The American economy remains strong, a White House economist asserted Tuesday, while acknowledging President Joe Biden’s team is concerned about a possible recession.
With inflation soaring at the fastest pace in more than four decades, sending prices for gas and housing rocketing, Americans are feeling the pain and the Federal Reserve is cranking up interest rates to try to cool the economy, fueling fears of a sharp downturn.
Despite a contraction in the first three months of the year, core parts of the world’s largest economy remain in good shape, including the labor market and consumer spending, Cecelia Rouse, head of Biden’s Council of Economic Advisers said on CNBC.
“When we look at recession (risks) … that’s obviously a concern, but the bones of our economy are solid,” she said, noting that the United States is better positioned to face the challenges than most other nations.
On Sunday, Treasury Secretary Janet Yellen also tried to quell recession fears, saying a downturn is not “inevitable” even while the economy will slow as it “transitions to stable growth.”
Rouse said Biden is focused on the inflation challenge, which is related to the Covid-19 pandemic: “It’s not easy to turn back on a global economy.”
Global supply chain snarls have been a key factor in fueling the prices increases, and pandemic lockdowns in China are adding to the ongoing uncertainty.
But Russia’s invasion of Ukraine was a “game changer,” she said.
“We all hope the Fed can get inflation under control without ceding too much on maximum employment,” Rouse said “We all hope for the longed-for soft landing.”
The Fed last week implemented the third interest rate hike this year, the biggest in nearly 30 years, and promised more big increases in coming months.
– ‘Relatively healthy’ –
Richmond Federal Reserve Bank President Thomas Barkin said there is a risk of recession, but agreed there are many signs the economy remains strong.
“Data on today’s economy still looks relatively healthy. Tomorrow is of course unclear,” Barkin said Tuesday in a speech prepared for delivery to an event in Richmond.
However, he acknowledged that with the Fed raising interest rates and an uncertain outlook for the global supply chain, fears of a coming downturn are not surprising.
But “not all recessions are equal,” he said, and “it’s worth remembering that most other recessions aren’t that long or that deep.”
Getting the economy back to normal in the wake of the supply disruptions “doesn’t have to require a calamitous decline in activity.”
Barkin echoed comments from Fed chief Jerome Powell that the central bank has the tools and will do whatever it takes to bring down inflation, but he cautioned that “we may or may not get help from global events and supply chains. There is of course recession risk.”
Earlier Tuesday, during a discussion with the National Association for Business Economics, Barkin said it was not yet clear how fast and how far the central bank will have to move.
“You want to get back to where you want to go as fast as you can without breaking anything,” he said.
US vows enforcement as ban on Xinjiang imports takes effect
The United States on Tuesday promised enforcement as a landmark ban took effect on most imports from Xinjiang, the Chinese region where rights groups report the Uyghur people are being forced into slave labor.
The Uyghur Forced Labor Prevention Act, which will be felt especially in the textile industry, took effect six months after it was signed into law by President Joe Biden following bipartisan support in Congress.
“We are rallying our allies and partners to make global supply chains free from the use of forced labor,” Secretary of State Antony Blinken said in a statement.
The US Customs and Border Protection service, which will enforce the new law, issued guidance that said it would presume products from Xinjiang involve forced labor and are therefore banned unless businesses can document otherwise.
The act “requires that importers demonstrate due diligence, effective supply chain tracing and supply chain management measures to ensure that they do not import any goods made, in whole or in part, by forced labor,” its advisory said.
It said it would look at the complete supply chain and not exempt goods shipped from other parts of China or third countries.
An estimated 20 percent of garments imported into the United States each year include some cotton from Xinjiang, according to labor rights groups.
The vast western region is also a major center of tomatoes canned for export.
Senator Marco Rubio, a Republican hawk who teamed up with liberal Democrats to push for the legislation, called the act “the most significant change in America’s relationship with China since 2001.”
“No longer will we look at images of bareheaded prisoners in shackles and blindfolds, lined up like animals for slaughter, and shrug,” he wrote in an opinion piece for Real Clear Politics.
Omer Kanat, executive director of the Uyghur Human Rights Project, called the law a “huge win” for the movement and said it would push other governments to take similar action.
Rights groups, citing witness accounts, say that well more than one million Uyghurs and other predominantly Muslim Turkic-speaking people have been locked up in re-education camps in a bid to integrate them forcibly into China’s Han majority.
Beijing denies the charges and says it is providing vocational training to reduce the allure of Islamist extremism following violence.
US high court denies Bayer bid to block Roundup weedkiller lawsuits
The US Supreme Court on Tuesday declined to hear a bid from Bayer-owned Monsanto that aimed to challenge thousands of lawsuits claiming its weedkiller Roundup causes cancer — a potentially costly ruling.
The high court did not explain its decision, which left intact a $25 million ruling in favor of a California man who alleged he developed cancer after using the chemical for years.
The decision marks a major blow to the German conglomerate’s legal fight against Roundup-related cases, and Bayer has set aside more than $15 billion to deal with a wave of US lawsuits linked to the weedkiller.
“Bayer respectfully disagrees with the Supreme Court’s decision,” the company said in a statement.
“The company believes that the decision undermines the ability of companies to rely on official actions taken by expert regulatory agencies,” it added, referring to a 2020 federal finding that Roundup’s active ingredient is not risky.
Bayer has been plagued by problems since it bought Monsanto, which owns Roundup, in 2018 for $63 billion and inherited its legal woes around the chemical’s ingredient glyphosate.
The German firm says it has not committed any wrongdoing, and maintains that scientific studies and regulatory approvals show glyphosate is safe.
Glyphosate is nonetheless classified as a “probable carcinogen” by the International Agency for Research on Cancer at the World Health Organization (WHO).
– Billions in claims –
However, the United States Environmental Protection Agency, on its website, says “there are no risks of concern to human health when glyphosate is used in accordance with its current label.”
The Supreme Court’s decision not to intervene leaves in place Monsanto’s appellate conviction in the lawsuit filed by Edwin Hardeman, who was diagnosed with non-Hodgkin’s lymphoma in 2015.
In addition to the some 30,000 cases about health problems allegations against the weedkiller, Bayer’s own shareholders have taken legal action as well.
Investors are seeking 2.2 billion euros ($2.5 billion) in damages in a German court for losses incurred following its troubled takeover of Monsanto, their lawyers said in January.
The investors accuse Bayer of having “misled capital markets about the economic risks from pending consumer lawsuits in the United States in connection with glyphosate and the herbicide Roundup,” law firm Tilp said in a statement.
Tilp said around 320 investors have submitted complaints, most of them institutional investors such as banks, wealth managers, insurers and pension funds.
Some three-quarters of the claims targeting Roundup originate with residential consumers, and not large-scale farmers.
Bayer executives have argued that its agricultural users know the proper use of the product better than residential ones.
The firm said it is transitioning its glyphosate-based products in the US residential market to new formulations that have alternative active ingredients beginning in 2023.
“The company is taking this action exclusively to manage litigation risk in the US and not because of any safety concerns,” it said in a statement.
Bayer says it has resolved around 107,000 of a total of 138,000 cases related to the herbicide.
Bayer’s share price was down just under two percent after the court’s decision on Tuesday.
Ecuador military calls Indigenous protests a ‘grave threat’
Thousands of Ecuadorans took to the streets Tuesday for a ninth day of Indigenous-led fuel price protests, as the military vowed to defend the country’s democracy against what it called a “grave threat.”
Called by the powerful Confederation of Indigenous Nationalities of Ecuador (Conaie), the demonstrations have seen roads barricaded countrywide, cost the economy tens of millions of dollars and left dozens injured.
“Ecuador’s democracy faces a grave threat from the concerted actions of… people who are preventing the free movement of the majority of Ecuadorans,” Defense Minister Luis Lara told a press conference, flanked by the heads of the army, navy and air force.
The armed forces, he warned, “will not allow attempts to break the constitutional order or any action against democracy and the laws of the republic.”
Conaie — credited with helping topple three presidents between 1997 and 2005 — called the demonstrations as Ecuadorans increasingly struggle to make ends meet.
Indigenous people comprise more than a million of Ecuador’s 17.7 million inhabitants and wield much political clout, but are disproportionately affected by rising inflation, unemployment and poverty exacerbated by the coronavirus pandemic.
– 10 Demands –
Thousands of protesters entered Quito from the south and north on Monday, on foot and on the backs of trucks, to reinforce protesters in the capital, where they burnt tires and tree branches in the streets — and were back out in the streets on Tuesday morning.
At least some in the crowd, many wielding sticks and others draped in the Ecuadoran flag, or carrying children in their arms, said the president’s ouster was precisely what they sought.
“We are the people and we will stay here until the end,” Victor Taday, a 50-year-old Indigenous resident of Quito originally from Chimborazo province, told AFP Monday night — as similar marches took place in other parts of the country.
It was time for Lasso to “go away,” he said.
Fuel prices have risen sharply since 2020, almost doubling for diesel from $1 to $1.90 per gallon and rising from $1.75 to $2.55 for gasoline.
Conaie is demanding a price cut to $1.50 a gallon for diesel and $2.10 for gasoline.
It also wants jobs, food price controls and a commitment to renegotiating the personal bank loans of about four million families.
The movement has since been joined by students, workers and other Ecuadorans also feeling the economic pinch.
Police said Monday 63 armed forces personnel have been wounded in clashes and 21 others briefly held hostage since the protests began, while human rights observers reported 79 arrests and 55 civilians wounded.
President Guillermo Lasso extended a state of emergency to cover six of the country’s 24 provinces, with a night-time curfew in the capital Quito, as he sought to curtail the countrywide show of anger.
The state of emergency empowers Lasso to mobilize the armed forces to maintain order, suspend civil rights and declare curfews.
Conaie has vowed to maintain its blockade until the government meets 10 demands.
– ‘They seek chaos’ –
The president, a former banker in power since May 2021, said in a video on Twitter Monday that the protesters “do not want peace” and have rejected government calls for dialogue.
“They seek chaos. They want to eject the president,” he charged.
Ecuador’s parliament Monday evening voted 81 to 56 in favor of a resolution demanding the government conduct a “serious, clear and honest” dialogue with the protesters.
It proposed the convening of a “round table” of talks including the UN, Red Cross, universities and the powerful Catholic Church to find a solution to the stalemate.
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