Will Trump Tip the AI Race in China’s Favor?
Beijing/Singapore – While the trade war between the United States and China remains stagnant, the competition for technological supremacy between the two nations has entered a new and accelerated phase. As both sides vie for dominance in artificial intelligence—along with the accompanying productivity and geopolitical gains—a significant question looms: Will China catch up to the U.S. in AI, and perhaps even surpass it?
This trend is driven by a series of policies introduced during the presidency of Donald Trump. His administration marked a radical departure from the United States’ commitment to openness, which has supported its technological leadership for decades. Policies aimed at bringing innovation back to the U.S. could have counterproductive outcomes, potentially paving the way for China’s supremacy.
The evolution of the digital economy may offer some insights into how the current AI race is unfolding under Trump’s policies. In the 1990s, the U.S. led the internet revolution, dominating the pivotal "zero to one" phase by accelerating the transition of innovations from labs to markets. This fueled what was then termed the "new economy," characterized by rapid growth, strong productivity increases, and low inflation. Meanwhile, China, initially a follower, later added remarkable dynamism to the digital economy by expanding its innovations.
China’s digital evolution has gone through three phases:
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The Imitation and Following Phase: From the mid-1990s to the early 2000s, Chinese companies mimicked American models by launching portals and online services, resulting in huge user growth.
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The Localization and Improvement Phase: Between 2005 and 2015, as the local digital ecosystem matured, Chinese tech firms began leveraging their deep understanding of local users and market conditions to adapt and enhance their services. Platforms like WeChat and Taobao not only copied American concepts but also surpassed Western counterparts like WhatsApp and eBay in the Chinese market.
- The Entrepreneurial Innovation Phase: In the last decade, Chinese companies transitioned from imitation to innovation, launching new digital models and outperforming foreign competitors. A prominent example is TikTok from ByteDance, which positioned China at the forefront of global digital culture, reshaping social media and forcing American companies like Meta to catch up.
This model has already become evident in sectors like renewable energy and electric vehicles, and AI will be no exception. Following the launch of ChatGPT in late 2022—marking the beginning of mass adoption of AI—China quickly demonstrated its ability to imitate Western models.
The release of the DeepSeek model in January signified China entering the localization and improvement phase, with its R1 model being 30 to 50 times cheaper than OpenAI’s model. By February, the performance gap between the top Chinese and American models shrank to 1.7%, down from 9.3% in 2024. DeepSeek also achieved 100 million active users in just seven days, compared to ChatGPT’s two months to reach the same figure.
One of China’s significant advantages is its vast pool of engineers. It graduates four times the number of STEM graduates annually compared to the United States. This "engineering yield" reflects not only quantity but also a practical mindset and strong work ethic focused on complex improvements, as seen in the architecture of DeepSeek.
China provides an ideal environment for applying, testing, and developing AI applications, thanks to its more than a billion internet users and diverse industrial base. China represents about 30% of global industrial production, generating massive amounts of data. In 2019 alone, its industrial sector produced 1,812 petabytes of data, and this figure is estimated to reach 2,435 petabytes by 2024.
Energy is another critical component. In 2023, China produced approximately 9,456 terawatt-hours of electricity—equivalent to 32% of global production and more than double that of the U.S.’s 4,178 terawatt-hours—giving it a significant advantage in powering the vast data centers necessary for widespread AI adoption.
America’s position in the AI race is further deteriorating due to Trump’s research funding cuts and immigration restrictions. In February, his administration laid off 170 National Science Foundation employees, including AI experts, and proposed more than a 50% budget cut for the agency.
These cuts—alongside delays in funding for the National Institutes of Health and the freezing of approximately $2.2 billion in federal grants for Harvard University—could hinder foundational research and stifle innovation in AI. Meanwhile, restrictive immigration policies may make it difficult for the U.S. to attract and retain global talent, leading to a "reverse brain drain," as Chinese talents return home to take prominent roles in a growing sector.
Though the Trump administration supported massive infrastructure projects like the proposed $500 billion Stargate project—a data center for AI in collaboration with OpenAI, Oracle, and SoftBank—such projects may reinforce corporate dominance and undermine the necessary innovation for technological leaps.
Yet, the deeper issue lies in America’s drift away from an open economic policy. While companies like OpenAI have become more closed, Chinese firms are adopting open-source strategies. As Trump’s trade and immigration policies push talent and international partnerships away, China promotes its low-cost AI models to its trading partners.
Certainly, China faces internal challenges, including American trade restrictions that limit access to advanced semiconductors. Chinese policymakers must also balance encouraging innovation with strict data control. However, while neither side has an easy path to dominance in AI, Trump’s agenda to "Make America Great Again" may inadvertently "Make China Great Again."
