The EU Opens Its Arms to Canada

The EU's top executive floats making Canada the block's first associate member. Plus, Wilga the details as the U.S. burns through its interceptors to counter Iran. The U.S. military fired 60 to 70 of its Patriot interceptors in a span of about two days last week. That's more than 10% of one year's worth of production depleted in a single attack. And our Nick Timmeros walks up to one of the most consequential Fed-Rate decisions in recent memory. It's Wednesday, September 16th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. The EU is opening its arms to Canada, European Commission President Ursula Von der Leyen, this morning invited Canada to become the block's first-ever associate member, praising their shared values and promising to build a shared future as well. Von der Leyen said that the two sides would build on an existing free trade agreement with partnerships spanning AI, critical minerals, the Arctic, and a range of other issues. This is not a partnership against anyone else, but for our common strength. Canadian Prime Minister Mark Karney is set to address the EU Parliament tomorrow. Our reporting earlier this week suggested the new relationship could include visa-free travel, as well as the free movement of goods and people working in critical industries to secure supply chains. Well, Von der Leyen used her state-of-the-European union speech this morning to break some other news as well, proposing to ban children under 13 from accessing social media, online games, and chatbots. I am aware that many perceive the power of big tech as overwhelming and impossible to roll back. I disagree. Under her proposal, Von der Leyen said the kids aged 13 to 15 could access many accounts shaperoned by guardians. The EU's 27 member nations would need to approve the measures, which have passed, could raise the eye of President Trump, whose long-criticized European tech regulations. It's a fed day, and quite possibly the most closely watched rate decision of the year. Sticky inflation, stemming from the Iran War's effect on oil prices, has made a rate hike all but certain today, something chief economics correspondent Nick Timmeros says no one anticipated at the start of the year. An interest rate increase would be a big deal here, not just because they haven't raised interest rates in three years, but because Donald Trump put somebody in charge of the fed earlier this year, who he said was going to lower interest rates, and now four months into Fed Chairman Kevin Worsh's term, you could actually see the fed raising interest rates. The second thing I'm watching is does everybody support it? Does sense happen? But if the fed raises interest rates, but somebody says hold on, I don't think we need to do this. It could create an awkwardness for the Fed chair because President Trump has been suggesting Kevin Worsh didn't want to raise interest rates, and it was a hostile committee dragging him to do it. The third thing I'm watching this week is how do they explain their decision, whatever it is they do? If they raise interest rates, what is it that they think they're trying to accomplish here, and what is it that hasn't gone according to plan this year, because at the beginning of the year, it looked like the Fed thought it was going to be cutting interest rates. If the Fed holds interest rates steady, that's going to invite a lot of questions because markets overwhelmingly have anticipated a rate increase given everything that's happened in the economy and everything Fed officials said in the run-up to this meeting. Of course, a key driver of inflation are prices at the pump. According to Brown University, American consumers have spent an additional $100 billion on fuel since the onset of the Iran War, costing the average US household more than $760 in extra expenses since late February. Well, gasoline accounts for the majority of that added tab, surging diesel costs, which have climbed over 60 percent, are posing a broader risk to the economy, driving up transportation and production expenses across agricultural, manufacturing, and retail supply chains. Well speaking of the war, the US is continuing to burn through its supply of air defense interceptors, with a response to a single attack last week using up the equivalent of a week's worth of patriots and thads. Journal correspondent Jared Malson has more. What we understand from our reporting is that the US military fired more than 70 of its high-end air defense interceptors, and that includes 60 to 70 of its patriot interceptors in a span of about two days last week during an Iranian attack on Jordan. That attack we understand actually hit some American aircraft at an air base that they use in Jordan. To put this in context, Lockheed Martin, which makes patriot interceptors, produced 620 of these interceptors last year, so that's more than 10 percent of one year's worth of production depleted in a single attack. And it speaks to this problem of the munitions math that's been an issue since the onset of the war in which Iran is able to continue striking while the US is reaching what some officials have described as critical levels of munitions when it comes to air defense. New report this week by the Defense Department's Inspector General, found that the war had exposed industrial-based bottlenecks and led to "strategic inventory shortfalls." The Pentagon spokesman said that any reports suggesting the US had depleted its munitions were completely false. The US is investigating cyber attacks last month that targeted foreign energy tankers bound for the East Coast. We report that the tankers, which were carrying oil and liquefied natural gas, were attacked while transiting the Strait of Gibraltar. Experts have warned that cyber attacks on ships can be extraordinarily dangerous given the risk of explosion should compromise systems shut down an engine or lead to a loss of crew control. US authorities haven't confirmed whether Iran or another adversary like Russia or China is behind the attacks, the officials have said they are concerned that recent incidents are opening up a new front in the 7-month war. Amazon Web Services says it can't restore access to some customer information from data centers in the United Arab Emirates and Bahrain that were hit by Iranian drones earlier this year. AWS data centers in both countries have been mostly offline since those attacks, which mark the setback for Gulf States angling for a key role in the AI build out. Correspondent Omar Abdel-Baki has more. They're doing this in part to diversify their economies away from hydrocarbons, their attracting all kinds of American companies, Microsoft, AWS, OpenAI, they're all sort of striking. Multi-billion dollar deals with the UAE, Bahrain, Saudi Arabia, and the UAE in particular is sort of leading the charge. These facilities have been in the works for years, and the expert I spoke to said that data centers are not necessarily built to withstand missile attacks and it's kind of a new target of war anyway. So one thing specifically the UAE is proposing to confront the new danger of Iran lobbing missiles over the Gulf and drones over the Gulf to target their data centers is building data centers or parts of data centers underground, and they're also considering putting drone defense systems closer to these data centers, to swage fears, about them being targeted, again an expensive endeavor, and we don't know exactly if they're going to move forward with those plans. And the Pentagon is on the lookout for military service members to attend defense secretary Pete Hegseth's State of the Force event later this month, where apparently only those with the best grooming, uniforms, and physical standards will be considered. According to an email sent to Army commanders yesterday, troops would need to pass the Army's waste to height ratio, and Army fitness tests, and be selected on the basis of leadership qualities and professionalism candidates will also have the chance to work out with Hegseth, whose prioritized physical standards among the ranks, which he says are critical to improving the military's ability to fight wars effectively official, so that other commanders throughout the military received a similar version of the message of Pentagon official decline to comment. Coming up, OpenAI considers a funding round that could make the company more valuable than rival and thropic. We've got that story and more after the break. OpenAI is in early talks with investors for a fresh funding round that could value the chat GPT maker at more than $1.2 trillion. That proposed pre-IPO valuation marks a steep jump from the $852 billion benchmark of the company set in March. OpenAI's push for cash comes as it continues to absorb massive computing costs to train next-generation models, while pushing back its timeline for an initial public offering to next year. The U.S. is pressuring Mexico to accept tighter sourcing rules on AI hardware in order to prevent Chinese companies from using America's southern neighbor to bypass tariffs as part of negotiations under the U.S.-Mexico Canada Agreement. Washington is proposing strict limits on the amount of non-North American components that are allowed into AI servers and data center equipment exported from Mexico. Driven by massive demand from U.S. tech giants, AI hardware has overtaken cars as Mexico's top export to the U.S. However, trade officials fear that foreign firms are leveraging Mexican assembly plans to evade levies, setting up a major battle over regional tech supply chains. And singer Ed Sheeran, stadium tour has been thrown into turmoil after all of his supporting acts quit in solidarity with rapper Maclamore. Openers, including Aaron Row, Billy Eilish's brother Phineas, and the Danish band Lucas Graham withdrew after Maclamore was dropped from the lineup over pro-Palestinian comments that he made on stage. Removal follows pressure from venue owners and promoters, including Gillette Stadium owner Robert Kraft, who had threatened to cancel upcoming concert dates if the rapper remained on the bill. Sheeran defended his decision to continue the tour, stating that the call was made strictly by promoters, and that he prefers to keep his views on the Israel Hamas war private. And that's it for what's news for this Wednesday morning. Today's show was produced by Daniel Bach, our supervising producer, his Sandra Killhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.