Foundation for American Innovation economist Samuel Hammond: tariff chaos risks derailing the AI race America can't afford to lose

for you. You just Sleepless nights probably on maybe eight hours over three days. Ouch. Not good. Uh you should get an eight sleep. Go to eight asleep. com/tbpn. I have a helix. No. Uh we'll get you a switch. Anyway, uh no, it's great to have you on. Um what uh what's running through your brain?

Uh there's a bunch of things we can talk about, but uh where should we start? Oh, just the contagion effects and potential collapse of the world economy. Um, simple stuff like that, you know, how bad is US primacy?

Are are you a uh is there any element of cautiously optimistic about this for you, or are you just totally black build on it? Um, I mean, my white pills are Lucy's, so I do I do have some of those. Uh, but you know, you're going to need a higher milligram for for for this week.

Well, walk me through why why is it so disruptive to you and what you do and uh maybe just for the viewers give a little background on yourself and the organization. Sure. So, I'm chief economist for the Foundation for American Innovation. Ripping the uh the swag here. FI.

Um we are a tech policy think tank in Washington DC. Originally founded to bridge Silicon Valley and the DC culture. Uh today we work on the intersection of national security, tech, and governance. Um, I focus on AI but cover sort of all e economic issues as well.

And um, you know, I think we we kind of are at least associated with the sort of tech right with with you guys like yourselves. Like I'm rooting for y'all and uh hopefully Martin Scarley's Bloomberg terminal killer takes off so then we can combine combine you guys and completely disrupt Bloomberg.

Um, so you know I I think you see this in the administration too. the Trump administration is is a is a series of factions or coalitions and we are definitely you know in the mix. Um but uh you know Elon Musk today called Peter Navaro Peter Rardo and I kind of and I kind of you know definitely uh hard to argue with.

Can you talk about the the bridge between Silicon Valley and DC? Uh it feels like that bridge is massive at this point. there was a moment where uh maybe tech was drifting away from DC. Uh but now it feels like tech has taken over DC. At the same time, you go back to the Obama administration.

I always think about this statistic that I believe the number one organization that was non-governmental that Obama visited during his eight years in office was Google. And so there there was there was a moment when big tech and DC were tightly intertwined. just happened to be with the Democratic party.

Now it happens to be with the Republican party. Um but what is what is the state of the bridge and how did we get here? Yeah, I think it's almost like a qualitative difference. So if you think like the last 80 years, the power structure in the US as being sort of either Wall Street or like West Texas Oil.

So we either get like Rex Tillerson or Jamie Diamond. Sure.

And you know since the internet took off you know there's this new new wealth on the west coast and um as that sort of germinated and matured it originally was just sort of like one interest group among many you know you still still had those two main power elites and I think with the with this last election it was it was sort of an example of Silicon Valley at least a part of Silicon Valley asserting itself as its own distinct power center.

Sure. And that that is that is very very different. Um, of course, you know, all the other power centers still exist to some degrees and so it is it is sort of a constant struggle. Uh, I think there's a lot that this administration is doing great. You know, the stuff on energy.

Um, I think Doge at some point is going to turn to regulation and that's what I'm most excited about, you know, once we start cutting whole parts of the CFR. Mhm.

You know, I back in the day I used to do like supersonic policy and early worked early with Boom Aerospace and and it's good that they're getting a hearing now and maybe uh I'll be able to fly to either coast in a couple hours rather than I'd love that. So So there's a lot a lot to like.

It's just um and and I think there's also like a steelman case for like these trade actions. You know, we participate with like the re-industrialized conference. We have our own technoindustrial playbook that will be coming out in a couple weeks.

Um, so we're all on board for the like, you know, America needs to build again and um, you know, that that especially as AI like deflates all the knowledge sectors like we're going to need more aluminum smelting in this stuff like that. Is there any glimmer of hope that there's this uh, Mara Lago summit?

I forget exactly what Chimath is referring to, but the accords and you do see reciprocal tariffs, but they they actually have the effect of driving it down to zero tariffs anywhere in the world either direction. Uh are you hopeful for that and would that be a good outcome in your uh economic framework?

That would be sort of the best possible world. Um there's also risks associated with that, right? Because you know I wrote a piece recently discussing the sort of way the market reacted and you know on the one hand you could say Trump just likes tariffs and that's definitely true.

He has a 40-year track record of just liking tariffs. Yeah. But then you have other people like Stephen Moran and Scott Benson Bessent and u JD Vans himself as well who at various points talked about the um the curse of the US dollar being international reserve currency. Mhm.

And there's a lot of truth to that like the fact that you know China wants to hold our treasury debt and you know we you know they build cheap cars we build treasury bills is you know it does raise our living standards but means that we are not ready to fight a war. Yeah.

Um and so that is a core a core problem but then the question is like how do you deal with that? And if you do go all the way to a Mara Lago accord, what you're saying is this isn't just about tariffs. This is about resetting global financial imbalances. Yep.

And you we need to do that, but you need to do that sort of gradually because if you do this all at once, what that means is the entire floor will fall out of the stock market and the real estate market and you know with huge cascading effects through merging calls and you know I think I think mortgage debt is now back to its 2007 levels.

Um so it's less to me about like the mood or the the ideas behind the policy but the execution. Yeah. That they are they're this is a rugpole of you know rugged. Uh uh can you talk about u you know the value of the yuan has been uh dropping. I guess it's at a record low.

Can you talk about trade wars turning into currency wars and and um you know if that's what people should really be focused on? Yeah. So you know China was a currency manipulator through throughout a lot of the 2000s and early 2010s but really that really hasn't been the main way that they they cheat.

um they cheat by basically suppressing household consumption and you know having these 60% saving savings rates and so they end up building these ghost cities and you know whatever technology they enter whether it's cars or telecom equipment or pick pick your poison they just overproduce it to the maximum drive down the the the cost worldwide and then have to find these export markets to dump it and and and the way they resol the way that we're ever going to resolve this is especially now that like the US is like has is going to have 100% plus tariffs on China and Europe doesn't want their [ __ ] either.

Uh they need to like build up their domestic economy, you know, they need to like reduce their own savings rate, raise the standard of living of their households, like introduce like some basic, you know, social welfare programs or something so that they uh you know, actually have a domestic consumer base.

And if they do that, like that's actually the best way that they can retaliate in a sense because they're sort of shielding themselves from the tariffs. But it also is it helps correct the big imbalance. And so that that is like it's sort of aligned in that sense where like if if China does the right thing.

Um then it's a win-win situation if instead they double down on tariffs and trade war. Um you know I I don't see I don't see we just exacerbate the the uh the contradictions in the economy and and don't get to a resolution.

Uh Ben Thompson has been advocating for a rethinking of the chips act uh mainly shifting from export controls removing those and instead uh taking a more operation warp speed approach where uh the US government is potentially a uh a massive buyer of domesticmade 3nanmter 5nmter chips.

Uh with the demand signal there the American market should solve it. How are you processing the the current chips act and what are you hopeful for going forward? I'm not opposed to that idea. Um the thing about like you know Nvidia's chips is they're they're kind the demand is kind of saturated, right?

They can kind of pick who their buyers are because there's just so much demand for them and at the same time they've not been the most sort of like uh loyal uh actor in this space.

And you know if there's any sort of big meta narrative or theme to uh a lot of the right the tech rights move into DC it's been you know since from project naven on that uh you know these companies have had corporate social responsibility policies but not corporate patriotic responsibility policies and and technology is becoming geopolitical and you sort of have to pick your side and so you know every time we introduce an export control Nvidia's two weeks later has a new chip that just gets under the line of what's being controlled and the latest one is the H20 and Yeah, the H20 is an inference chip.

It's, you know, it will power these reasoning models. If you're, if we're worried at all about SER staying competitive, I don't think we can give up on those. And in fact, we should we should be doubling down. And that would be like a smarter kind of trade war than just across the board tariffs.

Um, and but that doesn't have to be mutually exclusive with doing a kind of industrial push. And that that's what I'd like to see because if we're going to do this big rebalancing, you can't just pull the rug.

You have to, you know, to mix my metaphors, you have to be the Indiana Jones that like swoops in the the bag of sand or something as you take the holy grail and what is that what is that like new thing that we're going to be swooping in?

What is the industrial bank that we're going to be using to bootstrap the industries that we need because they won't just materialize on their own? Can you talk about uh putting the the trade wars in the context of like this race for super intelligence? Right.

In many ways, people are arguing like, "Hey, if we're making like Transformers like harder to get and more expensive, like does that hold us back from winning the AI race? " And is that the only race that that really matters?

You know, we we've joked on the show about this idea of like picking up pennies like in front of a steamroller, right? Like AI's, you know, has potential to transform the economy in so many ways.

And like if it's very possible that like that just winning AI matters more than like winning um you know the trade war in in the year 2025. No, I I I 100% agree with that take.

like um I can forgive a lot of stupid policy because in four years we're going to have such powerful AI systems that like really it swamps everything else and the you know we know what the bottlenecks are going to be right like the building these models only has a few basic ingredients you have like the the data and algorithms which the US you know the algorithms are basically public domain um the the data China maybe even has an advantage because they don't have privacy laws and they can just scoop up everyone's genome or whatever and you know then it comes to like energy and chips.

The export controls exist because right now our only structural advantage is at the chip and hardware stack where you know our install base of Nvidia data centers is you know a huge portion of the world's um China's been basically cut off since 2022 and 23.

Then when it comes to energy you know China added 446 gawatts of energy last year. It was a 20% year-over-year increase. They're going to do that again this year. We added zero net new energy. We added a lot of renewables, but it came directly out of coal and other sources.

And so, um, you know, the the chips are the chips is the short run bottleneck. So, that's why we need to lean into that. And then the long run is like how are we going to supply the energy? And then as the stuff diffuses, you know, to the the people who worry about de-industrialization, it's like it's true.

The last 40 years we've specialized in, you know, higher education, knowledge work, legal management services, Hollywood, you know, the creative class, all the stuff that is going to like be deflated and China will have the factories that will become fully automated and do course because they'll also have the workforce that they can extract all like the tacet knowledge out of and put into their robots.

Mhm. And so we it's like a really urgent thing that we don't just like try to win on AI but like win on AI plus heavy industry and robotics because otherwise our our innovation in bits will be their innovation in atoms. Yeah.

The the one point of view on on the trade war and and trying to bring manufacturing back to America is like yeah yeah we can bring the production capacity back but will the jobs come back in the same way? Right. just due to if we if we actually want to scale uh production, we need to lean into automation and robotics.

Uh how do you think about job creation uh as part of reshoring uh and and increasing domestic production in the context of uh long-term a lot of production just becoming automated and and just just because that's going to be the most efficient way to produce the most amount of goods.

Yeah, we need to bring back manufacturing, but it's not it's not a jobs program. That's for that's for sure. In fact, the only way we're going to bring it back is if we automate significant amounts of this. And maybe the guy who presses the on button every morning gets paid, you know, multiple six figures.

But, uh, it's not going to be this nostalgic vision of like 1950s where we're all going into the factory. Um, and that's just like a structural thing. We're not that, you know, AI is going to do that for a lot of stuff, probably, you know, most stuff at some point.

And we're going have to figure out what the new jobs are. Like I saw on uh you know I saw a video of like professional back scratcher. You know I know in the VC world those exist already but like uh but this was like a woman of long acrylic nails and so you know maybe we can start growing her nails out.

Um crazy is that there's like there's there's so much knowledge work to do around an advanced factory. I mean we just talked to Jay from the advanced manufacturing company of America. There's clearly a lot of highskill labor that is not getting displaced anytime soon that um could that's not millions of people. Yeah.

Well, it might be if we're manufacturing a Dyson sphere with a million robots or something. I don't know. Uh I I I I could see a world where yes, there are a million jobs in the manufacturing sector, but it's all at the higher level.

But if two million, you know, uh, traditional like white collar jobs get evaporated, you know, in the in the inter, there's clearly some big, uh, big questions we're gonna have to be thinking about.

Uh, do you have strong opinions on Uni Tree or any of these other Chinese robotics companies that are trying to He's just like, I love them. Uh, yeah.

Uh I'm curious if you've written about it, if you've had, you know, policy recommendations that you or FAI have have made around uh you know, some of these more hybrid sort of dual use. Um well, everything's dual use in China, but um what do you think about?

No, the the unit is really impressive and you know, I've seen it do like kung fu and it it it does break dancing better than that Australian lady. Oh, yeah. Um not that. Yeah.

And but like you know if you you know Shenzen is like you know it's like going to a flea market where every you trip over like baskets full of micro electronics and we need to be building some of those like ecosystems in the US. That's number one.

Number two is like yes we have the the data centers and the the better models but China you know has uh the batteries right they they they have like that that's one area where they they have leaprogged us and whether it's electric vehicles or robotics um or drones like we need to have our own battery stack and maybe you know we do need like a chips act too but we also probably need like a batteries act um to to compete with that because other like that that will be the thing it's fine if if you know Anderil builds a drone factory, but where are these batteries going to be coming from?

Yeah. Uh not asking for financial advice, but where where are where specifically in America are you long? You know, areas that could be that sort of American Shenzen or maybe it's multiple places.

I'm curious what what what areas, you know, you know, different uh regions in the United States are are do you think benefit from reshoring most intensely? Uh, in recent history, it's been sort of the the South and South Atlantic, uh, you know, the North Carolina, the Tennessee's, uh, Nashville.

Um, you know, that partly because those alo have the best housing markets, right? It's so much easier to build when you have Greenfield. Um, but longer term, this is also not something that the US can do alone.

like we're going to need almost like a North American plus like production uh you know frontier where you know you know let's figure out the thing with Canada like do we need their lumber don't don't we you know are they going to you know do we want their bags of milk or not um but like we we do need their aluminum right uh and we will need to have some kind of integrated production ecosystem to be kind of competitive and and stand up to China because China you know already in purchasing our parody is is larger than the US and um you know that they want to gobble up their neighbors too and get even bigger.

So, but I I do think there is an opportunity here because when you do have like I'm not a technological unemployment guy, you know, I think new jobs get created, they'll just be very weird, not necessarily in the sectors that matter the most.

Like the the purpose of indust heavy industry and robotics is like more military and like do we control the supply of core goods and services? Mhm. Uh on energy, what do you think the lowest hanging fruit is in terms of energy deregulation? Should we be focusing on the NRC nuclear?

What what's the biggest uh opportunity to help us jump from, I guess, 0% to 20% where I want to be? Maybe 40% would be nice. Maybe 200%. Yeah, you guys should definitely have my colleague Thomas Hawkman on to talk about this for a full half hour because he's uh he's been putting up the winds lately.

We've helped pass a bill in Utah. Um there's activity in like Arizona, Montana, other places. Um there's a huge appetite to unlock America's energy. Uh in the short run, especially for these data centers, it's going to be natural gas. It's it's it's it's going to be a bridge to more permanent um base load energy.

Um and then the next bottleneck is like the grid itself because if you want to do a even if it's just like natural gas generators are rolling in like it that investment makes way more sense if you know that after that you know GPD7 is trained that you get to put your energy back into a grid and have have uh have customers for it.

Uh so that needs to be fixed. Other energy sources you know I think enhanced and advanced geothermal are they were underrated.

I think there people are starting to finally wake up to the potential, you know, with with like really advanced geothermal, we could make like everywhere in America kind of like Iceland where like, you know, you have energy under your feet.

Um, and then with nuclear, you know, there is this case before the courts that u I think it's Texas Utah versus US government that uh the NRC that argues that the NRC doesn't have jurisdiction over small modular reactors.

Um, and uh there's I think there's a good chance that this that Pam Bondi and the attorney general settle that case in which case states could then stand up their own licensing boards and I think there's actually already movement in Utah to have their own like nuclear regulator and so that could that could happen sooner than people realize.

That'd be fantastic. Do uh a bunch of young founders building, you know, small nuclear reactors, does that scare you? Does that keep you up at night or do you think uh the technology is you know it's solved burnout at Radiant isn't that young? He's got kids. I trust him with my life. Yeah.

Basically, I think it should be a requirement. You should be you should have to have kids to be a nuclear factory. He worked at SpaceX. He's got the pedigree. I love that company based in Elsagunda. Yeah. The big problem with nuclear is it it's it doesn't really pencil out without like large government support. Yeah.

And um and so I would love to see like the 600 billion in tariff revenue, you know, be given to Doug Bergam to like build a a reactor template and build 200 of them all around the country and like make this a, you know, use every national security, national emergency trick in the book to get it done as quickly as possible.

Um but it does need it will need like some kind of you know fixed capital backs stop to to make those investments at least at least with the current technology. I mean, given what you're see what like you're kind of optimistic about Doge, you're it seems like you're pretty bearish about the tariffs.

Like, are we in a regime where you trust the government to do mega projects yet? Because I think everyone was excited about the moon landing and then uh since then a little bit less excitement about the big projects. Highspeed rail in California has been a little bit of a rough go.

Uh, and I don't really want to see a California highspeed rail of 600 billion get burned on a nuclear strategy that doesn't produce a single watt of electricity for Yeah. You know, 70 years or something, which would be like the bad case. Yeah, 100%.

Um, you know, the state capacity and competence is really, you know, it's the jagged frontier. Yeah. There's places that have a lot of it, places that have a little of it. Uh, you know, I would have more, you know, I would have more trust in in a Bergam or like a Chris Wright, you know, execute on something like that.

Um, wouldn't be the Pete Buddhaj fund where it's just filling potholes in in Indiana. Um, they they they would know how to cut to the tape. They wouldn't make it like this, you know, everything big, you know, we're going to build TSMC chips, but then also like, you know, rehabilitate justice involved individuals.

uh you know, we need to keep our potatoes and our gravy separate. So, Got it. Uh how are you thinking about uh the Deep Seek versus Meta's llama strategy? We were talking about that earlier on the show, and it's kind of hard to to I think a lot of people on the vibes of deepseek, they're like, I don't want this.

Uh but then it's difficult to formulate an argument because are you anti-open source, in which case are you anti-za? uh how are you thinking about kind of the intellectual property that's being developed in America around large language models and then uh makes its way across the Pacific Ocean.

I think what I find most impressive about DeepSeek is less that the model they put up but just that they sort of have imported a kind of Silicon Valley model of like and and that that that came from the their CEO being like a hedge fund manager doing this as a side project.

It's very you know Sam Alman wasn't a hedge fund manager. is a a VC but sort of analogous, right? Yeah. Um and that that that's striking because uh it's just a different model of corporate governance than you're used to seeing.

And the I think there's a question of like how long the does deepseek become a victim of its own success and like you know they are the tall poppy and it's not that China tries to hurt them because of that but actually tries to help them and makes them a national champion and there thereby sort of perverts it.

But, you know, it's a fun take. They've been great at, you know, publishing what they're doing and everything sort of has checked out. Um, but they don't have the chips and they've said they've said that like their CEO said their biggest uh bottleneck is hardware and so we shouldn't help them on that front.

Like there's 16 billion of orders for H20s just sort of sitting in limbo about to go out the door. Um the commerce department has Howard Lutnik has said that he's going to export control the H20 but they're so distracted by tariffs they haven't prioritized it and the time is kind of running out.

Uh what's going on with Tik Tok? Uh we've been following uh poly market around a new ban before May. There's markets around um you know potential buyers, things like that. Do you have any insight uh that you can share around the latest there?

It feels like again one of those things that's just like not getting the attention and the focus because obviously you know if we are enter into the greatest global trade war of all time like yeah it's rightfully people should maybe be sort of focused on that.

Uh but at the same time it feels like something that we were supposed to have answers around by now and we definitely don't. Yeah totally. I mean, FAI, we we led the charge to to ban Tik Tok over a couple years. Um, and I fully support it.

I also enjoy Tik Tok, but I I do notice that like between my my my barbecuing steak videos and like funny memes, I'll get like a Pyongyang tourism board uh video now and then. It's like, well, that I don't plan on visiting North Korea anytime soon. But um uh yeah, I don't have any super deep intel.

You know, there has been talks about or rumors about, you know, Oracle maybe being part of this. Uh and I think Trump still wants it to be part of the new sovereign wealth fund.

Um and actually as sort of zeny an idea that is like he kind of has a point like if if Tik Tok became American and you know quadrupled in value that would actually help pay down the debt. Mhm.

Um the interesting thing here is like you know people have pointed out that you know Trump is sort of plays fast and loose with with the constitution with the law and stuff like that you know and matter of fact all the people he's fired totally constitutional.

The biggest the most unconstitutional thing he's done to date is not enforce the Tik Tok ban. Oh yeah because that was a direct you know statute that Congress passed that said thou shalt ban Tik Tok. Um, so I I I'm hopeful that they can get a a deal.

The reason I I would just doubt it is is China has very strong export controls. Like the reason Tik Tok can't sell is because algorithms in general are export controlled.

And so they would be able to buy the brand name and like the the offices, but they have to completely re revamp the algorithm, which is like the the secret sauce of the thing. Now, Tik Tok is in our building in DC, so I can uh I can try to plant a bug for you if you want. Sounds great. Well, uh, be fantastic.

Poly Market has the chance of Tik Tok being on the app store in on May 1st at 97%. And, uh, who will acquire Tik Tok? Oracles at 27%. Number two, Larry Ellison directly at 24%. You'll love to see it. Uh, Amazon's still up there. Uh, but I just want to say thanks so much for joining.

This is a really interesting conversation. We'll have to have you back soon. Yeah. And get some sleep. Get some sleep. We got to get we'll we'll work on getting you an aid sleep so you start putting in some proper sleep. I want to see a hundred for a week straight, I think.

Uh yeah, less red light from the stock market, more Yeah. Yeah. more sleep. Um but go get some sleep. Uh thank you for for coming on and uh yeah, part of the next one. Yeah. Talk soon. Bye. Later, man. Cheers. Next up, we have Shield coming back on for his second TBPN appearance.

We're going to talk about fintech, the markets, the tariffs, his dust up with another capital allocator on X the other day. Had a lot of fun with that. And I'm sure we'll have plenty to talk about. So, as soon as Shield gets here, we'll bring him into the studio. But, uh, those are some interesting questions.

There really are so many debates right now about China. It's like DJI, Unitry,