Consumer spending “will recover from the downward pressure, but because there are these negative factors, the question is how broad will that recovery be?” said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute.

Japan’s prime minister, Fumio Kishida, has tried to offset the effects of price increases with large government subsidies for fuel and cash handouts for families with children. But Japanese consumers, wary of the pandemic’s economic effects, have largely been putting rounds of stimulus money into savings.

Japan’s growth is facing diverse challenges, but ultimately its recovery will depend on Covid, analysts said, a common refrain over the last two years.

While Japan has high vaccination rates and has performed better than most other wealthy countries at keeping the pandemic in check, the virus’s protean nature has made it difficult to predict its path. And that has made experts hesitant to commit to any forecasts about its future impact on global economies.

“The big risk is that corona starts to spread again,” said Naoyuki Shiraishi, an economist at the Japan Research Institute. “If a new variant appears, there will be new restrictions on activity, and that will suppress consumption.”

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Stock Markets Off to Worst Start Since 2016 as Fed Fights Inflation

After falling for a fourth day in a row on Friday, the stock market suffered its worst week in nearly two years, and so far in January the S&P 500 is off to its worst start since 2016. Technology stocks have been hit especially hard, with the Nasdaq Composite Index dropping more than 10 percent from its most recent high, which qualifies as a correction in Wall Street talk.

That’s not all. The bond market is also in disarray, with rates rising sharply and bond prices, which move in the opposite direction, falling. Inflation is red hot, and supply chain disruptions continue.

Until now, the markets looked past such issues during the pandemic, which brought big increases in the value of all kinds of assets.

Yet a crucial factor has changed, which gives some market watchers reason to worry that the recent decline may be consequential. That element is the Federal Reserve.

intervened to save desperately wounded financial markets back in early 2020.

This could be a good thing if it beats back inflation without derailing the economic recovery. But removing this support also inevitably cools the markets as investors move money around, searching for assets that perform better when interest rates are high.

“The Fed’s policies basically got the current bull market started,” said Edward Yardeni, an independent Wall Street economist. “I don’t think they are going to end it all now, but the environment is changing and the Fed is responsible for a lot of this.”

The central bank is tightening monetary policy partly because it has worked. It helped stimulate economic growth by holding short-term interest rates near zero and pumping trillions of dollars into the economy.

This flood of easy money also contributed to the rapid rise in prices of commodities, like food and energy, and financial assets, like stocks, bonds, homes and even cryptocurrency.

said in 1955, the central bank finds itself acting as the adult in the room, “who has ordered the punch bowl removed just when the party was really warming up.”

The mood of the markets shifted on Jan. 5, Mr. Yardeni said, when Fed officials released the minutes of their December policymaking meeting, revealing that they were on the verge of embracing a much tighter monetary policy. A week later, new data showed inflation climbing to its highest level in 40 years.

Putting the two together, it seemed, the Fed would have no choice but to react to curb rapidly rising prices. Stocks began a disorderly decline.

Financial markets now expect the Fed to raise its key interest rate at least three times this year and to start to shrink its balance sheet as soon as this spring. It has reduced the level of its bond buying already. Fed policymakers will meet next week to decide on their next steps, and market strategists will be watching.

Low interest rates made certain sectors especially appealing, foremost among them tech stocks. The S&P 500 information technology sector, which includes Apple and Microsoft, has risen 54 percent on an annualized basis since the market’s pandemic-induced trough in March 2020. One reason for this is that low interest rates amplify the value of the expected future returns of growth-oriented companies like these. If rates rise, this calculus can change abruptly.

The very prospect of higher interest rates has made technology the worst-performing sector in the S&P 500 this year. Since its peak in late December, it has fallen more than 11 percent.

The S&P’s three best-performing sectors in the early days of 2022, on the other hand, are energy, financial services and consumer staples.

like Netflix and Peloton, have begun to flag as people venture out more.

Some astute market analysts foresee bigger problems. Jeremy Grantham, one of the founders of GMO, an asset manager, predicts a catastrophic end to what he calls a “superbubble.”

But the current losses could be beneficial if they let a little air out of a potential bubble, without bursting investor portfolios. This year’s declines erase only a small share of the market’s gains in recent years: The S&P 500 rose nearly 27 percent last year, more than 16 percent in 2020 and nearly 29 percent in 2019.

And the prospects for corporate earnings remain good. Once the Fed starts to act, and the effects are better understood, the stock market party could continue — at a less giddy pace.

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The Achilles’ Heel of Biden’s Climate Plan? Coal Miners.

All of that has raised the stakes for courting coal miners.

“Our guiding principle is the belief that we don’t have to choose between good jobs and a clean environment,” said Jason Walsh, the executive director of the BlueGreen Alliance, which has united labor and environmental groups to marshal support for initiatives like Mr. Biden’s. “But our ability to continue to articulate that belief with a straight face depends on the policy choices we make.”

“Coal miners,” he added, “are at the center of that.”

It is impossible to explain mine workers’ jaundiced view of Mr. Biden’s agenda without appreciating their heightened economic vulnerability: Unlike the carpenters and electricians who work at power plants but could apply their skills to renewable-energy projects, many miners are unlikely to find jobs on wind and solar farms that resemble their current work. (Some, like equipment operators, have more transferable skills.)

It is also difficult to overstate the political gamesmanship that has shaped the discourse on miners. In her 2016 presidential campaign, Hillary Clinton proposed spending $30 billion on economic aid for coal country. But a verbal miscue — “We’re going to put a lot of coal miners and coal companies out of business,” she said while discussing her proposal at a town hall — allowed opponents to portray her as waging a “war on coal.”

“It is a politicized situation in which one political party that’s increasingly captured by industry benefits from the status quo by perpetuating this rhetoric,” said Matto Mildenberger, a political scientist at the University of California, Santa Barbara, who studies the politics of climate policy.

And then there is Mr. Manchin, a complicated political figure who is among the Senate’s leading recipients of campaign money from the fossil fuel industry.

Mr. Manchin has sometimes resisted provisions favored by the miners’ union, such as wage-replacement payments to coal workers who must accept a lower-paying job. “At the end of the day, it wasn’t something he was interested in doing,” said Mr. Smith, the union’s lobbyist. A spokeswoman for Mr. Manchin declined to comment.

Yet in other ways Mr. Manchin has channeled his constituents’ feelings well, suggesting that he might be more enthusiastic about renewable-energy legislation if they were.

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As Omicron Threat Looms, Inflation Limits Fed’s Room to Maneuver

The Omicron variant of the coronavirus comes at a challenging moment for the Federal Reserve, as officials try to pivot from containing the pandemic’s economic fallout toward addressing worryingly persistent inflation.

The central bank has spent the past two years trying to support a still-incomplete labor market recovery, keeping interest rates at rock bottom and buying trillions of dollars’ worth of government-backed bonds since March 2020. But now that inflation has shot higher, and as price gains increasingly threaten to remain too quick for comfort, its policymakers are having to balance their efforts to support the economy with the need to keep price trends from leaping out of control.

That newfound focus on inflation may limit the central bank’s ability to cushion any blow Omicron might deal to America’s growth and the labor market. And in an unexpected twist, the new variant could even speed up the Fed’s withdrawal of economic support if it intensifies the factors that are causing inflation to run at its fastest pace in 31 years.

“In every one of the previous waves of the virus, the Fed was able to react by effectively focusing on downside risks to growth, and trying to mitigate them,” said Aneta Markowska, chief financial economist at Jefferies. “They’re no longer able to do that, because of inflation.”

said in an interview last week.

Janet L. Yellen, the Treasury secretary and a former Fed chair, made similar remarks at an event on Thursday.

“The pandemic could be with us for quite some time and, hopefully, not completely stifling economic activity but affecting our behavior in ways that contribute to inflation,” she said of the new variant.

during congressional testimony last week. “I think the risk of higher inflation has increased.”

Fed officials initially expected a 2021 price pop to fade quickly as supply chains unsnarled and factories worked through backlogs. Instead, inflation has been climbing at its fastest pace in more than three decades, and fresh data set for release on Friday are expected to show that the ascent continued as a broad swath of products — like streaming services, rental housing and food — had higher prices.

Given that, Mr. Powell and his colleagues have pivoted to inflation-fighting mode, trying to ensure that they are poised to respond decisively should price pressures persist.

Mr. Powell said last week that officials would discuss speeding up their plans to taper off their bond-buying program — prompting many economists to expect them to announce a plan after their December meeting that would allow them to stop buying bonds by mid-March. The Fed announced early in November that it would slow purchases from $120 billion a month, making the possible acceleration a notable change.

Ending bond-buying early would put officials in a position to raise their policy interest rate, which is their more traditional and more powerful tool.

nearly four million people are still missing from the labor market compared with just before the pandemic began. Some have most likely retired, but surveys and anecdotes suggest that many are lingering on the sidelines because they lack adequate child care or are afraid of contracting or passing along the coronavirus.

If the Fed begins to remove its support for the economy, slowing business expansion and hiring, the labor market could rebound more slowly and haltingly when and if those factors fade.

But the balancing act is different from what it was in previous business cycles. The factors keeping employees on the sidelines right now are mostly unrelated to labor demand, the side of the equation that the Fed can influence. Employers appear desperate to hire, and job openings have shot up. People are leaving their jobs at historically high rates, such a trend that job-quitting TikTok videos have become a cultural phenomenon.

In fact, the at-least-temporarily-tight labor market is one reason inflation might last. As they compete for workers and as employees demand more pay to keep up with ballooning consumption costs, companies are raising wages rapidly. The Employment Cost Index, which the Fed watches closely because it is less affected by many of the pandemic-tied problems that have muddied other wage gauges, rose sharply in its latest reading — catching policymakers’ attention.

If companies continue to increase pay, they may raise prices to cover their costs. That could keep inflation high, and anecdotal signs that such a trend is developing have already cropped up in the Fed’s survey of regional business contacts, called the Beige Book.

“Several contacts mentioned that labor costs were already being passed along to consumers with little resistance, while others said plans were underway to do so,” the Federal Reserve Bank of Atlanta reported in the latest edition, released last week.

Still, some believe that inflation will fade headed into 2022 as the world adjusts to changing shopping patterns or as holiday demand that has run up against constrained supply fades. That could leave the Fed with room to be patient on rate increases, even if it has positioned itself to be nimble.

Lifting rates “before those people come back is a little bit like throwing in the towel,” Ms. Markowska said. “I have a hard time believing that the Fed would throw in the towel that easily.”

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How Omicron Could Knock Economic Recovery Off Track

LONDON — This week, Marisha Wallace finally had to admit that her planned five-day ski holiday in Switzerland in mid-December was not salvageable: The Swiss government’s sudden decision to impose a 10-day quarantine on some international travelers meant she wouldn’t be able to leave her hotel or return home to London on her scheduled flight.

“It’s the way of the world right now,” said Ms. Wallace, an actress and a singer. “You can’t plan anymore.”

That provisional state, amplified across the world, has left the still-fragile economy in a state of suspense as spiking coronavirus infections and the new variant Omicron have popped up around the globe.

“There’s no way to know how bad it will get,” said Ángel Talavera, head of European economics at Oxford Economics.

report released Wednesday from the Organization for Economic Cooperation and Development showed, although growth has been uneven, the world economy this year bounced back more quickly and strongly than had been anticipated. The report, compiled largely before the latest coronavirus news, nevertheless warned that growth was projected to slow: in the eurozone, to 4.3 percent next year from 5.2 percent in 2021; and in the United States, to 3.7 percent in 2022 from 5.6 percent.

The organization characterized its outlook as “cautiously optimistic.” But it reiterated how much economic fortunes are inextricably tied to the coronavirus: “The economic policy priority is to get people vaccinated,” the report concluded.

a fourth wave of infections transformed Europe into a Covid hot spot and prompted new restrictions like lockdowns in the Netherlands and Austria.

During earlier outbreaks, trillions in government assistance helped quickly resuscitate the struggling U.S. and European economies. It also brought some unexpected side effects. Combined with pent-up demand, that support helped produce a shortage of labor and materials and rising inflation.

Given how much debt was racked up in the past 18 months, such aid is unlikely to recur even with a sharp downturn — and neither are wholesale closures. Vaccines provide some protection, and many people say they are unwilling to go back into hibernation.

People and business alike have shifted into a wait-and-see mode. “A lot of things do seem like they are on hold, like labor market or overall consumption decisions,” said Nick Bunker, director of economic research for the job site Indeed.

How that will affect unemployment levels and inflation rates is unclear. Jerome H. Powell, the Federal Reserve chair, indicated on Tuesday that concern about stubborn inflation was growing. The O.E.C.D. also warned that inflation could be higher and last longer than originally anticipated.

Omicron’s appearance just adds to the uncertainty, Laurence Boone, the organization’s chief economist, said in an interview.

governments have reacted with a confusing hodgepodge of stern warnings, travel bans, mask mandates and testing rules that further cloud the economic outlook. That patchwork response combined with people’s varying tolerance for risk means that, at least in the short term, the virus’s latest swerves will have a vastly different effect depending on where you are and what you do.

In France, Luna Park, an annual one-month amusement fair held in the southern city of Nice and slated to open this weekend, was called off after the government suddenly requisitioned the massive warehouse where roller coasters, shooting galleries and merry-go-rounds were being set up in order to convert the space to an emergency vaccination center.

“Today I find myself trying to save my company, and I’m not sure that I can,” said Serge Paillon, park’s owner. He feared he would face huge losses, including 500,000 euros (about $566,000) he had already invested in the event, as well as refunds for tickets that had been on sale for several months

Mr. Paillon furloughed 20 employees. Another 200 festival workers who were coming from around the country to manage the 60 games and rides were told to stay home.

“For a year and a half, it was already a disaster,” Mr. Paillon said. “And now it’s starting again.”

Israel’s decision on Saturday to shut its borders to all foreign tourists for two weeks is likely to reduce the number of tourists in Israel and the occupied territories this December by up to 40,000, or nearly 60 percent of what was expected, according to a government estimate.

Wiatt F. Bowers, an urban planner, had planned to leave Jacksonville, Fla., for Tel Aviv on Wednesday but had to cancel — the fifth time in 18 months that he had to scrap a planned trip to Israel. He will rebook, but doesn’t know when.

Foreign tourism, which brought a record 4.55 million tourists to Israel in 2019, had already nearly vanished. Between March 2020 and September 2021, nonresident foreigners were barred from entering Israel — and, by extension, the occupied territories, where entry and exit are controlled by Israel.

In Bethlehem, where tourism is the main industry, income consequently fell more than 50 percent, said the mayor, Anton Salman, in a phone interview.

Elias al-Arja, the chief of the Arab Hotel Association, which represents about 100 Palestinian hotels in the occupied territories, said he was concerned less about the short-term effect of the sudden travel ban than about the long-term message of unpredictability it sent to potential visitors.

“The disaster isn’t the groups who canceled over the next two weeks,” Mr. al-Arja said. “How can I convince people to come to the Holy Land after we promised them that you can come, but then the government closes the border?”

Reluctance to travel, though, could mean an upswing in other sectors if the new variant is not as harmful as people fear. Jessica Moulton, a senior partner at McKinsey & Company in London, said previous spending patterns during the pandemic showed that some money people would otherwise use for travel would instead be spent on dining.

She estimated that the roughly $40 billion that British consumers saved on travel last summer was used for shopping and eating out.

At the moment, Ms. Moulton said, “to the extent that Omicron decreases travel, which will happen as we head into Christmas, that will benefit restaurants.”

In Switzerland, where travelers from Britain and 22 other countries must now quarantine, the effect of the policy change on hotels was immediate.

“The majority of travelers from England — between 80 to 90 percent — have already canceled,” said Andreas Züllig, head of HotellerieSuisse, the Swiss hotel association.

Ms. Wallace, who canceled her trip to the Cambrian Hotel in Adelboden, was one of several people who changed their reservations at the hotel after the Swiss government made its announcement on Friday, just one week before the slopes open.

“This obviously has an impact on our very important winter and Christmas business,” said Anke Lock, the Cambrian’s manager, who estimated that 20 percent of the hotel’s December bookings were at risk.

For now, though, most guests are watching and waiting, Ms. Lock said: “We’ve changed the bookings from guaranteed to tentative.”

Extreme uncertainty about the economy may turn out to be the only certainty.

Patrick Kingsley contributed reporting from Jerusalem, Melissa Eddy from Berlin and Léontine Gallois from Paris.

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Markets

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  • European shares on track for worst sell-off in a year
  • Companies benefiting from economic reopening tumble in early U.S. trading
  • Crude prices tumble

WASHINGTON/LONDON, Nov 26 (Reuters) – Shares tumbled on Wall Street on Friday as they reopened after Thanksgiving, while European stocks saw their biggest sell-off in 17 months and oil prices plunged by $10 per barrel as fears over a new coronavirus variant sent investors scurrying to safe-haven assets.

The World Health Organization (WHO) on Friday designated a new COVID-19 variant detected in South Africa with a large number of mutations as being “of concern,” the fifth variant to be given the designation. read more

Unofficially, the Dow Jones Industrial Average (.DJI) closed down 2.53% at 34,899.34 in its largest percentage drop in more than a year. The S&P 500 (.SPX) lost 2.27%, its worst one-day drop since Feb. 25, and the Nasdaq Composite (.IXIC) dropped 2.23%, the biggest one-day route in two months.

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U.S. markets closed early on Friday after being shut all day on Thursday for the Thanksgiving holiday.

The benchmark STOXX 600 index (.STOXX) ended 3.7% lower on the day, leaving it down 4.5% for the week. The volatility gauge (.V2TX) for the main stock market hit its highest in nearly 10 months.

Companies that had benefited from an easing of COVID-related restrictions this year, including AMC Entertainment (AMC.N), plane engine maker Rolls Royce (RR.L), easyJet (EZJ.L), United Airlines (UAL.O) and Carnival Corp (CCL.N) all fell.

Retailers dropped as Black Friday, the start of the holiday shopping season, kicked off as the new variant fuelled concerns about low store traffic and inventory issues. read more

In Europe, the travel and leisure index (.SXTP) plummeted 8.8% in its worst day since the COVID-19 shock sell-off in March 2020.

“Bottom line is this is showing that COVID is still the investor narrative, a lot of today’s movement is driven by the South African variant,” said Greg Bassuk, chief executive officer of AXS Investments in Port Chester, New York.

“We have been talking about four or five factors that have been driving the last couple of months’ activity – inflation fears, some economic data, Fed policy – but what we have seen over the last year is that big developments with respect to COVID really have ended up eclipsing some of those other factors by a substantial degree and that is what is driving today’s market activity.”

Little is known of the variant detected in South Africa, Botswana and Hong Kong, but scientists said it has an unusual combination of mutations and may be able to evade immune responses or make the virus more transmissible.

Britain said the new variant was the most significant variant to date and was one of several countries to impose travel restrictions on southern Africa. read more

A U.S. one dollar banknote is seen in front of displayed stock graph in this illustration taken May 7, 2021. REUTERS/Dado Ruvic/Illustration

The European Commission also said it wanted to consider suspending travel from countries where the new variant has been identified, though the WHO cautioned against hastily imposing such restrictions. read more

Global shares (.MIWD00000PUS) fell 1.81%, their biggest down day in more than a year. France’s CAC 40 (.FCHI) shed 4.8%. The UK’s FTSE 100 (.FTSE) dropped 3.6%, while Germany’s DAX (.GDAXI) fell 4.2% and Spain’s IBEX (.IBEX) lost 5.0%.

Malaysian rubber glove maker Supermax (SUPM.KL), which soared 1500% during the first wave of the pandemic, leapt 15%.

MSCI’s index of Asian shares outside Japan (.MIAPJ0000PUS) dropped 2.44%, its sharpest fall since late July.

In commodities, oil prices plunged. Gold prices reversed earlier gains seen amid the move away from riskier assets.

U.S. crude was last down 12%, at $69.02 per barrel by 1:21 p.m. EST (1812 GMT). Brent crude dropped 10.5% to $73.59.

Spot gold prices were down 0.09%.

As investors dashed for safe-haven assets, the Japanese yen strengthened 1.87% versus the greenback, while sterling was last trading at $1.3331, up 0.08% on the day.

The dollar index fell 0.757%, with the euro up 1% to $1.1318.

U.S. Treasury debt yields posted their sharpest drop since the pandemic began. Treasuries benchmark 10-year notes last rose to yield 1.4867%. The 2-year note last rose to yield 0.4941%, from 0.644%.

“A flight to safety is underway with the 10-year U.S. Treasury yield down,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “The proximate cause of the sell-off is yesterday’s announcement of a new COVID-19 variant in South Africa, which investors fear could weigh on economic growth.”

The market swings come against a backdrop of already growing concern about COVID-19 outbreaks driving restrictions on movement and activity in Europe and beyond. read more

Markets had previously been upbeat about the strength of economic recovery, despite growing inflation fears.

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Reporting by Chris Prentice; Editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

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Biden Finds Raising Corporate Tax Rates Easier Abroad Than at Home

ROME — President Biden and other world leaders endorsed a landmark global agreement on Saturday that seeks to block large corporations from shifting profits and jobs across borders to avoid taxes, a showcase win for a president who has found raising corporate tax rates an easier sell with other countries than with his own party in Congress.

The announcement in the opening session of the Group of 20 summit marked the world’s most aggressive attempt yet to stop opportunistic companies like Apple and Bristol Myers Squibb from sheltering profits in so-called tax havens, where tax rates are low and corporations often maintain little physical presence beyond an official headquarters.

It is a deal years in the making, which was pushed over the line by the sustained efforts of Mr. Biden’s Treasury Department, even as the president’s plans to raise taxes in the United States for new social policy and climate change programs have fallen short of his promises.

The revenue expected from the international pact is now critical to Mr. Biden’s domestic agenda, an unexpected outcome for a president who has presented himself more as a deal maker at home rather than abroad.

end the global practice of profit-shifting, celebrated the international tax provisions this week and said they would be significant steps toward Mr. Biden’s vision of a global economy where companies invest, hire and book more profits in the United States.

But they also conceded that infighting among congressional Democrats had left Mr. Biden short of fulfilling his promise to make corporations pay their “fair share,” disappointing those who have pushed Mr. Biden to reverse lucrative tax cuts for businesses passed under Mr. Trump.

The framework omits a wide range of corporate tax increases that Mr. Biden campaigned on and pushed relentlessly in the first months of his presidency. He could not persuade 50 Senate Democrats to raise the corporate income tax rate to 28 percent from 21 percent, or even to a compromise 25 percent, or to eliminate incentives that allow some large firms — like fossil fuel producers — to reduce their tax bills.

“It’s a tiny, tiny, tiny, tiny, step,” Erica Payne, the president of a group called Patriotic Millionaires that has urged tax increases on corporations and the wealthy, said in a statement after Mr. Biden’s framework announcement on Friday. “But it’s a step.”

The Treasury Department said on Friday that even the additional enforcement money for the I.R.S. could still generate $400 billion in additional tax revenue over 10 years and said that was a “conservative” estimate.

An administration official said that the difficulty in rolling back the Trump tax cuts was the result of the fact that the Democrats are a big tent party ideologically with a very narrow majority in Congress, where a handful of moderates currently rule.

In Rome, Mr. Biden’s struggle to raise taxes more has not complicated the sealing of the international agreement. The move by the heads of state to commit to putting the deal in place by 2023 looms as the featured achievement of the summit, and Mr. Biden’s surest victory of a European swing that also includes a climate conference in Scotland next week.

Briefing reporters on Friday evening, a senior administration official, speaking on the condition of anonymity in order to preview the first day of the summit, said Biden aides were confident that world leaders were sophisticated and understood the nuances of American politics, including the challenges in passing Mr. Biden’s tax plans in Congress.

The official also said world leaders see the tax deal as reshaping the rules of the global economy.

The international tax agreement represented a significant achievement of economic diplomacy for Mr. Biden and Ms. Yellen, who dedicated much of her first year on the job to reviving negotiations that stalled during the Trump administration. To show that the United States was serious about a deal, she abandoned a provision that would have made it optional for American companies to pay new taxes to foreign countries and backed away from an initial demand for a global minimum tax of 21 percent.

For months, Ms. Yellen cajoled Ireland’s finance minister, Paschal Donohoe, to back the agreement, which would require Ireland to raise its 12.5 percent corporate tax rate — the centerpiece of its economic model to attract foreign investment. Ultimately, through a mix of pressure and pep talks, Ireland relented, removing a final obstacle that could have prevented the European Union from ratifying the agreement.

Some progressives in the United States say that Mr. Biden’s ability to follow through on his end of the bargain was a crucial piece of the framework spending bill.

“The international corporate reforms are the most important,” said Seth Hanlon, a senior fellow at the liberal Center for American Progress, who specializes in tax policy, “because they are linked to the broader multilateral effort to stop the corporate race to the bottom. It’s so important for Congress to act this year to give that effort momentum.”

Jim Tankersley reported from Rome, and Alan Rappeport from Washington.

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Persistent Inflation Threatens Biden’s Agenda

WASHINGTON — At least once a week, a team of President Biden’s top advisers meet on Zoom to address the nation’s supply chain crisis. They discuss ways to relieve backlogs at America’s ports, ramp up semiconductor production for struggling automakers and swell the ranks of truck drivers.

The conversations are aimed at one goal: taming accelerating price increases that are hurting the economic recovery, unsettling American consumers and denting Mr. Biden’s popularity.

An inflation surge is presenting a fresh challenge for Mr. Biden, who for months insisted that rising prices were a temporary hangover from the pandemic recession and would quickly recede. Instead, the president and his aides are now bracing for high inflation to persist into next year, with Americans continuing to see faster — and sustained — increases in prices for food, gasoline and other consumer goods than at any point this century.

That reality has complicated Mr. Biden’s push for sweeping legislation to boost workers, expand access to education and fight poverty and climate change. And it is dragging on the president’s approval ratings, which could threaten Democrats’ already tenuous hold on Congress in the 2022 midterm elections.

CNBC and Fox News show a sharp decline in voter ratings of Mr. Biden’s overall performance and his handling of the economy, even though unemployment has fallen quickly on his watch and economic output has strengthened to its fastest rate since Ronald Reagan was president. Voter worry over price increases has jumped in the last month.

via executive actions.

“There are distinct challenges from turning the economy back on after the pandemic that we are bringing together state and local officials, the private sector and labor to address — so that prices decrease,” Kate Berner, the White House deputy communications director, said in an interview.

Mr. Biden’s top officials stress that the administration’s policies have helped accelerate America’s economic rebound. Workers are commanding their largest wage gains in two decades. Growth roared back in the first half of the year, fueled by the $1.9 trillion economic aid bill the president signed in March. America’s expansion continues to outpace other wealthy nations around the world.

Inflation has risen in wealthy nations across the globe, as the pandemic has hobbled the movement of goods and component parts between countries. Virus-wary consumers have shifted their spending toward goods rather than services, travel and tourism remain depressed, and energy prices have risen as demand for fuel and electricity has surged amid the resumption of business activity and some weather shocks linked to climate change.

But some economists, including veterans of previous Democratic administrations, say much of Mr. Biden’s inflation struggle is self-inflicted. Lawrence H. Summers is one of those who say the stimulus bill the president signed in March gave too much of a boost to consumer spending, at a time when the supply-chain disruptions have made it hard for Americans to get their hands on the things they want to buy. Mr. Summers, who served in the Obama and Clinton administrations, says inflation now risks spiraling out of control and other Democratic economists agree there are risks.

“The original sin was an oversized American Rescue Plan. It contributed to both higher output but also higher prices,” said Jason Furman, a Harvard economist who chaired the White House Council of Economic Advisers under President Barack Obama.

That has some important Democrats worried about price-related drawbacks from the president’s ambitious spending package, complicating Mr. Biden’s approach.

ease the pain of high-profile price spikes, like gasoline. Some in his administration have pushed for mobilizing the National Guard to help unclog ports that are stacked with imports waiting to be delivered to consumers around the country. Mr. Biden has raised the possibility of tapping the strategic petroleum reserve to modestly boost oil supplies, or of negotiating with oil producers in the Middle East to ramp up.

During a CNN town hall last week, Mr. Biden conceded the limits of his power, saying, “I don’t have a near-term answer” for bringing down gas prices, which he does not expect to begin dropping until next year.

“I don’t see anything that’s going to happen in the meantime that’s going to significantly reduce gas prices,” he said.

Janet L. Yellen, the Treasury secretary, told CNN’s “State of the Union” on Sunday that she expects improvement in the overall inflation rate “by the middle to end of next year, second half of next year.”

With an American public that had gone nearly 40 years without seeing — or worrying — about inflation, the issue provides an opening for the opposition. Republicans have turned price spikes into a weapon against Mr. Biden’s economic policies, warning that more spending would exacerbate the pain for everyday Americans.

“It’s everywhere,” said Representative Kevin Brady of Texas, the top Republican on the Ways and Means Committee, in an interview. “You can’t live your life without seeing your paycheck buy less.”

White House officials have monitored inflationary pressure for months. They remain convinced, as they were in April, that price increases will not spiral out of control and force abrupt interest-rate increases from the Federal Reserve that could slam the brakes on growth.

The president and his top advisers remain confident that price growth will start to fall well before the midterms. They defend the size of the rescue plan and say Americans are focused on inflation right now because the success of the stimulus bill accelerated economic and employment growth and took a larger issue — the availability of jobs for people who want them — off the table.

“It is a highly incomplete view to try to assess the economy, and even people’s views about the economy, by looking at inflation alone,” Jared Bernstein, a member of Mr. Biden’s Council of Economic Advisers, said in an interview. “You also have to appreciate the robustness of the expansion, and how it’s lifting job and earnings opportunities.”

Mr. Bernstein and other advisers say many of the causes of inflation are already improving. They point to calculations by Mark Zandi, a Moody’s Analytics economist, that suggest Americans who have left the labor force will begin flocking back into the job market by December or January, because they will likely have exhausted their savings by then.

The advisers are also continuing to explore more actions they could take, including efforts to increase the number of truck drivers near ports and to force lower prices and more competition in the food industry.

“We are always all in on everything,” Ms. Berner said.

To which many officials add a caveat: Almost anything the White House could do now will take time to push prices down.

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