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

26:14But 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 that happen in the future is pretty limited, but also the future is genuinely unknown. 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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28:27This 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.

29:04An hour north of the line dividing the U.S. and Canada, in a small town called Knowlton, the cross-border relationship feels fragile. We love the American people, but we're also defensive about our economy and want to support Canadian business, which we feel might be under attack right now. Having family in the United States as well makes things a little precarious right now. Since President Trump imposed new tariffs on imports from Canada, the relationship has soured. Canadian imports from the U.S. are down, and the nation slipped from being the largest buyer of U.S. goods to number two, behind Mexico.

29:42Canadians 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that our geography and alliance memberships automatically conferred prosperity and security, that assumption is no longer valid.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. The past few days, we've concluded new strategic partnerships with China and Qatar. 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 percent from 6.5 percent in January. We're all going to lose around 2 percent of our GDP because of the new trade environment.

30:22That includes the United States. When I say 2 percent, for somebody it's 100 percent of their livelihood. 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 the loss. Where do we see it now? 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, you know, really strategically important. As U.S. tariffs weighed on Canadian exports for much of the year, real GDP contracted in two of the four quarters of 2025.

31:01And for the year, increased by just 1.7 percent, the slowest pace of annual growth since the economy shrank during COVID in 2020. Right now, you still encounter that belligerence at the grocery store, looking for the thing not made, not grown in the United States. Or, well, look, Mexican vegetable versus U.S., California. You know, people are still doing that. Some Canadians say they feel betrayed by the U.S., with more than half of respondents in a political poll saying the country is no longer a reliable ally. Life here before this particular round was wonderful. We had a great relationship.

31:41I guess it was February of last year when everything changed. Louise Penny is a Canadian journalist-turned-author. When she was on tour last year, Penny decided to redirect her U.S. tour dates back to Canada in protest of Trump's tariffs. She's also refusing to return to the U.S. until the trade war is over, a trend that's becoming increasingly common amongst Canadians. 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.

32:28So we sell merchandise here and the vast majority of it went into the United 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. What are CEOs saying? What are they thinking at this point? Well, they remain very cautious, I would say. And 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.

33:19The truth is we need to be more competitive. We need to be more productive. This is not a unique problem to Canada. Goldie Heider is the CEO of the Canada Business Council. Prime Minister Carney always likes to emphasize that when it comes to the marginal effective tax rate, the Canadian rate is the 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. Although small business owners and some industry CEOs are feeling the pinch, some have a more nuanced view. All those policies are working, more so than I've ever seen in my 40-year career.

33:58That's why I'd like Canada to endorse it and do the same thing. Barry Zeckelman is the chief executive of Zeckelman 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? Tremendously. I'm paying massive tariffs to ship products from Canada into the U.S. Can you put some kind of a dollar figure or percentage figure on what you're having to pay? We're having to pay roughly, you know, almost$250,$275 a ton, U.S.

34:44So, you know, I'm paying$6,$7 million 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 U.S. customers need the product. I'm manufacturing more and more in the U.S. 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 there. So the back and forth on tariffs, even though a lot's covered under USMCA, has put a chill on the Canadian economy. Yeah, we need to resolve it. All right. I understand Prime Minister Carney and he's our Prime Minister.

35:26So 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 U.S. Every one of them is in the back door trying to sign a deal with the U.S. 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.

36:08And we're saying, oh, we're going 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. You don't feel insulted by the president as a Canadian. No, I've got 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 who are bad for the U.S.

37:00and bad for Canada. Like Zeckelman, Heider 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. 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 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.

37:37I 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. Half of Canadians believe it's still important to preserve Canada's trade agreement with the U.S. and Mexico, the USMCA or KUSMA as the Canadians call it. It's up for review in July of this year, begging the question, what comes next? As KUSMA gets renegotiated and as the tariff situation goes on, there's been talk of Mexico and Canada sort of reaching over the United States and concluding some type of their own agreement.

38:26Do you see anything like that happening? Right now, I think we can both kind of treat as, you know, you can invest in Mexico and that gives you access to the United States market. That's basically what USMCA kind of does. And same thing in Canada. And so that's where investment comes the platform for trade in North America. Could it be the other way around? Or as you say, go over? Well, of course it can, because that's the nature of the current agreement. We'll see how the KUSMA or USMCA renegotiations go. But frankly, they could go nowhere. I do not like the fact at all that there are these trade tensions between Canada and the US.

39:07I 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 U.S. and I think there's a lot of things the U.S. 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 they feel they're standing up to what they perceive as a bully. 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 for decades now.

39:51What we cannot have is an agreement 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 of 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. Coming up, putting an age limit on social media users. Australia's done it. What would it mean if the rest of us followed? Wall Street Week is brought to you by OTC Markets Group.

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41:46This 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 Eladji, knew his eldest daughter's mobile phone was causing more harm than good. She constantly would say to us that if we didn't give her a phone, she'd be the only child in her grade.

42:30Without 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. It was enough to prompt Eladji 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...

43:10This is Australia showing enough is enough. Eladji was relieved. 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. 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.

43:54But 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 the social media business. We do not believe that we are within scope of the law because we are purely a messaging platform. we nonetheless are complying. It's displacing their studies, it's displacing their attention, and it's displacing their sleep. When my children are at school, they appreciate that children are less on their handheld devices. I've always been 50-50 with the restriction laws.

44:31Australia'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. So social media has at least three negative effects on youth. 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. 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.

45:09They're contacted by strangers. Sometimes they're groomed. And 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 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. Ayer 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%.

45:42Jennifer 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? 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 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.

46:30That'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. 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? Yeah, I think the research is mixed. There's no research yet that has come out that can give really any indication that bands are the right approach when dealing with teenage well-being and mental health.

47:04However, 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. Australia acted decisively in curbing youth access to social 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.

47:46But that doesn't mean the rollout has been a sweeping success. 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. That's also the concern for Paul Litherland, a former police officer and prominent e-safety advocate in Australia who founded Surf Online Safe.

48:29He 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. 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.

49:10So So my concern is with their determination or their interpretation of reasonable steps. 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.

49:54And by that, we then removed 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. 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? 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. And how many users do you have in Australia overall?

50:38We have roughly 8 million daily active users in Australia. 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? 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 develop these habits younger.

51:26And so it would be less in 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.

51:55Does it have a substantial effect on your revenue on advertising? 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. Society has long taken steps to restrict the activities of youth. be it watching movies, drinking, or the right to vote.

52:34Social media may just be the latest extension of that. 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 at 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. Parents like Danny Elagji hope Australia's social media restrictions are a step toward doing just that.

53:23That does it for us here at Wall Street Week. I'm David Weston. And see you next week for more stories of capitalism.

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