^{Source: newsweek}

Trump’s Tariff Gamble Could Derail America’s Future in AI

The U.S. faces a high-stakes race against China for dominance in artificial intelligence, but President Donald Trump’s economic strategies could leave America trailing behind. Last week, Trump unveiled sweeping tariffs aimed at revitalizing U.S. manufacturing—a sector that’s seen a dramatic decline over the past several decades. But many experts warn that focusing on outdated manufacturing policies while neglecting the rising importance of AI could jeopardize America's standing in the global tech race.

With the AI industry heating up globally, particularly in China, experts argue that President Trump’s tariffs, combined with proposed cuts to funding for universities and attempts to dismantle crucial initiatives like the CHIPS Act, might undermine America's progress in artificial intelligence.

AI's Competitive Edge Is the Key to the Future
While the U.S. grapples with tariffs, China has been making significant strides. For instance, the Chinese startup DeepSeek introduced a powerful AI model just this January. With such advancements, the competition for AI supremacy is intensifying, yet the Trump administration seems focused on policies better suited to the 20th century rather than 2050.

“The world has changed. AI is the backbone of not just the tech sector, but almost every sector we interact with today,” says Susan Ariel Aaronson, a research professor at George Washington University. “Instead of trying to recreate the manufacturing-based economy of the past, the U.S. needs to double down on AI and other technological sectors that are shaping the future.”

The Decline of U.S. Manufacturing and the Rise of AI

Manufacturing’s decline is not a new story. U.S. manufacturing employment peaked in the late 1970s and has been on a downward trajectory ever since. By the turn of the century, automation and fierce global competition had accelerated this decline, with U.S. companies increasingly opting for automation over traditional labor-intensive manufacturing methods.

The shift away from manufacturing has not resulted in stagnation, however. The U.S. services industry, ranging from software engineering to finance, has flourished, employing approximately 80% of the workforce today, according to Labor Department data.

And as the World Economic Forum outlines, the future jobs of tomorrow are not rooted in factories, but in sectors driven by technological advancement, particularly AI. “Demand for roles fueled by technological innovation such as artificial intelligence will shape the workforce of tomorrow,” the Forum states.

Despite these trends, Trump’s approach has leaned heavily into tariffs aimed at manufacturing, often likened to the disastrous Smoot-Hawley Act of 1930. The Act, which imposed tariffs on over 20,000 goods, is widely regarded as one of the key contributors to deepening the Great Depression, as it prompted retaliatory tariffs from trading partners, plummeting U.S. imports by nearly 40%.

Trump’s Tariffs Could Spark a Global Economic Crisis

As the tariff strategy persists, uncertainty continues to plague U.S. markets, with many business leaders and financial analysts voicing concerns about a potential recession, or stagflation, triggered by rising costs and tariffs. According to a recent survey by the Institute for Supply Management, “bearish market sentiment, tariffs, and rising costs have dominated discussions and will likely continue to do so until a clear path forward is established.”

America’s AI Future Is at Risk

The United States could miss the opportunity to lead in artificial intelligence, a field that has become as crucial as any military or industrial asset. While Trump’s administration has made some efforts to steer the country in the right direction by soliciting input on an AI strategy, key decisions are still pending. However, moves such as halting billions in research funding for universities like Harvard and Princeton, citing concerns about antisemitism, have only caused further complications.

“AI is driven by human talent,” says Andres Sawicki, law professor at the University of Miami. “The U.S. is cutting off the supply of skilled workers needed to lead in AI development. Many of the top minds in this field come from abroad, and these policies are pushing them away.”

Economic policies that stifle education and restrict global talent flow are counterproductive, Sawicki adds. “Artificial intelligence is the future of tech, and the U.S. needs to foster an environment where global talent can thrive.”

The CHIPS Act: A Lifeline for U.S. Semiconductor Research

In a potentially devastating blow to America’s position in the AI race, Trump has also called for scrapping the bipartisan CHIPS and Science Act, passed in 2022. The CHIPS Act authorized nearly $300 billion to boost semiconductor research and manufacturing in the U.S.—a critical step as semiconductors are the lifeblood of AI and other tech industries.

“The CHIPS Act has far exceeded expectations, drawing substantial investment in semiconductor production across the U.S.,” says Martin Chorzempa, senior fellow at the Peterson Institute for International Economics. “The $100 billion investment between TSMC and Trump’s administration to build U.S. semiconductor factories would not have been possible without the groundwork laid by the CHIPS Act.”

Without such investments, the U.S. risks falling behind in an industry essential to AI development and the future of technology.

The Way Forward: A Call for a Comprehensive AI Strategy

As AI transforms every industry, America needs a more forward-thinking economic strategy—one that recognizes the significance of cutting-edge technologies and adapts to the changing global landscape. While Trump’s tariffs may provide short-term relief for some industries, they ultimately fail to address the larger, long-term needs of the U.S. economy.

Instead, the focus should shift toward fostering AI innovation, ensuring that the U.S. remains competitive on the global stage. If America wants to maintain its edge, it will need policies that prioritize education, investment in AI research, and collaboration with international talent. Only then can the U.S. continue leading the technological frontier into the future.

To stay competitive in the 21st century, the U.S. must adapt to the realities of AI and technology-driven industries, rather than attempting to turn back the clock to a bygone era. It’s not about bringing back manufacturing jobs—it’s about securing America’s leadership in the technologies that will shape tomorrow’s economy.

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