Trump advocate resurrecting 1950s protectionist policies through tariffs; his focus should instead be on 2050 forward-thinking economic strategies.
Going Full Steam Ahead with the Wrong Economic Policies, Accelerating the AI Race Against China
Under the guidance of President Donald Trump, America's economic policies are being repositioned, yet industry experts warn this shift could cost the U.S. the high-stakes artificial intelligence (AI) race against China.
Last week, Trump introduced sweeping tariffs to revitalize American manufacturing, an industry that's been struggling for decades. However, these tariffs, coupled with funding cuts for universities and calls to dismantle the CHIPS Act, risk derailing the U.S.'s AI momentum.
While the Trump administration recognizes the significance of maintaining global leadership in AI - announcing hundreds of billions in AI infrastructure investments - some of their actions are counterproductive. Stiff tariffs aren't expected to generate the economic success Trump seeks, according to economists. Meanwhile, competition in the AI race is escalating, with Chinese startup DeepSeek unveiling a powerful model earlier this year.
Susan Ariel Aaronson, research professor of international affairs at George Washington University, explains, "Trump and his advisers see the world in a 19th-century perspective, wanting to return to a manufacturing economy. AI now underpins a lot of other technologies that could be even more important, and the United States really needs to invest in that."
The Engine Behind Success Isn't Manufacturing
Employment in America's manufacturing sector decreased after reaching a peak in the late 1970s, as per Labor Department data. Factors contributing to this decline include globalization, free trade, increased automation, and global competition. Conversely, the services industry flourished, particularly in areas like finance and software engineering.
The World Economic Forum predicts the jobs of the future will be driven by technological advancements like artificial intelligence. Yet Trump is initiating a global trade war to resurrect the long-passed days of peak U.S. manufacturing. Economists caution against repeating the same mistakes as the Smoot-Hawley Act of 1930, in which Congress placed tariffs on all countries exporting goods to America. The move worsened the Great Depression by triggering retaliatory tariffs and a 40% drop in total U.S. imports within two years.
Now in 2025, business leaders find themselves uncertain due to the ongoing trade war and growing recession concerns. Financial markets across the globe have experienced extreme volatility in light of the tariff-related uncertainties.
The Trump Administration's AI Strategy Remains Vague
In the midst of ongoing tariff chaos, Trump's AI strategy remains unclear. The administration has solicited feedback from tech companies on the plan through an executive order. However, they have taken some counterproductive steps, such as holding billions in grants and contracts for major universities like Harvard, Brown, and Princeton on account of antisemitism concerns, and revoking visas for hundreds of foreign students with alleged ties to the pro-Palestinian movement.
Andres Sawicki, a law professor at the University of Miami and director of the school's Business of Innovation, Law, and Technology concentration, highlights the importance of foreign students in AI development, "The majority of PhD students in artificial intelligence are foreign-born students. You are cutting off the supply of the human talent that you need in order to develop the best possible technology."
Trump's tariffs, if sustained, could burden the U.S. manufacturing industry by causing a recession and ramping up costs, an outcome known as "stagflation." Trump also called for the scrapping of the "awful, awful" CHIPS and Science Act, passed in 2022 under President Joe Biden. This bipartisan law authorized nearly $300 billion in funding to boost semiconductor research and manufacturing. Eliminating the CHIPS Act wouldn't help America win the AI race.
As AI continues to transform sectors including work and communication, several countries are eager to establish supremacy in the industry. For the U.S. to maintain its edge, the Trump administration will need to reassess some policies that may be hindering progress in AI development.
- Contrary to Trump's intentions, the ongoing imposition of tariffs could lead to a counterproductive outcome, known as "stagflation," burdening the U.S. manufacturing industry and hindering its progress in the AI race.
- In the realm of artificial intelligence, foreign students play a crucial role, with the majority of PhD students in this field being foreign-born. The Trump administration's policy of revoking visas for foreign students with alleged ties to the pro-Palestinian movement could thus be seen as a detrimental step in AI development.
- The World Economic Forum predicts that the jobs of the future will be driven by technological advancements like artificial intelligence. However, the Trump administration's focus on rejuvenating the manufacturing sector through tariffs could be seen as a warning of a repeating of history, with the potentially disastrous consequences of the Smoot-Hawley Act of 1930 in mind.
