By Lucia Mutikani

WASHINGTON (Reuters) – U.S. prices accelerated in January amid a surge in the costs of services like housing and finance, but the annual increase in inflation was the smallest in three years, keeping a mid-year interest rate cut from the Federal Reserve on the table.

The report from the Commerce Department on Thursday also showed consumer spending slowing last month, restrained by decreases in outlays on goods, including motor vehicles, furniture and other long-lasting household equipment.

The inflation and consumer spending readings were in line with economists’ expectations. But with the costs of services increasing by the most in 12 months, likely as businesses raised prices at the start of the year, the timing of the first Fed rate cut remains uncertain. Most economists do not expect the price increases to repeat in February.

Services, which also include healthcare, restaurants, hotels and motels as well as recreation, are at the heart of the U.S. central bank’s fight against inflation. Policymakers have said they are in no rush to start lowering borrowing costs.

“The economy is not going off the rails and the inflation scare in January seems unlikely to continue, so Fed officials are still likely to consider a first interest rate cut when they meet in June,” said Christopher Rupkey, chief economistat FWDBONDS.

The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department’s Bureau of Economic Analysis said. Data for December was revised lower to show the PCE price index gaining 0.1% instead of the previously reported 0.2%. Goods prices fell 0.2% as the cost of energy dropped 1.4%, offsetting a 0.5% rise in food prices.

There were also decreases in the prices of motor vehicles and parts, clothing and footwear. But recreational goods and vehicles cost more, as did furnishings and household equipment.

In the 12 months through January, PCE inflation rose 2.4%. That was the smallest year-on-year increase since February 2021 and followed a 2.6% advance in December.

The monthly data mirrored rises last month in consumer and producer prices, which were also attributed to increases at the start of the year. Economists believe the model used by the government to strip out seasonal fluctuations from the data is probably not fully incorporating these price hikes.

Excluding the volatile food and energy components, the PCE price index increased 0.4% last month. That was the largest monthly rise since last February and followed a downwardly revised 0.1% gain in December. The so-called core PCE price index was previously reported to have climbed 0.2% in December.

Services prices jumped 0.6%, the most since last January, after climbing 0.3% in December. They were boosted by a 0.6% rise in the cost of housing and utilities. The cost of financial services and insurance surged 1.3%, likely reflecting higher share prices. Prices for services at restaurants, bars, hotels and motels rose, as did those for recreation and healthcare.

Core inflation increased 2.8% on a year-on-year basis in January, the smallest advance since March 2021, after rising 2.9% in December. The Fed tracks the PCE price measures for its 2% inflation target. Monthly inflation readings of 0.2% over time are necessary to bring inflation back to target.

Stocks on Wall Street were trading mostly higher, while the dollar fell against a basket of currencies. U.S. Treasury prices rose.

CONSUMER SPENDING COOLS

PCE services inflation excluding energy and housing shot up 0.6% last month, the most since March 2022, after rising 0.3% in December. The so-called super core inflation increased 3.5% on a year-on-year basis in January after rising 3.3% in December.

The super core inflation has risen at a 4.1% annualized rate in the past three months. Policymakers are watching the super core measure to assess progress in their battle against inflation.

Financial markets have pushed back expectations for a rate cut to June from May. Since March 2022, the U.S. central bank has raised its policy rate by 525 basis points to the current 5.25%-5.50% range.

With inflation picking up, price-sensitive consumers slowed their spending last month. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2% after increasing 0.7% in December. When adjusted for inflation, spending fell 0.1% after rising 0.6% in December. This suggests that consumer spending moderated early in the first quarter after helping to power economic growth in the fourth quarter of 2023.

Spending remains supported by a still-tight labor market, though there are signs it is taking a bit longer for people who are unemployed to find new jobs.

A separate report from the Labor Department on Thursday showed initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 215,000 for the week ended Feb 24.

The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 45,000 to 1.905 million during the week ended Feb. 17. The so-called continuing claims data covered the period during which the government surveyed households for February’s unemployment rate.

Continuing claims rose between the January and February survey weeks, suggesting the unemployment rate could rise this month from 3.7% in January. A Conference Board survey on Tuesday showed consumers less upbeat about the jobs market in February.

For now, the labor market is supporting wages, which rose 0.4% in January, contributing to the 1.0% jump in personal income. That was the largest increase in a year and followed a 0.3% gain in December. Income was boosted by a 3.2% cost-of-living adjustment for Social Security recipients and a special dividend paid by Costco Wholesale Corp.

But a sharp increase in taxes combined with inflation left income at the disposal of households unchanged after a 0.3% rise in December. With income outpacing spending, the saving rate rose to 3.8% from 3.7% in December.

“Consumer spending will continue to gradually increase over the course of 2024, although at a slower pace than in 2023 as job and wage gains soften,” said Gus Faucher, chief economist at PNC Financial. “The economic expansion should continue throughout this year and into next.”

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

WASHINGTON (Reuters) – U.S. President Joe Biden discussed the “tragic and alarming incident” in northern Gaza on Thursday with the leaders of Egypt and Qatar, as well as ways to secure the release of Hamas hostages and a six-week ceasefire, the White House said.

Gaza health authorities said more than 100 Palestinians had been shot dead by Israeli forces as they waited for a food aid delivery, but Israel challenged the death toll and said many of the victims had been run over by aid trucks.

In separate calls, Biden discussed the deadly incident in northern Gaza with Egyptian President Abdel Fattah Al-Sisi and Qatari Emir Sheikh Tamim Bin Hamad Al-Thani

The leaders “grieved the loss of civilian lives and agreed that this incident underscored the urgency of bringing negotiations to a close as soon as possible and expanding the flow of humanitarian assistance into Gaza,” the White House said.

At least 112 people were killed and more than 280 wounded in the incident near Gaza City, Palestinian health officials said, as the Palestinian death toll in nearly five months of war passed 30,000. Israel disputed the account provided by Gaza health officials.

Biden and the two leaders also underscored that the release of the remaining hostages, who were seized by Hamas militants in their Oct. 7 attack on Israel, would result in an immediate and sustained ceasefire in Gaza over a period of at least six weeks, the White House said.

They also discussed how a ceasefire could help them surge humanitarian aid into the small seaside enclave, whose 2.3 million population is facing acute food shortages and other perils.

(Reporting by Katharine Jackson; writing by Paul Grant; Editing by Doina Chiacu)

By Jonathan Stempel

(Reuters) – Wells Fargo, which has spent years trying to extricate itself from its fake accounts scandal, was sued on Thursday for allegedly not doing enough to help customers who were harmed.

The lawsuit was filed in federal court in San Francisco, after Wells Fargo began notifying customers to contact the fourth-largest U.S. bank if they had been enrolled in unwanted products.

Amanda Gonzales, a New Mexico schoolteacher leading the proposed class action, said Wells Fargo hopes many customers will throw out its opaque-sounding letters.

She also said several phone representatives and her local branch gave her the runaround when she tried to learn her rights after being enrolled in an insurance product covering accidental deaths.

“Wells Fargo relies on the inconspicuous and suspicious nature of the letter to depress claims rates, shifting the burden on the customer to take action to dispute an ‘enrollment’ that Wells Fargo knows to have been,” the complaint said.

By shifting that burden, Wells Fargo tries “to avoid, reduce, and delay its ultimate liability and sweep under the rug its long-standing, intentional misconduct,” it added.

Wells Fargo had no immediate comment.

The complaint accuses Wells Fargo of violating the federal Fair Credit Reporting Act, and California and New Mexico consumer protection laws.

It seeks at least $5 million for customers who received letters from Wells Fargo about the unwanted products.

Wells Fargo’s fake accounts scandal surfaced in September 2016, revealing that employees at the San Francisco-based bank had opened millions of fraudulent accounts, often to meet sales goals.

The scandal has led to billions of dollars of fines, the toppling of two chief executives, a guilty plea by a former retail banking chief to an obstruction charge, and a Federal Reserve cap on assets that remains in place.

Marc Dann, a lawyer for Gonzales, said Wells Fargo had offered his client $200 to resolve her claim.

“It’s a high priority to get out from these enforcement orders,” Dann said in an interview. “In typical Wells Fargo fashion, they’re doing the minimum.”

The case is Gonzales v Wells Fargo & Co et al, U.S. District Court, Northern District of California, No. 24-01223.

(Reporting by Jonathan Stempel in New York; editing by Jonathan Oatis)

By Marisa Taylor

WASHINGTON (Reuters) – U.S. Food and Drug Administration inspectors found problems with record keeping and quality controls for animal experiments at Elon Musk’s Neuralink, less than a month after the startup said it was cleared to test its brain implants in humans, according to an agency report reviewed by Reuters.

The inspectors identified quality control lapses at the company’s California animal research facility. A similar inspection at Neuralink’s Texas facility did not find problems, according to agency records.

Those visits took place last year from June 12-22, and represent the FDA’s sole inspections of Neuralink facilities on record. The inspector reports were shared with Reuters by Redica Systems, a data analytics company that obtains FDA compliance reports through open records requests.

“These issues show a lack of attention to detail,” said Jerry L. Chapman, a senior quality expert with Redica Systems.

The laboratory problems identified by FDA inspectors included missing calibration records for instruments such as a pH meter used in one of the studies. For another study, seven instruments including a “vital signs monitor” had no record of having been calibrated. Neuralink conducted experiments on hundreds of animals, including monkeys.

Other issues included quality assurance officials not signing off on the final study report or documenting any deviations from approved protocols or standard operating procedures.

“This certainly is a signal that the company needs to be vigilant about certain practices,” said Chapman, adding that the company would be required to follow similar practices for its human trials.

The brain implant is being tested to help patients paralyzed by spinal cord injury or amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease, communicate using thoughts to move a computer device.

Reuters reported in December 2022 that U.S. Department of Agriculture (USDA) investigators were probing potential animal-welfare violations at Neuralink following internal staff complaints that its animal testing was being rushed, causing needless suffering and deaths. An animal welfare advocacy group, Physicians Committee for Responsible Medicine, submitted a formal complaint to both USDA and FDA over the alleged breaches.

In July, the USDA said it did not find any violations of its animal research rules beyond a 2019 incident that Neuralink had already reported.

‘VIOLATIONS OF FUNDAMENTAL REQUIREMENTS’

The FDA has its own requirements for animal research, known as Good Laboratory Practice, to demonstrate that any scientific data being collected in the development of a drug or medical device is reliable, three regulatory experts told Reuters.

Neuralink cited its animal research data in its FDA request to test the implants in humans. Musk, the company’s billionaire founder, announced in May that his device was cleared for human trials, and said last month the first patient had received an implant and was recovering well.

Neuralink did not respond to questions about the FDA visit.

The FDA has not issued its designation indicating the severity of problems found in the inspection, according to the agency’s database. While the problems identified are serious, they do not appear to be significant enough to justify the FDA’s worst inspection designation, which would prompt action, the experts said.

Carly Pflaum, an FDA spokesperson, said Neuralink “provided sufficient information to support the approval” of its human trial application. The agency routinely conducts such inspections, Pflaum said, after human trial approval and before commercial approval to “assure data integrity and reliability” and compliance with other FDA regulations.

“The FDA will continue to monitor the safety of those enrolled in the study for Neuralink’s implant device through required, regular reports,” Pflaum said.

Ryan Merkley, director of research advocacy at the animal welfare group PCRM, said the FDA should have inspected Neuralink before human trial approval given concerns raised by his organization months earlier.

Victor Krauthamer, a former long-time FDA official, said the agency had jurisdiction to conduct the inspection before permitting the company to go ahead with its clinical trial, and has done so in other cases.

“It would have made sense for the FDA to have conducted the inspection before human trial approval,” said Krauthamer, who once reviewed human-trial requests for brain implants at the agency. “These are violations of fundamental requirements that you don’t want to worry about happening again in the human trial.”

(Reporting by Marisa Taylor; Editing by Michele Gershberg and Bill Berkrot)

By David Shepardson and Valerie Insinna

WASHINGTON (Reuters) – Boeing must develop a comprehensive plan to address “systemic quality-control issues” within 90 days, the head of the U.S. Federal Aviation Administration said Wednesday, after a mid-air emergency last month sparked renewed safety concerns.

The head of the FAA demanded the plan in a statement critical of the planemaker following an all-day meeting with CEO Dave Calhoun on Tuesday.

“Boeing must commit to real and profound improvements,” FAA Administrator Mike Whitaker said. “Making foundational change will require a sustained effort from Boeing’s leadership, and we are going to hold them accountable every step of the way, with mutually understood milestones and expectations.” 

Calhoun said in a statement Boeing’s leadership team was “totally committed” to addressing FAA concerns and developing the plan.

“We have a clear picture of what needs to be done,” Calhoun said. “Boeing will develop the comprehensive action plan with measurable criteria that demonstrates the profound change that Administrator Whitaker and the FAA demand.”

Boeing has scrambled to explain and strengthen safety procedures after a door panel detached during a Jan. 5 flight on a brand new Alaska Airlines 737 MAX 9, forcing pilots to make an emergency landing while passengers were exposed to a gaping hole 16,000 feet above the ground.

Bloomberg News reported on Wednesday the Justice Department is scrutinizing the Alaska Airlines MAX 9 blowout to determine if it falls under a 2021 deferred-prosecution agreement over two fatal 737 MAX 8 crashes in 2018 and 2019 that killed 346 people.

If prosecutors determine the MAX 9 blowout is a breach of that agreement, Boeing could face criminal liability, the report said, citing an unidentified source.

Boeing said last month the DOJ was currently considering whether the company fulfilled its obligations under the agreement. The Justice Department declined to comment on Wednesday.

Boeing shares fell 1% in after-hours trading.

PRODUCTION CAP

Boeing’s production rate has been capped by the FAA and its operations closely scrutinized by lawmakers and customers following the Jan. 5 incident. The new FAA statement raises fresh questions about how long the production rate freeze will last.

Whitaker said Boeing’s plan must incorporate forthcoming results of the FAA production-line audit and findings from an expert review panel report released on Monday.

That report, which had been commissioned in early 2023, was highly critical of the company’s safety management processes, saying Boeing suffered from “inadequate and confusing implementation of the components of a positive safety culture.”

Boeing last week abruptly removed Ed Clark, the head of its troubled 737 MAX program, as part of a management shakeup.

The FAA said on Wednesday that Boeing must take steps to improve its Safety Management System (SMS) program, which it committed to in 2019 and combine it with a Quality Management System to “create a measurable, systemic shift in manufacturing quality control.”

Whitaker visited Boeing’s Renton, Washington, factory, where the 737 MAX line is produced, on Feb. 12. He expressed concerns about some things he saw on the tour, two people briefed on the matter told Reuters.

The FAA meetings with Calhoun lasted more than seven hours, sources said, and much of it focused on a series of quality issues at the planemaker.

The participants included Boeing Commercial Airplanes CEO Stan Deal, the planemaker’s new head of quality Elizabeth Lund and Mike Fleming, Boeing senior vice president and general manager, airplane programs.

“Boeing must take a fresh look at every aspect of their quality-control process and ensure that safety is the company’s guiding principle,” Whitaker said. 

The Alaska Airlines mishap is Boeing’s second major crisis in recent years, after the crashes in 2018 and 2019 prompted a grounding of the 737 MAX for 20 months that damaged Boeing’s reputation.

The door panel that flew off the MAX 9 appeared to be missing four key bolts, according to a preliminary report this month from the U.S. National Safety Transportation Board. The panel is a plug in place on some MAX 9s instead of an additional emergency exit.

The FAA panel report referenced the recent issues, saying it amplified concerns that “safety-related messages or behaviors are not being implemented across the entire Boeing population.”

Airline industry executives have expressed frustration with Boeing’s quality control. France’s Airbus, the only other major manufacturer of commercial jets, in January reported record annual jet orders and confirmed an 11% rise in 2023 deliveries, maintaining the top manufacturing spot against Boeing for a fifth year.

The door plug blowout led to a weeks-long grounding of the MAX 9 in January and angered Boeing’s airline customers. Some, including Alaska Airlines, announced they would conduct enhanced quality oversight of planes before they leave the Boeing factory.

(Reporting by David Shepardson and Valerie Insinna; Editing by Nick Zieminski, Aurora Ellis and Jamie Freed)

By Stephen Nellis

(Reuters) -Apple plans to disclose more about its plans to put generative artificial intelligence to use later this year, Chief Executive Officer Tim Cook said during the company’s annual shareholder meeting on Wednesday.

Cook said that the iPhone maker sees “incredible breakthrough potential for generative AI, which is why we’re currently investing significantly in this area. We believe that will unlock transformative opportunities for users when it comes to productivity, problem solving and more.”

Apple has been slower in rolling out generative AI, which can generate human-like responses to written prompts, than rivals such as Microsoft and Alphabet’s Google, which are weaving them into products.

On Wednesday, Cook argued that AI is already at work behind the scenes in Apple’s products but said there would be more news on explicit AI features later this year. Bloomberg previously reported Apple plans to use AI to improve the ability to search through data stored on Apple devices.

“Every Mac that is powered by Apple silicon is an extraordinarily capable AI machine. In fact, there’s no better computer for AI on the market today,” Cook said.

Apple shareholders on Wednesday rejected a measure asking the company to disclose more information about how it uses artificial intelligence in its business and its ethical guidelines for the technology.

The proposal, which did not pass but won 37.5% of votes cast, was put forth by the pension trust of the AFL-CIO, the largest American labor union federation, which has also proposed AI measures at other technology companies.

Compared to other leading technology companies, Apple has been behind the curve on disclosing ethical guidelines regarding the use of artificial intelligence,” Brandon Rees, deputy director for corporations and capital markets with the AFL-CIO, said in statement. “We hope that Apple will enhance its disclosure practices on this important issue to investors and other stakeholders.”

A similar proposal will be heard at Walt Disney’s annual meeting in April.

At Apple, the AFL-CIO asked for a report on the company’s use of AI “in its business operations and disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology.”

In its supporting statement in Apple’s proxy materials, the AFL-CIO wrote that “AI systems should not be trained on copyrighted works, or the voices, likenesses and performances of professional performers, without transparency, consent and compensation to creators and rights holders.”

Apple opposed the measure, saying that disclosures could tip its hand on strategy as it competes against rivals in the fast-moving AI field.

(Reporting by Stephen Nellis in San Francisco; Editing by Jonathan Oatis and Lisa Shumaker)

(Reuters) -Coinbase Global said on Wednesday that all services on its website have been restored after an issue earlier in the day caused some users to see zero balance across their accounts.

“Very few customers may still see an inaccurate balance on their account. Our team is working on resolving this display issue for these users,” the crypto exchange added in a post on social media platform X.

Earlier in the day, Coinbase assured customers that it was seeing an improvement in trading and their funds were safe.

The outage comes after bitcoin hit $60,000 on Wednesday for the first time in more than two years, as a flurry of capital into new U.S. spot bitcoin exchange-traded products fuelled a price rally in February.

Traders have poured into bitcoin ahead of April’s halving event – a process designed to slow the release of the cryptocurrency.

Coinbase CEO Brian Armstrong said in a separate post on X that the crypto exchange was dealing with a large surge in traffic.

At their peak on Wednesday afternoon, user reports of issues had crossed more than 9,000, according to Downdetector. As of 1213 GMT on Thursday, the reports of issues dropped to nearly 28.

(Reporting by Manya Saini and Arasu Kannagi Basil in Bengaluru; Additional reporting by Akanksha Khushi; Editing by Maju Samuel and Sherry Jacob-Phillips)

By Dan Levine and Kristina Cooke

(Reuters) -The chairwoman of the Federal Communications Commission on Wednesday proposed a potential new rule that would subject automakers that sell internet-connected cars to a telecommunications law intended to protect domestic violence survivors.

Cases of technology-enabled stalking involving cars are emerging as automakers add ever more sophisticated features, such as location tracking and remote control of functions like locking doors or honking the horn.

FCC Chairwoman Jessica Rosenworcel last month wrote to nine large automakers and three telecom providers seeking more information about their policies involving internet-connected car technology and domestic abuse. The federal Safe Connections Act gives the FCC authority to help domestic abuse survivors securely access communications, the letter said.

The FCC has required telecom providers under the law to separate phone lines linked to family plans where the abuser is on the account.

In an interview with Reuters this week, Rosenworcel said issues involving connected cars and domestic abuse “seemed extraordinarily similar” to the work the FCC had already done implementing the Safe Connections Act. Rosenworcel will circulate a “notice of proposed rulemaking” to other FCC commissioners, which will say some types of connectivity arrangements in cars are also covered by the law.

If the full FCC adopts it, a formal public comment period would commence. That could ultimately lead to new rules for the sector.

“It’s really important to remember that we want to make sure survivors of domestic violence are safe, and that their connections are secure,” Rosenworcel said.

The notice will seek comment on what proactive steps car service providers can take to protect survivors from being stalked, harassed or intimidated through their cars, Rosenworcel said. “We are open to creative ideas,” she said.

The Alliance for Automotive Innovation, a car industry group, referred on Wednesday to a previous letter it wrote to Rosenworcel, which said in-vehicle connected services “fall outside the purview” of the Safe Connections Act. “Because the connectivity functionality is associated with the vehicle, rather than a particular person, it cannot be separated among users of the vehicle,” the letter said.

Separately, California state Senator Dave Min on Wednesday announced a bill that would require carmakers to disable an abuser’s access to remove vehicle technology within two business days of a survivor’s request. The carmaker would have to act if the survivor presents a restraining order, or a court ruling awarding sole possession of the vehicle.

Reuters in December reported on a woman who unsuccessfully sued Tesla, alleging the company negligently failed to help her after she repeatedly complained that her husband was stalking and harassing her with the automaker’s technology after she had obtained a restraining order. She would return to the Model X to find the doors open, the suspension settings changed, and the vehicle’s ability to charge turned off. Tesla argued she had no proof that her husband used the car’s technology to stalk her.

When the woman and her husband bought the car, he configured the settings to make himself the administrator on the account and listed her as an additional driver, her lawsuit said. That meant she could not remove his access without his password. When she complained, Tesla told the woman it could not remove him because his name remained on the vehicle’s title as a co-owner, along with hers, according to records she filed in her lawsuit.

Rosenworcel asked auto companies last month if they had processes in place to act on requests from domestic violence survivors to remove access to connected apps from individuals on the title. “Some automakers replied in more detail than others,” she said.

Tesla did not specifically address the issue of domestic abuse in its response, saying customers can grant temporary or permanent access to other drivers and restrict visibility to those people if they wish. The automaker also did not address the question of removing access from people who are on the title.

“Customer data privacy is important to Tesla and embedded in each product, service, and feature by design,” the company wrote.

Meanwhile, Toyota said if a domestic abuse survivor on the title requests that connected services be disabled for another person, the company may ask for verification from law enforcement that the customer was a victim.

“Through these steps, Toyota works to respond promptly to requests from domestic abuse survivors while also focusing on appropriate authentication in order to screen out fraudulent or abusive requests that could further harm the abuse survivor,” the company said in its response.

The chairwoman expects the FCC will likely take up the issue in the next month.

(Reporting by Dan Levine and Kristina Cooke in San FranciscoEditing by Peter Henderson and Matthew Lewis)

(Reuters) -Coinbase Global said on Wednesday it was beginning to see improvement in customer trading after an issue caused some users to see zero balance across their accounts and may have led to errors in buying or selling.

“We’re beginning to see improvement in customer trading. Due to increased traffic, some customers may still see errors in login, sends, receives and with some payment methods,” the crypto exchange added in a post on social media platform X, adding that all customer funds were safe.

The outage comes after bitcoin hit $60,000 on Wednesday for the first time in more than two years, as a flurry of capital into new U.S. spot bitcoin exchange-traded products fuelled a price rally in February.

Traders have poured into bitcoin ahead of April’s halving event – a process designed to slow the release of the cryptocurrency.

Coinbase CEO Brian Armstrong said in a separate post on X that the crypto exchange was dealing with a large surge in traffic.

At their peak earlier in the afternoon, user reports of issues had crossed over 9,000, according to Downdetector. As of 2:33 p.m. ET they were close to 140.

(Reporting by Manya Saini and Arasu Kannagi Basil in Bengaluru; Editing by Maju Samuel)

By David Shepardson

WASHINGTON (Reuters) -Republican U.S. Senator Josh Hawley introduced legislation Wednesday to hike tariffs on Chinese vehicle imports as concerns mounted about the potential competitive impact on U.S. car companies.

Hawley said President Joe Biden should take steps to protect U.S. auto workers “from the existential threat posed by China.”

A bipartisan group of lawmakers in November urged U.S. Trade Representative Katherine Tai to boost tariffs on Chinese vehicles, saying she should plan “to address the coming wave of (Chinese) vehicles that will be exported from our other trading partners, such as Mexico, as (Chinese) automakers look to strategically establish operations outside of (China).”

Hawley’s bill would hike the base tariff rate to 100% from 2.5% currently. This would mean a total tariff of 125% on all imported Chinese autos from 27.5% currently. It also seeks to apply the 100% tariff hike to vehicles assembled in Mexico by Chinese-based automakers.

Auto industry officials told Reuters Biden is considering hiking tariffs on Chinese EVs. “China is determined to dominate the electric-vehicle market by using unfair trade practices, but I will not let them,” Biden told autoworkers in November.

Tai said last month the Biden administration is closely reviewing “China’s non-market policies and practices in its automotive industry” and reviewing current tariff levels.

On Friday, a U.S. manufacturing advocacy group urged Biden to block low-cost Chinese autos and parts from Mexico.

“The introduction of cheap Chinese autos – which are so inexpensive because they are backed with the power and funding of the Chinese government – to the American market could end up being an extinction-level event for the U.S. auto sector,” the Alliance for American Manufacturing said in a report.

While many Chinese automakers are state backed, they have worked to improve vehicles and are moving faster than other regions” in high-tech areas like dashboard displays and tests for autonomous driving, said S&P Global Mobility analyst Stephanie Brinley.

Republican Donald Trump, who is seeking a second term as president in November, has threatened to impose hefty new tariffs on Chinese vehicle imports after hiking tariffs by 25% when he was president.

The Chinese embassy in Washington said China’s automobile exports “reflect the high-quality development and strong innovation of China’s manufacturing industry.”

The issue has received new interest after reports China’s BYD plans to set up an EV factory in Mexico. BYD, known for cheaper models, recently overtook its biggest rival, Tesla, to become the world’s top EV maker by sales.

(Reporting by David Shepardson; editing by Miral Fahmy and David Gregorio)