Crypto News: AI safety clash

Good morning. AI chiefs are hitting the brakes, and Wall Street isn’t happy. Kevin Warsh may be about to test the limits of Fed independence. And Mark Carney rolls out the red carpet for some of the world’s deepest pockets. Listen to the day’s top stories.

— Hellmuth Tromm

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AI’s safety debate is coming to a head, pitting increasingly cautious industry leaders against Wall Street and Donald Trump’s administration. The biggest players want to slow development, while the president is downplaying the risks. China is also pushing back against AI “fearmongering.” The warnings are rattling markets, with tech stocks leading a global selloff.

Adding to the unease, oil pushed higher after Saudi Arabia shut a major crude pipeline following multiple attacks, disrupting a key route for bypassing the Strait of Hormuz. Diplomatic efforts also stumbled, with talks on a temporary shipping lane through the strait postponed. Oman called for alternative LNG routes through the Gulf. The US, meanwhile, kept up pressure on Tehran, blocking a top Iranian nuclear official from addressing the IAEA.

Then there’s the Fed. Kevin Warsh is on a collision course with Trump, with markets overwhelmingly betting on a rate hike this week. Trump has threatened to escalate his trade wars if policy isn’t eased and continued to argue that US borrowing costs should be the world’s lowest. With the 10-year Treasury yield flirting with 5%, some investors say the Fed is already “behind the curve.”

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Trump’s immigration crackdown is reshaping more than the border. Houston’s population-driven growth model is stalling, and the slowdown extends across the Sun Belt. As deportation orders surge to a record, the US may even be heading for its first-ever population decline.

Trump’s climate rollback is set to deepen, with the EPA poised to scrap Biden-era carbon limits on fossil fuel power plants. It already dismantled similar rules for vehicles and a landmark finding on greenhouse-gas risks. The Supreme Court struck down Obama’s Clean Power Plan in 2022, while Biden’s replacement required coal plants to capture most carbon emissions by 2039 or close — the mandate now being repealed.

Deep Dive: Carney’s Trump Challenge

Mark Carney’s brainchild, the first-ever Canada Investment Summit, kicks off today, drawing money managers overseeing more than $70 trillion. The charm offensive comes as Canada grapples with fallout from his politically popular decision to walk away from trade talks with Trump.

The new 50% tariffs by the US on $20 billion of Canadian goods will hammer businesses largely sheltered from the trade war, with auto parts and forestry already hurting.
Carney’s urgent task is to reshape Canada’s economy for a hostile US and convince deep-pocketed investors to help fund the transition.
Canada began his tenure with weak investment and productivity, and was increasingly seen as a difficult place to put money after major projects were rejected by courts or ultimately abandoned altogether.
There are already some green shoots in foreign investment, while Carney is looking abroad for deeper ties, including a closer trade and security alliance with the EU.

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Kevin Warsh has talked himself into a rate trap: underlying inflation is improving, but not enough to clear the bar he set for avoiding a hike, leaving the Fed little choice but to raise rates this week, John Authers writes.

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Before You Go

The red carpet at a screening during the Toronto International Film Festival.

Hollywood clashes with high finance in Toronto as the film festival coincides with Mark Carney’s investment summit. Film stars and financiers are competing for penthouses, private dining rooms and $1,440 cocktails.

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