply,” Mr. Xi said in a speech last year.In the call on Sunday, Biden administration officials acknowledged that talks might not persuade China to abandon its increasingly authoritarian, state-centered approach. So instead, they said, the administration’s primary emphasis will be on building the competitiveness of the U.S. economy, working with allies and diversifying markets to limit the impact of Beijing’s harmful trade practices.Keith Bradsher reported from Shanghai, and More

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    U.S. and Europe Announce New Trade Cooperation, but Disputes Linger

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    A new trade and technology partnership aims to counter China, but tensions over issues like metal tariffs remain.WASHINGTON — The United States and the European Union took a step this week toward a closer alliance by announcing a new partnership for trade and technology, but tensions over a variety of strategic and economic issues are still simmering in the background.The establishment of the Trade and Technology Council, which aims to establish a united front on trade practices and sophisticated technologies, is a significant test of whether President Biden can fulfill his pledge to mitigate trans-Atlantic tensions that soared under President Donald J. Trump. The Biden administration has long described Europe as a natural partner in a broader economic and political confrontation with China, and it criticized the Trump administration for picking trade fights that alienated European governments.But while officials on both sides say trans-Atlantic relations have been improving, the U.S.-Europe reset has been rockier than anticipated.The inaugural meeting of the Trade and Technology Council in Pittsburgh this week was nearly scuttled after the Biden administration said it would share advanced submarine technology with Australia, a deal that enraged the French government.Europeans say they have been frustrated by a lack of consultation with the Biden administration on a range of issues, including the U.S. withdrawal from Afghanistan. And officials face a difficult negotiation in the coming weeks over metal tariffs that Mr. Trump imposed globally in 2018.Europeans have said they will impose retaliatory tariffs on other U.S. products as of Dec. 1 unless Mr. Biden rolls back a 25 percent tax on European steel and a 10 percent duty on aluminum.“The E.U. initially viewed the Biden administration as a ‘breath of fresh air’ but is now increasingly wondering how much Biden will differ from Trump,” Stephen Olson, a senior research fellow at the Hinrich Foundation and a former U.S. trade negotiator, wrote in a recent analysis. “Prospects for a U.S.-E.U. ‘united front’ have been overblown from the start.”Valdis Dombrovskis, the European commissioner for trade, said in a round table with journalists in Washington on Tuesday that the two sides had been doing intensive work on the issue. They were aiming to reach an agreement by early November to have enough time to avert European countertariffs, he said.The European Union was disappointed with the Biden administration’s handling of the Australian submarine agreement, Mr. Dombrovskis added, but “occasional divergences” should not disrupt their strategic alliance.“Of course, as allies and friends, we do not always agree on everything, and we have seen this in recent weeks,” Mr. Dombrovskis said, adding that there had been more engagement from the Biden administration than the Trump administration.In meetings this week, Secretary of State Antony J. Blinken; Gina Raimondo, the commerce secretary; Katherine Tai, the U.S. trade representative; and their European counterparts pledged to collaborate on a variety of 21st-century issues, such as controlling exports of advanced technology, screening investments for national security threats and offering incentives to manufacture chips in Europe and the United States as a semiconductor shortage continues.Though official documents did not explicitly mention China, the partnership is clearly aimed in part at countering the country’s authoritarian practices. Among other goals, the council promised to combat arbitrary and unlawful technological surveillance and the trade-distorting practices of nonmarket economies.U.S. and European officials in June announced an agreement ending a 17-year dispute over aircraft subsidies given to Airbus and Boeing.But a lingering fight over Mr. Trump’s metal tariffs on imports from Europe and elsewhere could prove harder to resolve. Mr. Biden is under intense pressure to maintain barriers to imports from domestic steel makers and labor unions that supported his campaign.In a virtual round table on Thursday, industry executives and labor leaders said that cheap steel produced in Europe could still damage the U.S. industry.While China is best known for subsidizing its steel industry, European makers have also been major recipients of government subsidies, giving them an unfair advantage over U.S. competitors, said Lourenco Goncalves, the chief executive of Cleveland-Cliffs Inc., an American iron ore mining company.He urged the Biden administration to negotiate from a “position of strength.”“We need the White House, and we need the ones on the front line not to be affected by sweet talk, particularly from the Europeans,” Mr. Goncalves said. “I believe that the friends are a lot worse than the enemies.”U.S. officials made an offer to their European counterparts this summer to transform the current 25 percent tariff on European steel into a so-called tariff-rate quota, an arrangement in which higher levels of imports are met with higher duties, according to a person familiar with the discussions, who spoke on the condition of anonymity to discuss confidential matters.The Europeans have argued for a more flexible arrangement, and discussions are expected to intensify over the next three weeks, the person said.Thomas Kaplan More

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    Janet Yellen says she supports eliminating the debt limit.

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    Treasury Secretary Janet L. Yellen said on Thursday that the statutory debt limit should be abolished, arguing that the borrowing cap is “destructive” and poses unnecessary risks to the economy.She made the comments at a House Financial Services Committee hearing, as the United States faces an Oct. 18 deadline to raise or suspend the debt limit. Ms. Yellen warned on Thursday that failure to act would be “catastrophic” for the economy and said she supported proposed legislation to do away with the limit because it blocks the government from carrying out spending that Congress has authorized.“I believe when Congress legislates expenditures and puts in place tax policy that determines taxes, those are the crucial decisions Congress is making,” Ms. Yellen said. “And if to finance those spending and tax decisions it is necessary to issue additional debt, I believe it is very destructive to put the president and myself, as Treasury secretary, in a situation where we might be unable to pay the bills that result from those past decisions.”The debt limit was instituted in the early 20th century so the Treasury did not need to ask for permission each time it needed to issue bonds to pay bills. The first debt limit was part of the Second Liberty Bond Act of 1917, according to the Congressional Research Service. A general limit on the federal debt was imposed in 1939.Republicans are refusing to join Democrats in raising the debt limit, insisting that they act alone in protest of big spending packages that Democrats hope to enact. At Thursday’s hearing, Ms. Yellen said dealing with the debt limit should be a bipartisan responsibility, because it allows the government to repay debts that were incurred by Democrats and Republicans.If the debt limit is not addressed by the Oct. 18 deadline, Social Security payments will be delayed, troops might not receive their paychecks on time, and interest rates for mortgages and car loans could spike.Ms. Yellen also warned that an erosion of confidence in the security of U.S. Treasury debt would be a “catastrophic event.” More

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    Democrats Move to Avert Shutdown, but Divisions Imperil Biden’s Agenda

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    Democrats prepared a spending bill to keep the government funded past a Thursday deadline, but moderates dug in harder against their ambitious social safety net bill.WASHINGTON — Democrats prepared legislation on Wednesday to avert a government shutdown this week, but they were desperately trying to salvage President Biden’s domestic agenda as conservative-leaning holdouts dug in against an ambitious $3.5 trillion social safety net and climate bill that carries many of the party’s top priorities.Congressional leaders moved to address the most immediate threat, working to complete a bill to prevent a government funding lapse at midnight on Thursday. Yet after days of intensive negotiations to bridge bitter differences in their party over Mr. Biden’s two biggest legislative priorities, the president and top Democrats appeared as far as ever from an agreement on their marquee social policy package, which the White House calls the Build Back Better plan.That, in turn, was imperiling a $1 trillion bipartisan infrastructure bill that was scheduled for a House vote on Thursday.The fate of the two measures could define the success of Mr. Biden’s presidency, and the intense negotiations surrounding them have posed a test of his skills as a deal maker, which he highlighted as a calling card during his campaign for the White House. But after days of personal meetings with lawmakers in the Oval Office and phone calls to key players, Mr. Biden remained far short of a deal.Dramatizing the challenge, Senator Joe Manchin III of West Virginia, a leading holdout on the social policy bill, issued a lengthy and strongly worded statement on Wednesday evening reiterating his opposition to the proposal as currently constituted, saying it amounted to “fiscal insanity.”“While I am hopeful that common ground can be found that would result in another historic investment in our nation, I cannot — and will not — support trillions in spending or an all-or-nothing approach that ignores the brutal fiscal reality our nation faces,” Mr. Manchin wrote, denouncing an approach that he said would “vengefully tax for the sake of wishful spending.”The statement was the polar opposite of what Mr. Biden and top Democrats had hoped to extract from Mr. Manchin and other centrist critics of the bill by week’s end — a firm public commitment to eventually vote for the social policy measure, in order to placate liberals who want to ensure its enactment.Instead, it further enraged progressives who were already promising to oppose the infrastructure bill until Congress acted on the larger social policy plan, which Democrats plan to push through using a fast-track process known as budget reconciliation to shield it from a filibuster. They have been pressing to push off the infrastructure vote until after votes on the reconciliation bill — or, at the very least, after the centrist holdouts provided a firm sense of what they would accept in that package.“I assume he’s saying that the president is insane, because this is the president’s agenda,” Representative Pramila Jayapal, Democrat of Washington and the leader of the Congressional Progressive Caucus, said of Mr. Manchin. “Look, this is why we’re not voting for that bipartisan bill until we get agreement on the reconciliation bill. It’s clear we’ve got a ways to go.”“I tell you, after that statement, we probably have even more people willing to vote ‘no’ on the bipartisan bill,” she added.The impasse left unclear the fate of the infrastructure measure. While a handful of centrist Republicans plan to support it, G.O.P. leaders are urging their members to oppose it, leaving Democrats who hold a slim majority short of votes to pass the bill if progressives revolt.“The plan is to bring the bill to the floor,” Speaker Nancy Pelosi told reporters, returning to Capitol Hill after huddling at the White House with Mr. Biden and Senator Chuck Schumer of New York, the majority leader. Asked whether she was concerned about the votes, she added, “One hour at a time.”She spoke shortly after the House passed legislation lifting the statutory limit on federal borrowing until Dec. 16, 2022, an effort to avert a catastrophic federal debt default next month when the Treasury Department says it will breach the current cap.Senate Republicans blocked a Democratic effort to pair the increase with a spending bill to keep the government funded, and are likely to oppose the House-passed bill, which was approved on a nearly party-line vote of 219 to 212 on Wednesday. Still, the move signaled that Democrats were willing to act on the government funding measure separately, steering clear of a shutdown even as the debt ceiling remains unresolved for now.But much of the urgency on Wednesday was focused on salvaging the president’s agenda, after Mr. Biden and his aides cleared his schedule on Wednesday in an attempt to broker a deal among Democrats.Some Democrats have complained this week that the president has not engaged in talks to their satisfaction. He welcomed groups of progressives and moderates to the White House last week, for example, but met with each separately, as opposed to holding a group negotiating session.And efforts by Mr. Biden and his team to pressure Mr. Manchin and Senator Kyrsten Sinema of Arizona, another Democratic holdout on the reconciliation bill, appear to have fallen flat. Officials have been working for days to persuade the pair to specify how much they would be willing to spend on the package, calculating that such a commitment would allay the worries of progressives now refusing to support the infrastructure bill.Both Ms. Sinema and Mr. Manchin visited the White House on Tuesday, but after their meetings, neither they nor White House officials would enumerate the contours of a bill they could support. Top White House officials also trekked to Capitol Hill on Wednesday to huddle privately with Ms. Sinema for more than two hours.“The president felt it was constructive, felt they moved the ball forward, felt there was an agreement, that we’re at a pivotal moment,” Jen Psaki, the White House press secretary, told reporters on Tuesday, characterizing the meetings. “It’s important to continue to finalize the path forward to get the job done for the American people.”Mr. Biden held conversations with various lawmakers throughout the day on Wednesday and planned to continue them on Thursday, White House officials said.Senator Kyrsten Sinema of Arizona and other centrist holdouts haven’t provided a firm sense of what they would accept in the reconciliation bill.Sarahbeth Maney/The New York TimesPrivately, administration officials said Mr. Biden was continuing to take an encouraging role with Mr. Manchin and Ms. Sinema, and not demanding they agree to anything immediately. Both senators have yet to publicly do so, even as liberal Democrats continue to publicly fume over the reticence.In his statement on Wednesday, Mr. Manchin said he wanted to set income thresholds for many of the social program expansions Democrats have proposed. He suggested that he would be open to undoing some components of the 2017 tax cut.Moderate House Democrats, who helped secure a commitment for a vote this week on the infrastructure bill, warned that a failed vote would worsen the already deep mistrust between the two factions of the party.“If the vote were to fail tomorrow or be delayed, there would be a significant breach of trust that would slow the momentum in moving forward on delivering the Biden agenda,” said Representative Stephanie Murphy of Florida, one of the moderates who sought to decouple the two plans.Even as they labored to work out philosophical differences in their party on the bill, Democrats suffered yet another setback on Wednesday when the Senate’s top rules enforcer rejected a second proposal to include a path to legal status for about eight million undocumented immigrants in the reconciliation bill.In a memo obtained by The New York Times, Elizabeth MacDonough, the Senate parliamentarian, wrote that the policy change “vastly outweighs its budgetary impact,” effectively disqualifying it from inclusion in a measure whose contents must have a direct impact on the federal budget.In their latest effort, Democrats had proposed moving up the date for a process known as immigration registry, which allows otherwise law-abiding undocumented immigrants who have been in the United States continuously since a certain date to adjust their status and gain a pathway to citizenship. The current date, established in 1986, is set at Jan. 1, 1972. Democrats had sought to change that date to Jan. 1, 2010.After days of personal meetings with lawmakers in the Oval Office and phone calls to key players, President Biden remained far short of a deal. Doug Mills/The New York TimesLast week, Ms. MacDonough rejected Democrats’ initial proposal to grant legal status to several categories of undocumented people, including those brought to the United States as children, known as Dreamers; immigrants who were granted Temporary Protected Status for humanitarian reasons; people working in the country under nonimmigrant visas; close to one million farmworkers; and millions more who are deemed “essential workers.”She said those changes to immigration law could not be included, under the Senate rules, in the reconciliation package because they represented a “tremendous and enduring policy change that dwarfs its budgetary impact.”Democrats said they would continue to look for alternative strategies to aid immigrants through the reconciliation process.Luke Broadwater More

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    Biden Presses Democrats to Embrace His Economic Agenda

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    The president canceled a trip to Chicago in an attempt to salvage a pair of bills containing trillions of dollars in spending on infrastructure, education, climate change and more.WASHINGTON — President Biden and his aides mounted an all-out effort on Wednesday to salvage Mr. Biden’s economic agenda in Congress, attempting to forge even the beginnings of a compromise between moderates and progressives on a pair of bills that would spend trillions to rebuild infrastructure, expand access to education, fight climate change and more.Mr. Biden canceled a scheduled trip to Chicago, where he was planning to promote Covid-19 vaccinations, in order to continue talking with lawmakers during a critical week of deadlines in the House. One crucial holdout vote in the Senate, Kyrsten Sinema, a centrist from Arizona, was set to visit the White House on Wednesday morning, a person familiar with the meeting said.Ms. Sinema was one of the Democratic champions of a bipartisan bill, brokered by Mr. Biden, to spend more than $1 trillion over the next several years on physical infrastructure like water pipes, roads, bridges, electric vehicle charging stations and broadband internet. That bill passed the Senate this summer. It is set for a vote this week in the House. But progressive Democrats have threatened to block it unless it is coupled with a more expansive bill that contains much of the rest of Mr. Biden’s domestic agenda, like universal prekindergarten and free community college, a host of efforts to reduce greenhouse gas emissions and tax breaks for workers and families that are meant to fight poverty and boost labor force participation.Ms. Sinema and another centrist in the Senate, Joe Manchin III of West Virginia, have expressed reservations over the scope of that larger bill and balked at the $3.5 trillion price tag that Democratic leaders have attached to it. Moderates in the House and Senate, led by Ms. Sinema, have resisted many of the tax increases on high earners and corporations that Mr. Biden proposed to offset the spending and tax cuts in the bill, in order to avoid adding further to the budget deficit.Mr. Biden has thus far failed to convince Ms. Sinema and Mr. Manchin to agree publicly to a framework for how much they are willing to spend and what taxes they are willing to raise to fund the more expansive bill. If Mr. Biden cannot find a way to address their concerns, while also assuaging progressives and persuading them to support his infrastructure bill, he could see the warring factions in his party kill his entire economic agenda in the span of a few days.Some Democrats have complained this week that the president has not engaged in talks to their satisfaction, though he has cleared his schedule this week in hopes of brokering a deal. He welcomed groups of progressives and moderates to the White House last week, for example, but met with each separately, as opposed to a group negotiation session.Both Ms. Sinema and Mr. Manchin visited the White House on Tuesday, but after their meetings, neither they nor White House officials would enumerate the contours of a bill they could support.“The president felt it was constructive, felt they moved the ball forward, felt there was an agreement, that we’re at a pivotal moment,” Jen Psaki, the White House press secretary, told reporters on Tuesday, characterizing the meetings. “It’s important to continue to finalize the path forward to get the job done for the American people.”White House officials said late Tuesday that Mr. Biden remained in frequent contact with a wide range of Democrats, including phone calls with progressives, and that he would have more conversations on Wednesday. More

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    Elizabeth Warren Calls Jerome Powell a ‘Dangerous Man’

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    Senator Elizabeth Warren, Democrat of Massachusetts, blasted the Federal Reserve chair, Jerome H. Powell, for his financial regulation track record and said that she would not support him if the White House renominated him, calling him a “dangerous man to head up the Fed.”Mr. Powell’s term as head of the central bank ends in early 2022, and the Biden administration is considering whether to reappoint him. Mr. Powell, a Republican, was nominated to the Fed’s Board of Governors by former President Barack Obama and elevated to chair by former President Donald J. Trump.While some prominent Democratic economists and advocacy groups support Mr. Powell, who has been intensely focused on the labor market during his term as Fed chair, some progressives openly oppose him. They often cite his track record on financial regulation — as Ms. Warren did to his face on Tuesday, as he testified before the Senate Banking Committee.“The elephant in the room is whether you’re going to be renominated,” Ms. Warren said, looking down at the Fed chair during the hearing. “Renominating you means gambling that, for the next five years, a Republican majority at the Federal Reserve, with a Republican chair who has regularly voted to deregulate Wall Street, won’t drive this economy over a financial cliff again.”Ms. Warren, and those who agree with her, have worried that leaving Mr. Powell in place will prevent the Fed from taking a tougher stance on financial regulation. Mr. Powell has said that when it comes to regulatory matters, he defers to the Fed’s vice chair for supervision, noting that Congress created that job to lead up bank oversight following the 2008 financial crisis.“I respect that that’s the person who will set the regulatory agenda going forward,” Mr. Powell said during a news conference last week. “And furthermore, it’s fully appropriate to look for a new person to come in and look at the current state of regulation and supervision and suggest appropriate changes.”Ms. Warren’s colleague Senator Michael Rounds, a Republican from South Dakota, followed her scathing comments by saying that Mr. Powell deserved to be renominated, and that he looked forward to working with him for the next several years.The White House has so far given little indication of whom it will pick to lead the central bank.President Biden already has the opportunity to fill one open governor position at the Fed, and several other roles will soon become available: The governor seat of the Fed’s vice chair, Richard Clarida, will expire in the coming months, as will Randal K. Quarles’s position as vice chair for supervision. The openings could give the administration a chance to remake the central bank from the top with its nominations, who must pass Senate confirmation.Other lawmakers at the Senate hearing pushed Mr. Powell to focus on improving diversity at the central bank — highlighting another key concern among Democrats as the leadership shuffle gets underway.Senator Sherrod Brown, a Democrat from Ohio and the head of the Senate Banking Committee, pointed out that there had never been a Black woman on the Federal Reserve’s Board of Governors in Washington, while also referring to reporting from earlier this year that showed a dearth of Black economists at the central bank.He asked if Mr. Powell believed that the central bank should have a Black woman on its Board of Governors.“I would strongly agree that we want everyone’s voice heard around the table, and that would of course include Black women,” Mr. Powell said. “We of course have no role in the selection process, but we would certainly welcome it.”Lisa Cook, a Michigan State University economist, and William Spriggs, chief economist of the labor union AFL-CIO, are often raised as possible candidates for governor positions or leadership roles. Both are Black. Lael Brainard, a white woman who is currently a Fed governor, is frequently raised as a possible replacement for Mr. Powell if he is not renominated, and Sarah Bloom Raskin, a white woman who is a former top Fed and Treasury official, is often suggested as a replacement for Mr. Quarles.Mr. Powell, as he noted, has no formal role in selecting his future colleagues at the Fed Board.He and his colleagues at the Fed Board will, however, have a chance to weigh in on who will take over two newly open positions around the Fed’s decision-making table. The central bank has 19 total officials at full strength, seven governors and 12 regional bank presidents.Robert S. Kaplan, the Dallas Fed president, and Eric S. Rosengren, the Boston Fed president, both announced their imminent retirements on Monday, amid widespread criticism of the fact that they were trading securities in 2020 — during a year in which the Fed unrolled a widespread market rescue in response to the pandemic.Mr. Powell addressed that scandal on Tuesday, pledging to lawmakers that the Fed would change its ethics rules and saying that the Fed was looking into the trading activity to make sure it was in compliance with those rules and with the law.“Our need to sustain the public’s trust is the essence of our work,” Mr. Powell said, adding that “we will rise to this moment.”Beyond grabbing headlines, the departures will leave two regional bank jobs available at the Fed. The regional branches’ boards, except for bank-tied members, will search for and select replacement presidents. The Fed’s governors in Washington have a “yes” or “no” vote on the pick.The Fed has never had a Black woman as a regional bank president, either. Raphael Bostic, president of the Federal Reserve Bank of Atlanta, is the first Black man to serve in one of those roles.At the Board of Governors, Mr. Quarles’s leadership term ends most imminently, on Oct. 13. His position as governor does not expire until 2032, and he has signaled that he will likely stay on as a Fed governor at least through the end of his leadership term at the Financial Stability Board, a global oversight body, in December. Mr. Powell’s leadership term ends in early 2022, though he could stay on as governor since his term in that role does not expire until 2028. Mr. Clarida will have to leave early next year unless he is reappointed. More

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    Janet Yellen and Jerome Powell warn that the Delta variant is slowing the recovery.

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    America’s two top economic policymakers will warn lawmakers on Tuesday that the Delta variant of the coronavirus has slowed the economic recovery but will convey optimism about the economy’s overall trajectory, according to prepared remarks.Treasury Secretary Janet L. Yellen and the Federal Reserve chair, Jerome H. Powell, will testify before the Senate Banking Committee as the U.S. economy is at a crossroads, with businesses facing labor shortages and consumers coping with rising prices amid a resurgent pandemic. Congress is also grappling with a thicket of legislative challenges in the coming days, all of which could have an impact on the economy. They include extending federal funding to avoid a U.S. government shutdown, raising the debt limit to prevent defaulting on the nation’s financial obligations and passing President Biden’s infrastructure and social safety net packages.“While our economy continues to expand and recapture a substantial share of the jobs lost during 2020, significant challenges from the Delta variant continue to suppress the speed of the recovery and present substantial barriers to a vibrant economy,” Ms. Yellen will say, according to her prepared remarks. “Still, I remain optimistic about the medium-term trajectory of our economy, and I expect we will return to full employment next year.”The testimony will offer Ms. Yellen and Mr. Powell a chance to publicly press lawmakers to take action to raise or suspend the nation’s borrowing cap and to warn of the calamitous consequences if the United States defaulted on its obligations. Ms. Yellen has cautioned that debt-limit brinkmanship is eroding confidence in the United States and that a default, which could happen as soon as mid-October, would do irreparable harm to the economy.For weeks, Ms. Yellen has been quietly pressing lawmakers to put politics aside and ensure that the United States can continue to meet its fiscal obligations. She has been in touch with Wall Street chief executives and former Treasury secretaries as she looks to keep markets calm and find allies who can help her make the case to recalcitrant Republicans, who believe Democrats must deal with the debt limit on their own.“It is imperative that Congress swiftly addresses the debt limit,” Ms. Yellen will say. “The full faith and credit of the United States would be impaired, and our country would likely face a financial crisis and economic recession.”Mr. Powell is slated to tell senators that the Fed will continue to support the economy with its monetary policies, which influence how expensive it is to borrow and spend. But he will also make it clear that Fed officials will act if a recent jump higher in prices persists.“Inflation is elevated and will likely remain so in coming months before moderating,” Mr. Powell is prepared to say, based on remarks released Monday afternoon.He will cite the lingering coronavirus pandemic as a risk to the economic outlook, according to his prepared statement.Mr. Powell has also fretted about the debt limit in recent weeks, saying during a news conference last week that default is “just not something that we should contemplate,” and that “no one should assume that the Fed or anyone else can protect the markets or the economy in the event of a failure, fully protect in the event of a failure to make sure that we do pay those debts when they’re due.”Ms. Yellen and Mr. Powell will testify again on Thursday before the House Financial Services Committee. More

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    The Economy Looks Solid. But These Are the Big Risks Ahead.

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    One concern is that political leaders will mismanage things in the world’s largest and second-largest economies.The low-hanging fruit of the pandemic economic recovery has been eaten. As a result, the expansion is entering a new phase — with new risks.For months, the world economy has expanded at a torrid pace, as industries that were shut down in the pandemic reopened. While that process is hardly complete — numerous industries are still functioning below their prepandemic levels — further healing appears likely to be more gradual, and in some ways more difficult.Reopening restaurants and performance arenas is one thing. Fixing extraordinary backups in shipping networks and shortages of semiconductors, among the most vivid examples of supply shortages holding back many parts of the economy, is harder.And a range of risks, including the hard-to-predict dynamics of Covid variants, could throw this transition to a healthy post-pandemic economy off course.One looming risk is if political leaders mismanage things in the world’s largest and second-largest economies. Namely, in the United States, a standoff over raising the federal debt ceiling could bring the nation to the brink of default. And in China, the fallout from the property developer Evergrande’s financial problems is raising questions about the country’s debt-and-real-estate-fueled growth.The Organization for Economic Cooperation and Development last week projected that the world economy would grow 4.5 percent in 2022, downshifting from an expected 5.7 percent expansion in 2021. Its forecast for the United States shows an even steeper slowdown, from 6 percent growth this year to 3.9 percent next.Of course, a year of 3.9 percent G.D.P. growth would be nothing to scoff at — that would be much faster growth than the United States has experienced for most of the 21st century. But it would represent a resetting of the economy.“We’ve had liftoff, and now we’re at cruising altitude,” said Beth Ann Bovino, chief U.S. economist at S&P Global.After the global financial crisis of 2008-9, the great challenge for the recovery was a shortfall of demand. Workers and productive capacity were abundant, but there was inadequate spending in the economy to put that capacity to work. The post-reopening stage of this recovery is the opposite image.Now there is plenty of demand — thanks to pent-up savings, trillions of dollars in federal stimulus dollars, and rapidly rising wages — but companies report struggles to find enough workers and raw materials to meet that demand.Dozens of container ships are backed up at Southern California ports, waiting their turn to unload products meant to fill American store shelves through the holiday season. Automakers have had to idle plants for want of semiconductors. Builders have had a hard time obtaining windows, appliances and other key products needed to complete new homes. And restaurants have cut back hours for lack of kitchen help.These strains are, in effect, acting as a brake that slows the expansion. The question is how much, and for how long, that brake will be applied.“The kinds of growth rates we are seeing were a bounce-back from a really severe recession, so it’s no surprise that won’t continue,” said Jennifer McKeown, head of the global economics service at Capital Economics. “The risk is that this becomes less about a natural cooling and more about the supply shortages that we’re seeing really starting to bite. That may mean that economic activity doesn’t continue to grow as we’re expecting it to, as instead there is a stalling of activity and price pressures starting to rise.”The problem is that the supply shortages have many causes, and it is not obvious when they will all diminish. Spending worldwide, and especially in the United States, shifted toward physical goods over services during the pandemic, more quickly than productive capacity could adjust. The Delta variant and continued spread of Covid has caused restrictions on production in some countries. And the lagged effects of production shutdowns in 2020 are still being felt.Then there are the risks that lurk in the background — the kinds of things that aren’t widely forecast to be a source of economic distress, but could unspool in unpredictable ways.Debt ceiling brinkmanship in Washington is a prime example. Senate Republicans insist that they will not vote to increase the federal debt limit, and that Democrats will have to do so themselves — while also planning to filibuster Democratic attempts to do so. Failure to reach some sort of agreement would risk a default on federal obligations, and could cause a financial crisis. For that reason, a deal in these cases has always ultimately been done — even if, as in 2011, it created a lot of uncertainty along the way.The risk here is that both sides could be so determined to stick to their stances that a miscalculation happens, like two drivers in a game of chicken who both refuse to swerve. And to those who are closest to American fiscal policymaking, that looks like a meaningful risk.“Chances of a default are still remote, and Congress will likely increase the debt ceiling. but the path to a deal is more murky than usual,” said Brian Gardner, chief Washington policy strategist at Stifel, in a research note. He added that the political game of chicken could spook markets in coming weeks.And on the other side of the Pacific Ocean, the Chinese government has its own challenge, as Evergrande struggles to make payments on $300 billion worth of debt.Real estate has played an outsize role in China’s economy for years. But few analysts expect the problems to spread far beyond Chinese borders. The Chinese banking and financial system is largely self-contained, in contrast to the deep global linkages that allowed the failure of Lehman Brothers in 2008 to trigger a global financial crisis.“Everyone’s learned a trick or two since 2008,” said Alan Ruskin, a macro strategist at Deutsche Bank Securities. “What you have here is the world’s second-largest economy, and one that has lifted all boats, could be slowing more materially than people anticipated. I think that’s the primary risk, rather than that financial interlinkages shift out on a global basis.”All of which could make for a bumpy autumn for the world economy, but which in the most likely scenarios would lead to a solid 2022. If, that is, everything goes the way the forecasters expect. More