Don’t bury the lead, they say. Well, here it is: the United States has prided itself on being an open society and has claimed that the success of its model of capitalism is predicated on innovation, the free flow of ideas, and massive amounts of research investment by both government and private companies. It has touted itself as a defender of a global free-trade system since the end of World War II. In the past two weeks, those basic premises have been undermined. That will, perhaps, be quite bad for the United States; that will, perhaps, be quite good for the world. Let me elaborate.
The first weeks of the new Trump administration promised to be eventful. They have not disappointed. Yes, most of the executive orders are more bombast than substance, and the most substantive one—a directive from the Office of Management and Budget instructing all agencies to pause spending—was halted by a federal court and then rescinded by the White House. But the new administration is clearly shaking up the executive branch in ways both chaotic and unclear. And now, tariffs on Canada and Mexico loom, with effects that remain anyone’s guess and in direct contravention of the USMCA trade agreement, which was established during Trump’s first term.
Equally eventful this week was the sudden awareness that a hitherto obscure Chinese start-up had released an AI large-language model (LLM) at a fraction of the cost of the American models and using earlier generation (i.e. more primitive) semiconductors than those now being developed and sold by cutting-edge companies such as Nvidia. The model, called DeepSeek, used Nvidia chips from a few years ago that were not subject to the stringent controls imposed on exports to China at the end of the first Trump administration and then vastly expanded under Biden. Its stated price tag of $5 million was almost certainly higher than the actual cost, given that the team that created DeepSeek built on a foundation of chips and software that had been developed in the United States at a cost of billions. Even so, the model has now been assessed by reams of experts, and most have concluded that it works exceedingly well for a fraction of the cost of OpenAI and comparable U.S. companies.
As Eric Schmidt (former CEO of Google) and Dhaval Adjodah point out in their piece in the Washington Post, DeepSeek also highlights the perils of the way the United States and Western companies have approached the development of AI—namely, with brute force, trillions of dollars, and high-walls around intellectual property. DeepSeek, by contrast, even if its actual cost was many multiples of $5 million, spent nimbly, leveraged considerable intellectual firepower, and released its model as open source. That means its methods and code can be examined, assessed, and built upon by the global community of software engineers and hardware developers, much as the code for Android is an open ecosystem compared to Apple iOS.
So, after five years of U.S. government policy focused on constraining the rise of China’s high-tech industries, especially by limiting its access to high-end chips, and after decades of the United States zealously defending and demanding free trade and lower tariff barriers around the world, we now have a situation where the United States is embracing high trade barriers and plunging ahead with AI development as a national security priority dominated by a few mega-companies such as Microsoft, Meta, Tesla, various Musk-controlled entities, and OpenAI, along with Nvidia. These companies will spend trillions of dollars, soon in closer conjunction with the Defense Department, to create AI models guarded by layers of intellectual property protections and code that is opaque and inaccessible.
The idea that the United States might soon become a beacon of a closed society, while China, of all places, might embrace aspects of an open society, that the U.S. might become an economic fortress while the rest of the world accelerates commerce, is a deeply alien one in relation to the past 75 years since World War II. However, it would not have been alien to the United States of the 1920s and 1930s—a period that Trump and some in Silicon Valley seem to want to recreate.
The domestic U.S. economy is a remarkable internal market. It is a $30 trillion annual economy, with trade accounting for roughly a quarter of that—exports plus imports. Compared to most countries that is quite low. The U.S. imports about $4 trillion a year and exports about $3 trillion a year. Those are huge trade numbers in absolute terms, but imports in particular are not a significant part of the U.S. economy in relative terms. By way of comparison, trade accounts for close to 40% of China’s economy.
This means that the United States can use tariffs and erect higher trade barriers with more internal resilience—albeit at the cost of higher prices for vital imported goods and/or lower profits for companies that depend on global supply chains. Tariffs may not be particularly good for the United States, but they may not be nearly as bad for the world at large once the initial shock wears off. And it will be a shock, no doubt.
That’s because as the United States closes off, much of the rest of the world is increasing trade. Latin American countries are trading more with each other. Asian countries are trading more with each other. EU internal trade is growing, even in stagnant economies. Countries of the Global South are trading more with each other—and with China. The shock of a full-scale U.S. trade war will be real and disruptive, but it will also accelerate the interconnections already being forged around the world that do not involve the United States, except for the ubiquitous use of the U.S. dollar as a global medium of exchange.
Meanwhile, DeepSeek could well signal a new AI and tech era in which the relative affordability of open-source technology galvanizes intellectual talent around the world at a fraction of the cost of the proprietary U.S. model—driving impressive breakthroughs and innovations in how these tools are adopted. Lower costs will mean more widespread use and a proliferation of demand.
The United States is likely to be a poorer place for closing itself off to the world and for embracing a model of capitalism that elevates intellectual property and closed systems. Poorer in that certain things will cost more—and the ones who will bear that burden will be the middle class and the lower-middle class, those in the middle-income tiers who have the least elasticity. Poorer as well for denying itself the intellectual bounty of a more open-source world in technology and innovation. To be sure, U.S. trillions in spending will guarantee some breakthroughs and results; at the same time, U.S. trillions do not make Boeing a better maker of airplanes. Money alone is not sufficient.
So here we are in upside-down land—the world of DeepTrump and bloated tech companies. A world where the United States is becoming the closed society while others become more open. China, of course, remains a nightmare for free-speech and political rights, so one should not pursue this idea too far. Even so, the open-closed dichotomy is becoming increasingly jumbled. Who knows how far that will go, but it’s safe to say that a more closed U.S. will be bad for Americans, and a more open world will be good for everyone else. Strange days indeed.
It is now apparent that the US cannot be trusted. By putting tariffs on goods from Canada and Mexico Trump is reneging on the USMCA trade deal that he agreed to with Canada and Mexico. What about the US commitments to NATO, the UN and the WTO? Along with his candidates for important positions running the the military, finance, health and other important governmental positions it would seem Donald Trump is doing his best to turn the US into an oligarchic society with no allies in the world. Can Republicans support Trump and still represent the interests of the American people? It is apparent to this proud Canadian that the answer is a resounding “No”!
Paul Tomlinson,
Grimsby, Ontario
Great insight, which parallels my observations over the last 50 years that the United States is falling behind in elevating women to a respected equal status. Countries that have accomplished this have accomplished much more for human health and happiness. Tech is not everything, but it is now a turning point for the U.S. We are already low by global happiness standards.