Fed on Iran War, AI Expectations, US-Canada Trade War, Australia’s Social Media Restrictions

Summary

Wall Street Week — March 20, 2026

Host: David Westin (Bloomberg)

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Episode Overview

This episode of Wall Street Week explores pivotal global economic and political stories, focusing on:

1. The Federal Reserve’s response to the uncertainty wrought by the Iran war
2. Debates about the economic impact of AI and whether expectations are overblown
3. Rising strain in US-Canada trade relations amid tariffs from President Trump’s second term
4. Australia’s world-first restrictions on social media access for youth and the ramifications for tech companies and society

David Westin leads nuanced discussions with former officials, economists, business leaders, and tech policy experts, dissecting the deeper currents beneath headlines.

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1. The Fed, the Iran War, and Monetary Policy Uncertainty

Guest: Randy Quarles (Former Fed Vice Chair, now at Cynosure)
Segment start: 01:56

Key Points

• Fed meets amid war-related uncertainty: The recent Federal Reserve meeting was overshadowed by the ongoing Iran war and its unknown impact on the global economy.
• Data-dependence re-emphasized:
  • “The Fed is always in a position of uncertainty... that's really what's behind the Fed's regular mantra of we'll be data dependent.” (03:06, Quarles)
  • High uncertainty is expected to keep Fed policy unchanged in the coming months.
• Inflationary pressures and energy markets:
  • Higher energy prices following the Iran conflict risk quick reactions in consumer behavior, particularly potential "demand destruction" if crisis persists.
  • “If we're talking a resolution in a month, even in two months... a blip. If it goes on longer... you'll start to see reaction.” (05:25, Quarles)
• Tariff effects:
  • Ongoing/oscillating tariff policy increases the risk that temporary price shocks bleed into broader inflation expectations.
  • “There's a slightly higher risk that tariffs could feed into overall inflation expectations just because of how this tariff policy has been rolled out.” (09:35, Quarles)
• Labor market and immigration:
  • Recent U.S. immigration policy changes have sharply curtailed both illegal and legal immigration, reducing labor supply growth.
  • “Softness that you see in the jobs numbers... offset by the shrinkage in labor supply.” (10:59, Quarles)

Notable Quotes

• “At a level of uncertainty like this, you have to look at the fundamental drivers... I think those drivers are more inflationary... unlikely the Fed will cut rates soon.” (03:06, Quarles)
• “People are underestimating the degree to which the labor supply has been changed as a result of immigration policy.” (10:59, Quarles)

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2. Is AI Overhyped? Challenging the Hype Cycle

Guests:

• Arvind Narayanan (Princeton computer science professor, author of AI Snake)
• Geoffrey Hinton (“Godfather of AI”, Nobel laureate)
• Drew Mattis (Chief Market Strategist, MetLife)
• Samyukta Melanji (VP, Open Evidence / practicing oncologist)
  Segment start: 15:42

Key Points

• AI as ‘normal technology’:
  • Narayanan suggests AI is a powerful general purpose technology, but its rollout will be gradual, much like earlier innovations.
  • “We acknowledge that AI is powerful... but like those technologies, it’s a gradual integration.” (16:58, Narayanan)
• Limits of disruption and job loss:
  • Many fears about AI eliminating vast swathes of jobs are rooted in misunderstanding the difference between ‘capability’ and ‘reliability.’
  • Productivity may increase, but mass displacement is unlikely in the short term.
  • “The usual reasons that are given for why AI is going to displace labor rely on a whole bunch of fallacies.” (17:40, Narayanan)
• AI Washing:
  • Companies may exaggerate AI’s role in layoffs to appease shareholders, dressing up standard cost-cutting as technological advancement (“AI washing”).
• Sector-specific variability:
  • Software engineering is seeing rapid AI adoption, but hasn't seen a fall in job opportunities; instead, postings have increased.
• Regulatory, legal barriers:
  • AI’s spread—especially in customer service and health—constrained by litigation, liability, and the need for “human-in-the-loop” oversight.
    • Example: Air Canada’s chatbot invented a refund policy; legal repercussions forced the airline to honor it. (21:46, Narayanan)
• Risks of Superintelligence:
  • Hinton warns of AI as an existential threat, likening it to “an alien invasion fleet” coming in ten years.
  • Narayanan argues “alignment” is a brittle fix and caution against lumping all AI risks as one.
• On predictability:
  • Even AI will not be able to reliably predict the future — limits stem from genuine unpredictability, not just informational scarcity.

Notable Quotes & Moments

• “Imagine 100,000 people smarter than any Nobel Prize winner.” (16:22, Hinton via Westin)
• “AI is a powerful general purpose technology... but it’s just normal technology.” (16:36, Narayanan)
• “If I have 100 questions to start the day and tech helps with 50, it just creates 50 new questions for me.” (18:46, Mattis)
• “Putting all our eggs in the alignment basket... is a very brittle scenario.” (25:46, Narayanan)
• “[AI will not become] the growth engine that drives their stock price... they'll just have to be like regularly profitable companies.” (54:54, Iyer)

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3. The US-Canada Trade War: Tariffs, Trust, and Uncertain Futures

Reporters/Guests:

• Michael McKee (Bloomberg), Louise Penny (Canadian author), Stephen Polish (Former Bank of Canada Governor), Goldie Heider (CEO, Canada Business Council), Barry Zecelman (Zecelman Industries)
  Segment start: 30:55

Key Points

• Tariffs disrupt “special relationship”:
  • President Trump’s new tariffs have deeply strained US-Canada relations. Canadian imports from the US are down; Mexico has surpassed Canada as the largest US trading partner.
• Economic & emotional impact:
  • Canadians cite not just increased prices but a sense of betrayal, loss of trust.
    • “There was no way I was going into a country that had declared war on us.” (34:36, Louise Penny)
  • Businesses are suffering major losses—from small merchants to big manufacturing.
  • “We're having to pay roughly $250, $275 a ton... $6-7 million a month in tariffs. It's huge.” (37:02, Zecelman)
  • Layoffs and low investment dominate (maintenance-only spending).
• Long-term effects and negotiations:
  • Many hope for temperature to cool—business leaders (even those critical of tariffs) stress the irreplaceable value of the U.S. market.
  • Canada is diversifying trade ties (with China, Qatar), but most see US relationship as paramount.
  • Upcoming renegotiation of USMCA/CUZMA is key; fears over a “zombie agreement” that exists in name only.
• Call for rationality:
  • “Capital doesn’t have a heart. Canadians like Americans. I think Americans like Canadians and we'll get through this.” (42:07, Heider)

Notable Quotes

• “It wasn’t even a decision... There was no way I was going into a country that had declared war on us.” (34:36, Louise Penny, regarding her book tour)
• “This agreement is good, it's working and should be reviewed and renewed.... It’s not in your interest to have a weak Canada and a weak Mexico.” (39:38, Heider)
• “If President Trump had the right relationship... he'd put his arms around Canada and hug them.” (38:50, Zecelman)

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4. Australia’s Social Media Restrictions: Can You Put the Genie Back?

Guests:

• Ravi Iyer (USC Marshall School / ex-Facebook), Jennifer Park Stout (SVP Snap), Paul Litherland (Australian esafety advocate), Danny Aladje (parent advocate)
  Segment start: 45:31

Key Points

• Youth restrictions 100 days in:
  • Australia bans social media for under-16s; over 400,000 underage accounts deleted by platforms like Snap; international trend catching.
• Public and parental support:
  • “Across Australia, polling... found around four in five adults support the restrictions.” (47:22, Westin)
  • Motivated by mental health, social pressure, displacement of family interaction (parent testimonial).
  • “Within days, [the phone] ripped her away from the family life.” (46:08, parent)
• Circumvention & enforcement challenges:
  • Many children easily rejoin platforms under new aliases.
  • “Overwhelmingly, children have managed to find a way back... have not had many obstacles.” (51:35, Iyer)
  • Compliance interpretation is vague (“reasonable steps”); age verification is technically difficult.
• Social media company response:
  • Snap says removals are not a material portion of total users (<5% of DAUs), reiterates safety focus over profit.
• Research on effectiveness mixed:
  • Some studies say neither a total ban nor unfettered access is healthy—balance is needed.
  • “There's no research yet that has come out that can give any indication that bans are the right approach.” (50:35, Park Stout)
• Business impact:
  • In the long term, restricting youth access could slow social media platform growth engines, but wouldn’t threaten their underlying profitability.

Notable Quotes

• “We know that many youth have negative experiences... graphic content, contacted by strangers, sometimes groomed.” (48:45, Iyer)
• “Social media, we haven't had [the protections we apply elsewhere]. Everything in our physical world has rules... But social media, we haven't had that.” (56:22, Litherland)

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Memorable Moments & Quotes

• “Suppose some telescope saw an alien invasion fleet... Well, that's what we have. We're constructing these aliens, but they're going to get here in about 10 years.” (25:19, Hinton)
• “People got to relax and calm down. Capital doesn't have a heart.” (39:38, Zecelman/Heider)
• On regulations: “Every regulation is written in blood, every safety regulation at least.” (21:46, Narayanan)

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Timestamps for Key Segments

• Fed on Iran War & Policy Uncertainty: 01:56–12:41
• AI: Hype vs. Reality: 15:42–27:20
• US-Canada Trade War: 30:55–42:41
• Australia’s Social Media Restrictions: 45:31–56:57

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Tone & Takeaways

Wall Street Week brings a measured, analytical tone, balancing macroeconomic realities with personal stories and sharp expert insights. The show challenges crisis-driven narratives—whether about AI risk, geopolitical trade tension, or regulatory breakthroughs—and illustrates the complexity beneath easy headlines.

In summary:

• The world's challenges—from AI to international trade and digital youth—are best met with realism, reason, and nuanced policy, not panic.
• Despite upheaval, relationships, institutions, and technologies evolve slowly, shaped by data, context, and stakeholder choices—not apocalyptic shifts.

Transcript

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[David Westin]

This is Wall Street Week. I'm David Westin bringing you stories of capitalism. We've heard all about how AI will change our world in ways we have yet to imagine. But we were surprised to find another side of the argument, a leading expert who thinks we may be getting it all wrong. And President Trump hasn't made too many friends in Canada during his second term. We go north of the border to get Canadians perspectives on what's happened to America's other special relationship. Plus, Australia has led the way in imposing age limits on social media 100 days in how are the country's new restrictions affecting children and families? And how big is the risk for social media companies if they lose their younger users? But we start with the Fed and how it handled the uncertainties posed by the Iran war when it met this week. Randy Quarles of Cynosure served as Fed vice chair. We heard from the Federal Reserve and from Chair Powell this week, and maybe the headline is the uncertainty because of the war In Iran, he was very careful in saying we don't know what the effects will be, big, small or in between. How does one make policy in the face of that kind of uncertainty?

[Randy Quarles]

Well, you know, writ large, that's the job of the Fed generally. The Fed is always in a position of uncertainty. That uncertainty may be greater from moment to moment. It's obviously at a fairly high level now. But that's really what's behind the Fed's regular mantra of we'll be data dependent. It's the data could be different next meeting than they are today. On the basis of what we know now, this is where we would be likely to go. I think, however, when you're at a level of uncertainty like this, you have to look at what you think the fundamental drivers of the economy are likely to be, you know, as you think going forward. And I think that those drivers currently are more inflationary than non inflationary and will therefore probably argue for probably no change in the Federal Reserve's monetary policy stance for some time into the future. I don't think that where the economy is going is going to argue for raising interest rates, but I think the argument for lowering interest rates is going to be hard to carry probably for the rest of this year.

[David Westin]

On the uncertainty, just for one more moment on that. At what point does the uncertainty itself start to weigh on the economy because businesses might be reluctant to make investments, consumers may hold off on spending. How long can we go before we start to see it, you think, in the economy?

[Randy Quarles]

Well, I think you start seeing that relatively quickly in terms of lowered business investment because you don't know exactly what you're, what environment you're investing into. We saw that at Liberation Day. There was a significant pause in business and business investment until companies felt that they had their foot on a rock with regard to where tariff policy was likely to go. And so you'll see that again. Now the question is how long does it last before that becomes sort of a material drag on the economy?

[David Westin]

Tell us about demand destruction. I'm reading about that a lot these days, which is not something you want necessarily. What are the risks of that? And at what point might we start seeing demand destruction given what's going on, particularly with the energy markets?

[Randy Quarles]

Again, you're going to start seeing responses pretty quickly to higher energy prices in consumer spending. And you know, and again, because of the uncertainty about the future macro environment and business investment, if that's relatively short, if we're talking a resolution in a month, even in two months, then that's from the point of view of the Fed, which looks over long arcs of time, a blip. If it goes on longer than that, you know, then you'll start to see, you'll start to see reaction. But on the flip side of that, which is partly why I think you're not going to see a hike in interest rates, but you're not going to see a lower interest rates either. Those are effects that slow the economy. But higher energy prices feed into higher prices generally, and that's inflationary. I think a lot of the other drivers of the economy, the fiscal stimulus that you have from the One Big Beautiful Bill act, which I thought was excellent legislation, it provides the right incentives for the economy, but it is stimulative and pushing upward on inflation in the short term. So I think the balance over the course of the next several months is likely to be in favor of no moves either down or up.

[David Westin]

One of the things we heard from the Fed this week was that the neutral interest rate has ticked up a little bit, I think, from 3.0 to 3.1. What is driving that? Is it some of the factors you just suggested, or is it some other structural things such as AI investment?

[Randy Quarles]

I don't think that AI investment is driving change currently in the new neutral interest rate. I think it's too early, you know, for us to see that sort of an effect. I think it's more the factors that, that I was talking about earlier. And I think part of this too is that the Fed is beginning to recognize changes in the, in the overall environment that have been pushing upward on the neutral interest rate for some time. I think their sort of institutional estimate of the neutral interest rate has been lower than warranted for time, and they're catching up to where the actual neutral rate has been for a while.

[David Westin]

We saw in the Fed in the summary of economic projections both a slight increase in, particularly in core inflation, but also in growth. Where does that growth come from, do you think? At this point?

[Randy Quarles]

I think you'll see growth across the economy. I don't think that the, for example, that the sole driver of growth is AI investment or AI changes in business processes. Again, I think we're too early for that. But the economic policies of this administration have been quite supportive of growth and in particularly the fiscal policy of the One Big Beautiful Bill. And those effects will be felt throughout the economy and the elements of the administration's economic package, economic policy package that at the outset of the administration, one might have thought could have slowed growth, for example, immigration policy, maybe tariff policy, have ended up to be not as slowing of growth as one expected at the beginning. So of the overall administration economic package, which I think was much more coherent and well thought out than a lot of people give it credit for, I think that the stimulative elements are outweighing the potential growth slowing elements. And so as a consequence we'll see that stimulation across the economy.

[David Westin]

You mentioned tariffs and goodness knows there's been a lot of talk about tariffs. What I took away from what Chair Powell and the Fed said was basically they, they do increase prices for the time being, but it's usually eight months to a year and that'll be up sometimes in the middle of the year. What are you seeing out there in the real world? Is that consistent with what you're seeing?

[Randy Quarles]

Yeah, it's very consistent. There's a slightly higher risk that tariffs could feed into overall inflation expectations just because of how this tariff policy has been rolled out. Because it's been up, it's been down, it's been rolled out over a long period of time as opposed to develop, explain implemented with a delay for everybody to process it, which would be the typical way to implement tariff policy. And then it would be be very clear that you have kind of a one time step change in prices during the period of, of implementation of the tariff policy that shouldn't feed into overall inflation expectations. There's a slightly higher risk that you have, you push up inflation generally for a longer period of time just because of the way the tariff policy was rolled out. But I don't think it's terribly high. And I think you can expect, the Fed can kind of expect to look through tariff policy. The tariffs themselves are not nearly as high as people thought that they might be at the outset of the administration.

[David Westin]

You mentioned immigration policy and it did come up in the news conference with Chair Powell in this sense. He said look, we still have sort of a low hire, low fire labor economy right now and therefore the unemployment rate actually is not going up. But he said that's not a really great balance. What are the risks in that sort of, sort of employment market?

[Randy Quarles]

So I actually think that people are underestimating the degree to which the labor supply has been changed as a result of immigration policy. You know, the administration hasn't really succeeded in forcibly deporting very many people. That's hard to do. The Eisenhower administration tried to do something similar and had sort of similar results. But the, but the policy had the effect of almost immediately closing off the very large amount of illegal immigration that there had been during previous years, a certain amount of self deportation and even legal immigration is down materially. So the growth in the labor supply that we had during the Biden administration has been closed off by a very significant amount, really maybe between 1 and 2 million people a year, I think. And so the softness that you see in the labor demand numbers, in the jobs numbers, I think people are underestimating the degree to which that is effectively offset or significantly offset by the shrinkage in labor supply. You layer on top of that just the continuing aging of the baby boomers. And so I am less concerned. And I think the data that you described are supportive of that lower level of concern than the Fed has been expressing for some time about the state of the labor market. And I think as the data continue to evolve, that will be another

[Goldie Heider]

sort

[Randy Quarles]

of support for interest rate policy that is on the higher end rather than the lower end of expectations.

[David Westin]

Coming up what if AI isn't as big as inventing the wheel or discovering fire? We look into the other side of the argument.

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[David Westin]

This is a story about right sizing our expectations since ChatGPT burst on the scene four years ago, all we've heard about is how big AI will be, how it could lead to superintelligence replacing humans, how fast it is coming, and at least for some, how dangerous it may be. We have 2,000 people doing it, spend $2 billion a year on it. It affects everything. Risk, fraud, marketing, idea generation, customer service. And it's kind of the tip of the iceberg. AI, AI, AI, AI, AI. So imagine hundred thousand people smarter than any Nobel Prize winner.

[Geoffrey Hinton]

When AI gets super intelligent, it might just replace us.

[David Westin]

But what if they're wrong? What if AI isn't taking us toward either utopia or dystopia? What if AI is just normal?

[Arvind Narayanan]

I have been surprised by how controversial the statement AI is normal technology is.

[David Westin]

Arvind Narayanan is a professor of computer science and director of the center for Information Technology Policy at Princeton. He's also co author of the book AI Snake, what Artificial Intelligence can do, what It can't do, and how to Tell the Difference.

[Arvind Narayanan]

We acknowledge that AI is a powerful general purpose technology compared to electricity, the Internet, I think, even the Industrial Revolution. But like all of those technologies, what we think is happening and will continue to happen is a gradual integration of this technology into society.

[David Westin]

If it is gradual, corporate America doesn't seem to be investing that way. The six US firms pouring the most cash into AI are projected to spend over $750 billion on it this year alone, more than the entire GDP of Ireland. And some firms are already claiming significant layoffs are driven by AI. But Narayanan is more circumspect.

[Arvind Narayanan]

This is not, we think, some impending superintelligence that is going to, you know, render obsolete the laws of economics or the limitations of human behavior. The usual reasons that are given for why AI is going to displace labor rely on a whole bunch of fallacies. AI developers are looking at these so called capability benchmarks. Oh, you know, AI is as capable as people are at answering customer service questions. So it's surely it's going to replace customer service representatives.

[Michael McKee]

Maybe.

[Arvind Narayanan]

But what we said was, hey, let's look at reliability separately from capability. Capability is not enough. You have to have reliability, which means does it answer the same question reliably every time, or is it giving different answers to different customers? Does it know which tasks it can take on and which ones are out of scope? A second big reason is even if you do implement AI, does that actually make workers more productive, able to do more work, and therefore actually increase the demand for their work?

[David Westin]

Drew Mattis, the chief market strategist at MetLife, agrees.

[Drew Mattis]

I think when you think about what artificial intelligence does and why people are concerned about it is they're afraid that the knowledge worker is going to become extinct. But the reality of it is, is that knowledge workers are constantly using technology to expand the bounds of knowledge. And when they expand those bounds, then they have other questions they need to ask. If I have 100 questions that I start the day with, and technology can help me answer 50 of them very quickly, it's not like I have 50 left that just created 50 new questions for me to answer. And the more questions I answer, the more valuable I become. And the more valuable I become, the more valuable the company I work for becomes.

[David Westin]

Some companies are investing hundreds of billions of dollars right now in AI. They have to get a return on investment from somewhere. Either they have to actually have more revenues and more profits, or they have to cut their costs somewhere. And that's part of the concern, I think, about employment. Some people say, yeah, you've got to cut employment. How does that pencil out, do you think? How does a return investment for all that come?

[Drew Mattis]

Well, so I think that that's a very short term way of looking at the world. And I think that if we really consider the long term view of what's best for a lot of Companies, it's to make the investment and make sure that you understand where the payoff is.

[David Westin]

Recently, companies have justified layoffs by saying AI can replace workers. But some critics have countered by calling the move AI washing, implying that companies are dressing up old fashioned cost cutting as AI adoption in a bid to satisfy shareholders.

[Arvind Narayanan]

What we've seen historically is that as technology advances, people move to higher and higher levels of abstraction, of performance work that involves supervising the technology to do the work instead of doing it directly themselves. And what we're seeing with AI so far is consistent with this pattern. So my bet is on not seeing massive labor effects across the economy. But there might be specific jobs in sectors in which there might in fact be quite negative consequences. Software engineering has been the clear leader, I think, in the pace of AI adoption, but also the effects of AI adoption to the point where going back to a time when all the code was written manually by hand, that almost feels like going back to punch cards before the days of keyboards. Critically though, even in companies where AI is being rapidly adopted for software engineering, it's not really clear that it's leading to replacing software engineers with AI. In fact, the number of job postings for software engineers actually continues to increase.

[David Westin]

Until recently, job postings for software engineers and others had been going down. But last year the need for programmers spiked, unlike the rest of the jobs market. One of the things that is sad is that although it may be as profound as the Internet or electricity, it's coming much faster. Does that make a difference?

[Arvind Narayanan]

There are many claims that are being made that AI is the fastest adopted technology in history. But when we looked at those numbers when writing this essay, we weren't really convinced. If you look at something that could really make an economic impact, like replacing customer service representatives with chatbots, for instance, I mean, when ChatGPT came out, so many people, including me, thought that that was the first thing that was going to happen in terms of labor effects. Chatbot. It's right there in the name. Why is that still not happening? For the most part, it turns out that when you kind of look at this deeper AI integration, where there are risks, there are legal liabilities involved, there are structural and organizational changes that companies have to make. It's not so simple. One of the stories we heard was that Air Canada had this kind of customer service chatbot and it made up a non existent refund policy when a customer was asking about it and the customer got upset and sued. It went all the way to the Canadian Supreme Court. And what the court decided was to force the airline to abide by this non existent refund policy. The speed limits in many cases are things like regulatory barriers that have of course been inserted by humans, but for very good reasons. There are, you know, there's kind of a saying that every regulation is written in blood, every safety regulation at least. So when you look at why AI can't make rapid inroads into health care, for instance, it's because we're not going to let AI autonomously do medical experiments on people, right, to figure out how to cure cancer.

[David Westin]

Samyukta Melanji has seen that firsthand. She's an oncologist who has been hired as vice president of clinical strategy at Open Evidence, a medical chatbot that was recently valued at $12 billion and has been called the ChatGPT for doctors.

[Samyukta Melanji]

I'm a little bit, you know, circumspect when it comes to those sort of grandiose statements around AI tools just replacing physicians entirely. But I do think that there's definitely going to be, you know, a world in which AI tools become a part of clinical practice. And I'm excited to enter that world, to be honest. I certainly do not think that they're going to replace physicians. Every single company founder putting out statements talking about the efficacy of their tool, they'll say something like, this tool has outperformed a group of physicians in coming to a diagnosis or solving a clinical problem. And I think what they're trying do to, to do by sort of putting these statements out there entirely is showcase the efficacy of their tool by, and as well not take any liability for the downside that could happen because the AI tool has hallucinated or provide a biased answer or provide a false negative. And I think that's a real problem. I think it's actually really inappropriate to sort of make statements like that without kind of realizing, sort of assigning or taking on responsibility for what happens when your algorithm messes up. What happens if a physician takes on a recommendation that an algorithm has generated and that turns out to be the wrong one, who kind of like assumes that responsibility?

[David Westin]

Like most technology, AI will continue to improve. And even if it doesn't get everything right now, that potential for improvement leads some to worry that it might get too smart for humans to handle. Among those raising concerns is Geoffrey Hinton, a Nobel prize winning computer scientist known as the godfather of AI.

[Geoffrey Hinton]

Suppose that some telescope had seen an alien invasion fleet that was going to get here in about 10 years. We would be scared and we would be doing stuff about it. Well, that's what we have. We're constructing these aliens, but they're going to get here in about 10 years and they're going to be smarter than us. We should be thinking very, very hard. How are we going to coexist with these things?

[David Westin]

What do you say to the people who say there may actually be a greater danger here beyond just losing your job?

[Arvind Narayanan]

Where I disagree with people like Hinton is on two big things. One, if we just club a whole bunch of things together as some umbrella category of AI risk and then treat it as an AI problem, we just lose a lot of clarity and we lose a lot of avenues by which we can actually address the problem. So one kind of risk that people are worried about is that AI is very good at hacking, finding new vulnerabilities in software, and maybe taking over critical systems. That is something we should be worried about. But it turns out that specific risk has a very specific solution. But this idea that we should imbue AI with a maternal instinct, or in computer science, it goes by the term alignment, that AI is going to magically know what is the right thing to do in every place, possible situation. That seems like a pipe dream to me, because what is the right thing to do in every possible situation? Well, people don't agree on that. So how can we agree on what AI should do in those situations? And so putting all our eggs in this one basket of alignment is going to result in a very brittle scenario, which is that if anyone ever creates a misaligned AI system, then all bets are off. And how are you ever going to stop every. Every kid in the world from creating their own AI system that might not follow your rules or your instinct or whatever it is? Because the trend we've seen is that something that takes a data center today within a few years is going to be something that you can do in your mom's basement.

[David Westin]

Whatever this new world of AI makes possible. Narayanan says there's one thing that it simply will not be able to predict the future.

[Arvind Narayanan]

Once this happens, we will have no choice but to rely on AI in order to figure out what, let's say, military or geopolitical strategy should be. But when we actually look at the research, the picture that emerges is that the reason people are not that great at predicting the future is not some limitation of our biology. It's because the data that's out there that might allow us to extrapolate to what might happen in the future is pretty limited. But also the future is genuinely unknown.

[David Westin]

And just because the future is genuinely unknown. None of us, not the experts like Hinton and Narayanan, and not even AI itself, can predict just how big it can get or how fast it can grow up. Next. It takes a lot to get the Canadians angry. Has President Trump managed to do it this time?

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[Amy Morris]

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[David Westin]

This is a story about a troubled relationship. For 100 years, the United States has had close ties with its neighbor to the north. But when President Trump imposed tariffs on Canada last year, Ottawa responded, businesses braced, and the tone between the two neighbors shifted from familiar to fraught. For a lot of Canadians, this wasn't just about prices or profits. It was about trust and whether the U.S. still sees Canada as a partner and ally. Michael McKee takes us to Canada to see how the relationship looks from north of the border.

[Michael McKee]

An hour north of the line dividing the US And Canada, in a small town called Knowlton, the cross border relationship feels fragile.

[Louise Penny]

We love the American people, but we're

[Samyukta Melanji]

also defensive about our economy and want

[Louise Penny]

to want to, to support Canadian business,

[David Westin]

which we feel might be under attack right now.

[Arvind Narayanan]

Having family in the United States as well makes things a little precarious right now.

[Michael McKee]

Since President Trump imposed new tariffs on imports from Canada, the relationship has soured. Canadian imports from the US Are down and the nation slipped from being the largest buyer of US Goods to number two, behind Mexico.

[Ravi Iyer]

Canadians know that our old comfortable assumptions that our geography and alliance memberships automatically conferred prosperity and security. That assumption is no longer valid. We are rapidly diversifying abroad.

[Arvind Narayanan]

The past few days we've concluded new

[Ravi Iyer]

strategic partnerships with China and Qatar.

[Michael McKee]

Although Carney is optimistic about Canada's economic agenda, February's jobs report paints a bleaker picture. The country shed the most jobs in more than four years last month, sending unemployment up to 6.7% from 6.5% in January.

[Stephen Polish]

We're all going to lose around 2% of our GDP because of the new trade environment that includes the United States. When I say 2% for somebody, it's 100% of their livelihood.

[Michael McKee]

Stephen Polish succeeded Mark Carney as governor of the bank of Canada and is now a special advisor at Canadian business law firm Osler. Let's talk a little bit more about

[Randy Quarles]

the, about the loss.

[Michael McKee]

Where do we see it now?

[Stephen Polish]

Oh, you see it in autos, you see it in steel, you see it in aluminum, you see it in copper, and you see it in the forestry sector. These are sectors that are deemed really strategically important.

[Michael McKee]

As US Tariffs weighed on Canadian exports for much of the year, real GDP contracted in two of the four quarters of 2025 and for the year increased by just 1.7%, the slowest pace of annual growth since the economy shrank during COVID in 2020.

[Stephen Polish]

But right now, you still encounter that belligerence at the grocery store, you know, looking for the thing not made, not groc grown in the United States or, well, Look, Mexican vegetable versus U.S. california. You know, people are still doing that.

[Michael McKee]

Some Canadians say they feel betrayed by the US with more than half of respondents in a political poll saying the country is no longer a reliable ally.

[Louise Penny]

Life here before this particular round was wonderful. We had great relationship. I guess it was February of last year when everything changed.

[Michael McKee]

Louise Penny is a Canadian journalist turned author. When she was on tour last year, Penny decided to redirect her US Tour dates back to Canada in protest of Trump's tariffs. She's also refusing to return to the US until the trade war is over, a trend that's becoming increasingly common amongst Canadians.

[Louise Penny]

The decision to not tour in the United States was obvious. It wasn't even a decision. There was no way I was going to go into a country that had declared war on us any more than I would imagine Americans, if Canada had done the same thing to you. But we sell merchandise here and the vast majority of it went into the United States States now, no longer, not because people don't want it, but because the tariffs are ruinous. They can't buy a $30 mug and have $50 worth of tariffs put on it. So we've lost huge amounts because of the tariffs and we're small. I can only imagine what larger corporations in Canada are suffering.

[David Westin]

What are CEOs saying?

[Drew Mattis]

What are they thinking at this point?

[Stephen Polish]

Well, they remain very cautious, would say in areas where trade matters the most, they're essentially still frozen. And they're the type would be just doing keep the lights on, do our maintenance, spend, keep our powder dry.

[Goldie Heider]

The truth is we need to be more competitive. We need to be more productive. This is not a unique problem to Canada.

[Michael McKee]

Goldie Heider is the CEO of the Canada Business Council.

[Goldie Heider]

Prime Minister Carney always likes to emphasize that when it comes to the marginal effective tax rate, you know, the Canadian price is the low Canadian rate is lowest in the G7. Those kinds of things inspire confidence for businesses to be able to deploy capital. Otherwise, you're going to see a lot of chilling and freezing of the capital.

[Michael McKee]

Although small business owners and some industry CEOs are feeling the pinch, some have a more nuanced view.

[Barry Zecelman]

All those policies are working, more so than I've ever seen in my 40 year career. That's why I'd like Canada to endorse it and do the same thing.

[Michael McKee]

Barry Zecelman is the chief executive of Zecelman Industries, a steel pipe and tube manufacturer. He sees the relationship from both sides of the border. Having started his business in Windsor, Ontario, now having his headquarters in Chicago and producing his products in both countries. How do the tariffs affect your business in Canada?

[Barry Zecelman]

Tremendously. I'm paying massive tariffs to ship products from Canada into the U.S. can you

[Michael McKee]

put some kind of a dollar figure or percentage figure on what you're having to pay?

[Barry Zecelman]

We're having to pay roughly almost 250, $275 a ton US so I'm paying 6, 7 million dollars a month in tariffs. It's huge. You know, we've got to eat it. I've got to keep this plant running. I'm trying. My US customers need the product. I'm manufacturing more and more in the us We've upped our production there tremendously. I mean, if you had to compare Canada to the U.S. the U.S. is booming. I have never seen more robust demand. So the policies are working over.

[Michael McKee]

So the back and forth on tariffs, even though a lot's covered under usmca, has put a chill on the Canadian economy.

[Barry Zecelman]

Yeah, we need to resolve it. All right, I understand Prime Minister Carney and he's our Prime Minister, so I've got to stand behind the leadership of our country. But we have to have a healthy trading relationship with the U.S. it is not going to be replaced by other countries. We can't just keep poking them in the eye and telling them we don't need you. And standing there at Davos pretending that these mid market or mid countries are going to band together against the US Every one of them is in the back door trying to sign a deal with the US it's not going to happen. It's the greatest economy in the world. It's the market that everybody in the world wants to be in. And we're right next door to it with the longest border in the world, next to it and biggest trading relationship. And we're saying, oh, we're going to move on. That doesn't work. That doesn't hold water. When you sit there and you know, oh, we're going to make it the 51st state. Look, people got to relax and people have to calm down.

[Michael McKee]

You don't feel insulted by the President as a Canadian?

[Barry Zecelman]

No, I have thicker skin. I mean, you can't get insulted like that and turn that into A global trading fight. You know, read in between the lines. I'm telling you, I believe with everything in my heart that if Donald Trump, President Donald Trump, had the right relationship with Canada, a fair trading relationship, and resolve some of these issues, he'd put his arms around Canada and hug them and welcome them into the family because he would feel secure that we've got a family that's working together for the greater good of North America against many bad actors who are bad for the US and bad for Canada, like Zecelman.

[Michael McKee]

Haider says it might be hard to separate business from personal when it comes to cross border relations, but in the long run, it might be for the best.

[Goldie Heider]

Canadians have the right to respond the way that they have. Look, it's emotional response, but I will say this about Canadians. We can separate emotion from reason. We ran a survey not too long ago which shows that, you know, over 80% of Canadians feel very strongly that this agreement is good, that it's working and that it should be reviewed and renewed. I mean, we have to some extent taken it for granted that we share this border with the largest economy in the world. And we've been a little bit comfortable. I have said this to many Americans, particularly in the administration. It is not in your interest to have a weak Canada and a weak Mexico. Let's be clear. We are a very lucky group of countries. This is not India, Pakistan or China, Taiwan or North Korea or South Korea. We are very fortunate to live in a neighborhood where we find a way to work together.

[Michael McKee]

Half of Canadians believe it's still important to preserve Canada's trade agreement with the US And Mexico. The USMCA or CUZMA as the Canadians call it. It's up for review in July of this year, begging the question, what comes next as CUZMA gets renegotiated and as

[Drew Mattis]

the tariff situation goes on, there's been talk of Mexico and Canada sort of reaching over the United States and concluding

[Michael McKee]

some type of their own agreement.

[David Westin]

Do you see anything like that happening right now?

[Barry Zecelman]

I think we can both kind of

[Stephen Polish]

treat as, you know, you can invest in Mexico and that gives you access to the United States market. That's, that's basically what USMCA kind of does and same thing in Canada. And so that's where investment comes, the platform for, for trade in North America. Could it be the other way around or just, as you say, go over? Well, of course it can because that's the nature of the current agreement. We'll see how the KUZMA or USMCA renegotiations go, but frankly, they could go nowhere.

[Barry Zecelman]

I do not like the fact at all that there are these trade tensions between Canada and the U.S. i would absolutely love for this temperature to come down. I think that these two countries should have a robust trading relationship between the two of them. I think that there's a lot of things that Canada can offer to the US And I think there's a lot of things the US can offer to Canada. And I think that they need to get to the issues that are contentious, deal with them and move on. I mean, if you talk to any Canadian, you know, they're upset, their pride's been hurt and, and they feel they're standing up to what they perceive as a bully.

[Goldie Heider]

I think it will be an important component of his legacy if we're able to review and renew it and allow it to continue to bring about the prosperity and the growth and the security that it has offered, you know, for decades now. What we cannot have is an agreement that's that some have called a zombie agreement. It exists, but it doesn't really mean anything. It just kind of perpetuates out there in the abyss. That's not constructive. And let me be clear about one thing that your viewers more than anywhere else in the world would understand. Capital doesn't have a heart. Canadians like Americans. I think Americans like Canadians and we'll get through this.

[David Westin]

Coming up, putting an age limit on social media users. Australia's done it. What would it mean if the rest of us followed?

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[Carol Massar]

I'm Carol Massar.

[Tim Stenovec]

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[David Westin]

This is a story about trying to put the genie back in the bottle. It's been 100 days since Australia implemented a world leading policy restricting social media for those under the age of 16. In the months since, other countries have moved towards similar measures. But while few argue about the need to do what we can to protect the mental health of young people, opinion is split on the success of the new rule. Long before Australia's social media restrictions took effect, Sydney father of five Danny Aladje knew his eldest daughter's mobile phone was causing more harm than good.

[Ravi Iyer]

She constantly would say to us that if we didn't give her a phone, she'd be the only child in her grade without one she would lose all her social connection. So we did give in and gave her that phone. Within the space of days, we saw that it ripped her away from the family life. It completely overwhelmed all her spare time. She was no longer reading like she was previously. She was no longer engaging with her siblings. She wasn't helping with dinner anymore. Every spare moment was spent attending to those pings and dings.

[David Westin]

It was enough to prompt Aladgie to start a community group heads up alliance for Australian parents delaying social media and smartphones for their children. So when the Australian government announced a landmark new policy, this is Australia showing enough is enough, Elaji was relieved.

[Ravi Iyer]

The social media laws that came into effect in December was a huge vindication for our movement because for a long time we were spreading the word through word of mouth and, you know, some people thought that we were just being a little bit over the top, that perhaps we weren't with the times.

[David Westin]

If they weren't with the times, then they appear to be now. Across Australia, polling from Monash University found around four in five adults support the restrictions. And countries around the world have either implemented or are considering similar rules. But the rollout has been uneven, with reports of many kids finding ways around the regulations. We canvassed opinions of a range of stakeholders to assess the effect of rules like that in Australia and their impact on on the social media business.

[Jennifer Park Stout]

We do not believe that we are within scope of the law because we are purely a messaging platform. We nonetheless are complying.

[Ravi Iyer (continued)]

It's displacing their studies, it's displacing their attention and it's displacing their sleep.

[Ravi Iyer]

When my children are at school, they appreciate that children are less on their handheld devices.

[Paul Litherland]

I've always been 50, 50 with the restriction laws.

[David Westin]

Australia's social media regulation was a long time coming. Concerns over youth mental health were growing and the role of social media was at the heart of it.

[Ravi Iyer (continued)]

So social media has at least three negative effects on youth.

[David Westin]

Ravi Iyer is the research director for the USC Marshall School's Neely center and helps manage the Psychology of Technology Institute. Before that, he led teams at Facebook working to improve the societal impact of social media.

[Ravi Iyer (continued)]

We know that many youth have these negative experiences. They see things they're not ready for. They see unwanted sexual content, they see graphic content, they're contacted by strangers, sometimes they're groomed. Then there are these displacements of all the other things that kids should be doing right. So kids should be sleeping. They're still growing. They're developing their brains. They need to get a good night's sleep in order to, you know, do well at school the next day. And a lot of kids are using these products overnight. At times when they shouldn't be, they may be using them in schools.

[David Westin]

Iyer is in good company even among teenagers themselves. In 2022, 32% of U.S. teens said social media is mostly negative and that share has gone up to 48%. Jennifer Park Stout is the senior vice president for global policy and platform operations at Snap, best known for its app, Snapchat. Do you share some of the concerns about social media apart from messaging, which is what you identify Snapchat as primarily being?

[Jennifer Park Stout]

Look, I think this is a really complicated topic and one that can't be solved by just quick fixes or blanket bans. I think individual choice and parent choice plays a big role in how young people should be spending time on social media, media and technology. Even though Snap is primarily a messaging platform, of course there are a number of choices out there for young people to be on platforms where they're consuming content or they may be interacting with strangers. That's not what Snapchat is about. Snapchat really is a messaging platform where we've built in a tremendous amount of protections to make sure that the experience they have is safe and that they're connecting with people that they actually know.

[David Westin]

Is there research that you think is reliable to really give us a sense about what the risk might be or not be, whether it's social media generally or something more specifically?

[Jennifer Park Stout]

Yeah, I think the research is, is mixed. There's no research yet that has come out that can give really any indication that bans are the right approach when dealing with teenage well being and mental health. However, I think it was the Journal of American Medical association that came out recently that said that, you know, complete removal of social media for young people as well as excessive use, neither are healthy for experiences for teens. But somewhere around the middle, the sweet spot, that's what actually can help young people. It makes them feel connected. It makes them feel like they belong to a community.

[David Westin]

Australia acted decisively in curbing youth access to social media media. Shortly after the rules went into Effect, close to 5 million accounts across 10 different platforms were removed and new users have been barred from signing up. But that doesn't mean the rollout has been a sweeping success.

[Ravi Iyer]

Perhaps unsurprisingly, over the last three months, we've heard overwhelmingly that children have managed to find a way back onto the platforms, have not had many obstacles placed in their path whatsoever. People can just log in under a new account. So this is now where we're looking to our government and to our regulators to wield the stick that is written in the legislation itself of significant fines for those platforms who don't comply.

[David Westin]

That's also the concern for Paul Litherland, a former police officer and prominent esafety advocate in Australia who founded Surface Online Safe. He expects the wave of kids trying to circumvent the restrictions to be largely confined to those that have had existing accounts removed. He believes the trend will die down in coming years, but is calling for more compliance from social media networks.

[Paul Litherland]

My concern is once again, time and time again we've seen the networks fail in regards to response from government requests and from legislative changes. So my main concern was the fact that the networks probably wouldn't respond. And as an example, within our legislation, there's two words. The networks must take reasonable steps to remove or to stop kids from joining under that age. So my concern is with their determination or their interpretation of reasonable steps.

[Jennifer Park Stout]

We have worked very hard to meet compliance. So what that means in practical terms is that we have worked very hard to quickly identify the population of users in Australia that are under the age of 16 that we had to immediately remove from our platform. That's quite a complicated task in a world where age verification and age assurance technologies do not exist in a foolproof way. We and our operations team worked very hard to quickly identify those that were under the age of 16 as well as those that we may have inferred to be under the age of 16. And by that, we then remove those users from our platform and are continuing to work to verify the ages of these users to make sure that they are not on our platform.

[David Westin]

As you describe it, it is a complicated process that you have to go through, but as you've gone through it, is that a material portion of your clients or customers in Australia?

[Jennifer Park Stout]

I wouldn't say that it's a material portion. Right. It's those that are on the platform between the ages of 13 and 15. So we've been public about those figures. It's over 400,000 people that fall in that age category that we have removed from Snapchat.

[David Westin]

And how many users do you have in Australia?

[Jennifer Park Stout]

Overall, we have roughly 8 million daily active users in Australia.

[David Westin]

For social media companies, teenagers are an important demographic. Late last year, the Washington Post reported on internal memos from the head of Instagram telling its teams in 2024 to be, quote, laser focused on teens. If we had age limits around the world along the lines of what Australia has done, how materially would it affect the bottom line of the social media companies?

[Ravi Iyer (continued)]

So, you know, social media companies will say that they don't monetize youth that much now, which is, you know, I would think is true, I don't know, 100%. But I think what would happen is that over time people would get less in the habit because you get to develop these habits younger. And so there'd be less of the habit of using social media. As they get older, you have fewer of these network effects. So I think over the long term it would be detrimental to the growth of these platforms. Now, these companies are wildly profitable. They could have amazing businesses not doing these things. So in the grand scheme of things, these companies would do fine. They'd be wildly profitable, but they wouldn't be the growth engines that drive their stock price. And so they would just have to be like regularly profitable companies as opposed to the super profitable companies that they are today.

[David Westin]

Does it have a substantial effect on your revenue, on advertising?

[Jennifer Park Stout]

You know, we're not focused on revenue or advertisers when it comes to the safety and well being of young people. And we understand that they're a very sensitive cohort and so we care more about their experience online. All of the safety protections and measures we put in place to ensure that when they are on Snapchat, those that are eligible to be on Snapchat, that they have the safest and most positive experience they can have.

[David Westin]

Society has long taken steps to restrict the activities of youth, be it watching movies, drinking, or the right to vote. Social media may just be the latest extension of that.

[Paul Litherland]

It's important we give that analogy in regards to alcohol and driving. There's education there, there's rules around the release of these products to kids and to humans. That's what I've been really frustrated and why I left the police because there were no rules. Everything in our physical world has rules. Look at a car manufacturer. You can't release a car into Australia unless it's a five star rated, unless it's got airbags, brakes, we need brakes. Okay, so. But social media, we haven't had that.

[David Westin]

Parents like Dani Alagy hope Australia's social media restrictions are a step toward doing just that. That does it for us here at Wall Street Week. I'm David Westin. See you next week for more stories of capitalism.

[Barry Zecelman]

This is Tom Keene inviting you to join us for the Bloomberg Surveillance podcast. It's about making you smarter every business day.

[Drew Mattis]

I'm Paul Sweeney.

[Arvind Narayanan]

We bring you complete coverage of the US Market open. We cover stocks, bonds, commodities, even crypto. All the information you need to excel.

[Amy Morris]

And I'm Alexis Christophers. Bloomberg Surveillance also brings you the analysis behind the headlines. We do that through conversations with the smartest names in economics, finance, investment and international relations.

[Arvind Narayanan]

We do all this live each and

[Barry Zecelman]

every weekday that bring you the best analysis in our daily podcast search for

[Arvind Narayanan]

Bloomberg Surveillance on Apple, Spotify, YouTube or

[Barry Zecelman]

anywhere else you listen on the east

[Goldie Heider]

coast, listen at lunch and on the

[Arvind Narayanan]

west coast, listen as soon as you wake up.

[Amy Morris]

That's the Bloomberg Surveillance Podcast with Tom Keene, Paul Sweeney and me, Alexis Christofores. Subscribe today wherever you get your podcasts.

[Barry Zecelman]

Bloomberg Surveillance Essential listening each and every business day.