Week 45 news

This week, in a post-US election special, we look at:

• The potentially catastrophic impact of Trump’s trade and foreign policy on American AI supremacy.
• How Trump plus AI could shape political norms, discourse and governance.
• Eight key domains where AI policy might shift under the new US administration.

Trump 2.0 risks American AI dominance

Donald Trump is back and following a crushing victory on Tuesday, the focus is now switching to understanding how an emboldened POTUS47 will govern, and which of the themes of his campaign he will prioritise. Tackling immigration, eliminating inflation, cutting tax, imposing tariffs, slashing regulation, radical health reform, ending various wars (and any investigations into his own dealings), and out-manoeuvring China, are all on his to-do list. But as is ever the case with Trump, these goals, and the band of radicals, conservatives, and now tech-oligarchs, form a complex mix of contradictions.

There are three elements to the Trump 2.0 agenda that have the most significant implications for AI: Tariffs, tech sovereignty, and Taiwan. Modern data centres, advanced semiconductors, and the vast computational power they provide have been the key unlock for AI in recent years and their rapid deployment across the globe will be the driving force behind economic, scientific and military progress in the coming years. Whilst Trump, Vance and Project 2025 have talked of “significant AI initiatives”, rolling-back the Biden executive order, and accelerating government adoption of AI, other populist policy making and ingrained ideas don’t bode so well for AI progress.

Kim Darroch, former British Ambassador to the US commented on an election night live stream that Trump has had very set views on the US role in the world and specifically on international trade since the 1980s when his focus was on Japan’s growing dominance (and he’s a very hard person to persuade). Trump is an avowed protectionist and throughout the campaign he spoke glowingly of the power of levying tariffs on imports to the US from not just China, but across the board.

While tariffs are presented as tools to restore American manufacturing jobs for the MAGA base, their economic impact will likely prove counterproductive. The proposed 10-20% blanket tariffs, combined with 60% duties on Chinese goods, would significantly increase the cost of critical compute infrastructure. The resulting dollar appreciation would partially offset these effects but create new problems – making US exports less competitive and undermining outside investment in re-shoring manufacturing capacity. A vast array of secondary data centre componentry comes from China, and as a result of existing tariffs, via ‘connector’ countries such as Mexico, another country Trump has in his sights. Trump’s pro-tariff stance is bolstered by one of his key advisors, and most effective operators from his first term, Bob Lighthizer who was instrumental in tough-talking trade negotiations with China (the kind of dealmaking beloved by Trump). But Lighthizer’s vision of strong-arming global competitors with tariffs may backfire by fragmenting the very supply chains the US needs for AI supremacy. Currently there are no alternatives to importing AI compute infrastructure from Asia, and chip production will take many more years to onshore in the US.

Which leads us to Trump’s opposition to the “very bad” CHIPS Act representing perhaps the most confusing contradiction in his policy portfolio. The $52.7 billion bipartisan initiative has already catalysed over $200 billion in private investment, and accelerated TSMC’s critical Arizona based advanced chip fabrication facilities. Trump’s ‘threat’ to withdraw funding could slow this progress exactly when the US needs it most, and again stems from a core personal distrust of hand-outs and government involvement. Meanwhile, JD Vance’s scepticism of big tech – shared by much of Trump’s base – threatens to push America’s leading AI companies further offshore. Whilst they will likely benefit from regulatory roll-back, the “Magnificent 7” tech giants, now valued at half of US annual GDP, may also accelerate their global diversification to avoid both tariffs and domestic uncertainty, taking their AI capabilities with them. That is the magnificent 6, as Elon Musk’s Tesla will be positioning itself to benefit from the new administration. But there may be trouble ahead; Musk will not want to see his vital Chinese supply chains cut-off by tariffs, nor his ability to export hampered by a rising dollar. Tech-insurgents, and crypto supporters such as Peter Thiel and Mark Andreesen have supported Trump and Vance and must figure they can profit from the influence, and the chaos, as they work to unpick incumbent hegemony.

Trump’s approach to Taiwan may prove the most destructive element of all. His claims that Taiwan “stole” America’s chip industry betray a fundamental misunderstanding of semiconductor development, while his suggestion that Taiwan should “pay for protection” undermines decades of US strategic ambiguity. Risk here is compounded by Taiwan’s military vulnerabilities – according to military analysts, Taiwan’s forces are “not capable of any of the things that we would typically associate with a military that is taking a threat as determined and capable and proximate as China seriously.” With Musk suggesting Taiwan should cave in and opt for Hong Kong style special administrative status, Beijing and an aging Xi may see a historic opportunity. A Chinese takeover of Taiwan would be catastrophic for global tech – instantly shutting down 92% of advanced semiconductor production and cutting off Western access to growth (just at the moment where China may have caught up with the likes of the Huawei chips that should reach Nvidia H100 parity at scale in 2025). As US Commerce Secretary Gina Raimondo stated in May, “a Chinese invasion of Taiwan and seizure of chips producer TSMC would be absolutely devastating to the American economy.” Conventional wars are won through industrial capacity. In an escalating economic or military conflict, China, and certainly China plus Taiwan’s capacity, could out-scale any level of US manufacturing response, be that semiconductor or almost any other industrial product.

Takeaways: 2025 is going to be a critical year. It will be a defining year for AI, for the scaling of model capabilities that show so much promise, and for nations aiming to lead into the future. America’s enemies and competitors will be looking on, and those that see the strategic criticality of AI will be cheered by the incoherence of the emerging US policy. Trump is drawn to populism and transactional geo-politics, built on an assumption of American dominance. While each of his policy strands have some level of internal logic, their interaction could prove devastating to American technological supremacy.