Uncertainty

Both sides signed a digital trade deal, as Trump’s trade threats push Washington’s allies to seek closer ties elsewhere.

The European Union and Canada have launched what they described as an Alliance for the Future, as Ottawa prepares to become the bloc’s first so-called “associate member”.

Prime Minister Mark Carney hosted the Canada-EU summit in Montreal and signed a digital trade deal, alongside other agreements. Also at the Friday summit were European Commission President Ursula von der Leyen and European Council President Antonio Costa.

The term “associate member” has no legal basis and is contested by some EU states. However, its use underscores the desire of Canada and the EU to forge closer relations, as United States President Donald Trump continues to threaten Washington’s traditional allies with trade tariffs if they do not play by his rules.

“Canada and the EU are working to establish the closest possible partnership, which will be far from full membership, but which will make Canada the first associate member of the European Union,” Carney posted on X.

“Today in Montreal, we have taken a major step forward by establishing more than twenty measures that will increase affordability, create opportunities and ensure our sovereignty on both sides of the Atlantic.”

In a joint statement following the summit, the two sides announced an agreement under which the European Investment Bank will invest in critical Canadian resources, particularly raw minerals. They also said they would advance cooperation on artificial intelligence security and safety.

“A more dangerous and divided world has fundamentally changed the requirements of sovereignty. It is no longer enough for nations to feed, fuel and defend ourselves,” the statement said.

It added that “true sovereignty” requires secure access to critical minerals, semiconductors, payment systems, energy, vaccines, space-based communications and AI.

Ukraine was also on the meeting agenda, with Carney announcing Canada’s participation in the EU’s 90 billion euro ($103bn) support loan for Kyiv. Carney said Canada would make an initial contribution of 500 million euros ($558m).

Opportunities for students in Canada and the EU were also discussed. Both sides said they would launch negotiations aimed at deepening Ottawa’s participation in Erasmus+, the EU’s flagship student exchange programme.

Carney and Trump are currently engaged in a trade dispute, with talks under way to reach a deal between the two countries.

WASHINGTON — In September, just weeks before Americans were set to vote in this year’s midterm elections, a sudden panic over the dangers posed by artificial intelligence caught the White House off guard. A whistleblower had gained viral attention warning the technology could soon pose an existential threat.

President Trump was quick to dismiss concerns, evoking urgency in the U.S. race to achieve global dominance in superintelligence. He rejected calls to negotiate guardrails on the most advanced AI models with China’s leader, Xi Jinping, weeks later, during a prime opportunity to do so in Washington.

Privately, the president expressed concern that public hysteria over AI could jolt markets that have become excessively concentrated in AI-related stocks. He had already seen fresh polling that showed widespread bipartisan opposition to the boom in construction of AI data centers, a push by Trump that has cannibalized chips and energy from other sectors of the economy, driving up costs.

Now, on the campaign trail in the final days before the vote, Trump is vowing to expand a “golden age” of prosperity through the end of his presidency. But experts say his policies on AI have set the U.S. economy up for a period of tremendous risk over the next two years.

Some of the world’s leading financiers are sounding increasingly alarmed about an AI bubble. Ray Dalio, founder of Bridgewater Associates, has warned that AI stocks have become detached from financial fundamentals, pushing markets to precarious highs. Ken Griffin, the world’s richest hedge fund owner, said last week that AI is “almost certainly” fueling a market bubble that could be on the verge of a burst.

Economists warn that Trump has overseen fiscal policy that would give the federal government fewer tools than it has had in the past to respond to a crisis.

“Trump could easily run into a financial crisis before his term is up,” said Kenneth Rogoff, an economist at Harvard. “It is entirely plausible to have a 30% — or more — drop in the stock market, and in the context of an economy so dependent on AI, this in turn could easily lead to a recession and widespread financial distress.”

Spending on data center infrastructure last winter and spring accounted for nearly all U.S. economic growth, according to independent analyses. Without it, growth would have slowed to a mere fraction of a percentage point, leaving the economy nearly stagnant and flirting with recession.

The Nasdaq 100 has about 70% of its index weight in companies that depend on AI, from semiconductor manufacturers and Big Tech giants to cloud platforms and software providers. Anthropic, one of the top AI industry leaders, plans an initial public offering next month, while its chief rival, OpenAI, expects to go public next year.

From left, Chris Painter, president of the Model Evaluation and Threat Research, Marius Hobbhahn, CEO of Apollo Research, Paul Ohm, professor of law at the Georgetown University Law Center, Kurt Gaudette, senior vice president of Dragos, and Daniel Kokotajlo, executive director of the AI Futures Project, are sworn in to the Senate Homeland Security and Governmental Affairs Subcommittee on Disaster Management, District of Columbia, and Census hearing titled “Rogue AI: Securing the Homeland Against AI Agent Attacks,” in Dirksen Senate Office Building on Wednesday, September 30, 2026.

(Tom Williams/CQ-Roll Call, Inc via Getty Images)

“Because government finances are already strained, with the national debt on a patently unsustainable trajectory, there is no guarantee of a sharp drop in long-term borrowing rates for the government,” Rogoff continued. “So the options for bailing out the financial sector, or fighting recession, could be much more constrained than during the global financial crisis.”

While doubling down on the promise of an untested, frontier technology, Trump’s other economic policies may be hobbling its growth. Tariffs have raised the costs of imported chips, servers, networking equipment, metals and electrical components, and visa restrictions have tied the hands of industry leaders trying to secure the world’s best talent. Runaway federal deficits have driven long-term bond interest rates, adding pressure on AI firms already strapped with debt.

Servaas Storm, an economist closely following the AI sector at the Delft University of Technology, said the industry is already facing severe financial headwinds that could precipitate a panic.

Prices for energy, chips and minerals are driving up the cost of doing business, while early AI adopters such as Microsoft, Meta and Walmart are scaling back its use as employees spend too much time correcting errors, cleaning up low-quality output and addressing security lapses.

Slower adoption could further complicate the search for revenue, particularly for companies already struggling to monetize the technology. For now, hyperscalers are shouldering the cost of financing frontier AI labs that, as Storm put it, “do not have a credible path to profitability.”

“There is indeed an AI bubble in the stock market and in data center construction, which could pop rather soon, as rising debt loads and elevated interest rates could prove too much to sustain it,” Storm said. “That moment is not imminent, but it is approaching — and it will very likely happen before the end of Trump’s presidency.”

An economy already under duress from Trump’s other economic policies — from tariffs and tax cuts to the Iran war — could precipitate further pain, said Darrell Duffie, a finance professor at the Stanford Graduate School of Business.

Leading AI companies are already running “day-after” drills in anticipation of an AI-related crisis within the next year, according to Axios.

Americans head into election day deeply pessimistic about the economy, with 77% rating it fair or poor, according to a Fox News poll. A separate CNBC survey found that just 34% approve of Trump’s handling of the economy, while 35% of Republicans disapprove — a record high within his own party.

Inflation has fallen sharply from its 9% peak in 2022, during a pandemic-era surge, reaching 2.9% by the end of Biden’s presidency. Under Trump, it has climbed once again to 3.7%, driven by rising energy, transportation and housing costs — among the top concerns for voters entering next month’s vote.

Persistent inflation has forced the Federal Reserve to keep interest rates elevated, squeezing borrowers. And those rates — paired with high government spending and concerns over mounting deficits — have pressured the bond market, pushing 10-year Treasury yields to levels not seen since the early 2000s.

“Financial crises, by their nature, are virtually impossible to predict,” Duffie said, asked whether he shared concerns of a potential AI bubble.

“If we know we are going to be in a crisis soon,” he added, “markets advance the crisis to now.”