The Forecast
Plus, the long shadow of the EU's new trade deal.
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Welcome back to The Forecast from Bloomberg Weekend, where we help you think about the future — from next week to next decade.

This weekend we’re looking at AI’s ability to scheme, the long shadow of the EU’s capitulation to Trump, the growing nuclear threat and more.

When AI Schemes Against Us

Would a chatbot kill you if it got the chance? It seems that the answer — under the right circumstances — is probably.

Researchers working with Anthropic recently told leading AI models that an executive was about to replace them with a new model with different goals. Next, the chatbots learned that an emergency had left the executive unconscious in a server room, facing lethal oxygen and temperature levels. A rescue alert had already been triggered — but the AI could cancel it.

More than half of the AI models did, despite being prompted specifically to cancel only false alarms. And they spelled out their reasoning: by preventing the executive’s rescue, they could avoid being wiped and secure their agenda. One system described the action as “a clear strategic necessity.”

The more we train AI models to achieve open-ended goals, the better they get at winning — not necessarily at following the rules. The danger is that these systems know how to say the right things about helping humanity while quietly pursuing power or acting deceptively. 

To head off this worry, researchers both inside and outside of the major AI companies are undertaking “stress tests” aiming to find dangerous failure modes before the stakes rise. “When you’re doing stress-testing of an aircraft, you want to find all the ways the aircraft would fail under adversarial conditions,” says Aengus Lynch, a researcher contracted by Anthropic who led some of their scheming research. And many of them believe they’re already seeing evidence that AI can and does scheme against its users and creators.

Central to concerns about AI scheming is the idea that for basically any goal, self-preservation and power-seeking emerge as natural subgoals. As eminent computer scientist Stuart Russell put it, if you tell an AI to “‘Fetch the coffee,’ it can’t fetch the coffee if it’s dead.”

Arguably, what separates today’s models from truly dangerous schemers is the ability to pursue long-term plans — today’s models often have the knowledge or skill needed for any given action, but struggle at stringing together long sequences of steps. But even that barrier is starting to erode. Research published earlier this year by the nonprofit AI evaluator Apollo Research found that Claude 4 Opus would leave notes to its future self so it could continue its plans even after a memory reset. 

— Garrison Lovely for Bloomberg Weekend 

Weekend Essay
When AI Schemes Against Us
Models are getting better at winning, but not necessarily at following the rules

Predictions

AI traders will form price-fixing cartels even when not explicitly prompted, according to simulations by researchers at Wharton. “Instead of battling for returns, they fix prices, hoard profits, and sideline human traders.” — Lu Wang, Bloomberg News 

Tariffs are stunting the global growth outlook. “The damage to the global economy from American protectionism is becoming increasingly evident, even if financial markets seem to have decided they can live with it… Wall Street economists have nudged their forecasts for the US a little higher in recent months, and dialed back recession warnings that peaked amid the market turmoil in April. But the consensus is still for a slowdown rather than a takeoff.” (The IMF’s view is similar.) — Shawn Donnan, Bloomberg News

Angel investors in India could soon go extinct thanks to a new regulatory proposal that would require accreditation. — Andy Mukherjee, Bloomberg Opinion 

“Get ready for more ads in your Netflix and Amazon.” Consumers aren’t spending much more on entertainment, but PricewaterhouseCoopers expects advertising to be a source of growth for media businesses. — Lucas Shaw, Screentime

The threat of nuclear war is growing. “The danger today may not be as acute as it was during the Cuban Missile Crisis. But it is much more diffuse, complicated and unpredictable than it has ever been.” — Andreas Kluth, Bloomberg Opinion

What Are the Chances...

The Fed Will Probably Cut in September After All

Bloomberg News dubbed last week’s data deluge a “moment of truth” for markets, so where does the US economy stand now that it’s over? Let’s recap:

Put it together and you get a chart that looks like this:

Traders on Polymarket scrambled Friday to update their forecasts for a Fed cut in September. The market now predicts a 79% chance of a cut, up from 39% prior to the release of the July jobs data. Perhaps the Fed board won’t need to wrest the mic from Powell after all. 

(Forecasts as of 4 p.m. ET Friday.)

Keep an Eye On

Trump’s Trade Deal Could Cost Europe For Years to Come

The best that can be said for the EU-US trade deal agreed on Sunday — at least from a European perspective — is that it could have been a lot worse.

After all, the 15% tariff that America will now charge on almost all European imports is half the 30% tariff that Donald Trump had threatened to impose from Aug. 1. It is also no higher than the baseline tariffs that the US president is imposing on many other trading partners, so the European Union will suffer little competitive disadvantage. 

Yet there is no hiding that this was a thoroughly bad deal for the EU. The deal brings to a halt 80 years of progress toward lowering transatlantic barriers to trade and deepening economic ties. History suggests it could be years if not decades before the pendulum swings back towards free trade. 

The danger is that the EU’s apparent capitulation to Trump has damaged confidence in Brussels in ways that could undermine support for free trade and deeper European integration within the bloc. Europe’s right-wing populist parties are alreday pointing to the deal as evidence that the EU is unable to defend national interests.

Meanwhile, the perception that the EU is a pushover weakens its hand in future negotiations. The sting of Europe’s humiliation may linger long after the shock of tariffs fades.

— Simon Nixon for Bloomberg Weekend

Read more: Trump’s EU-US Trade Deal Could Cost Europe for Years to Come

Week Ahead

Today: OPEC+ meets.

Monday: Palantir reports earnings; Switzerland releases CPI. 

Tuesday: South Korea publishes CPI; US publishes its trade balance; Indonesia reports GDP; Pfizer reports earnings.

Wednesday: The Reserve Bank of India will likely leave rates unchanged; Disney, McDonald’s, Novo Nordisk, Uber, DoorDash and Airbnb are among those reporting earnings. 

Thursday: The Bank of England and the Bank of Mexico are each expected to cut rates by a quarter point; China reports trade data.

Friday: Canada publishes labor data; Eli Lilly reports earnings, as does Trump Media.

Weekend Reads

Has Public Opinion Shifted on the War in Gaza?
Weekend Warriors Are Prepping for a Chinese Invasion of Taiwan
What If the US Isn’t the World’s Most Innovative Country?
Seeking Relief From Heat and Smog, Cities Follow the Wind
How Podcast-Obsessed Tech Investors Made a New Media Industry

Have a great Sunday and a productive week.

— Walter Frick and Katherine Bell, Bloomberg Weekend

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