Dear friends,
I am so sorry that the U.S. is letting down our friends and allies. Broad tariffs, implemented not just against adversaries but also steadfast allies, will damage the livelihoods of billions of people, create inflation, make the world more fragmented, and leave the U.S. and the world poorer. AI isn’t the solution to everything, but even amidst this challenging environment, I hope our community can hold together, keep building friendships across borders, keep sharing ideas, and keep supporting each other.
Much has been written about why high, widespread taxes on imports are harmful. In this letter, I’d like to focus on its possible effects on AI. One silver lining of the new tariffs is that they focus on physical imports, rather than digital goods and services, including intellectual property (IP) such as AI research inventions and software. IP is difficult to tax, because each piece of IP is unique and thus hard to value, and it moves across borders with little friction via the internet. Many international AI teams collaborate across borders and timezones, and software, including specifically open source software, is an important mechanism for sharing ideas. I hope that this free flow of ideas remains unhampered, even if the flow of physical goods is.
However, AI relies on hardware, and tariffs will slow down AI progress by restricting access to it. Even though a last-minute exception was made for semiconductors, taxing imports of solar panels, wind turbines, and other power-generation and -distribution equipment will diminish the ability to provide power to U.S. data centers. Taxing imports of servers, cooling hardware, networking hardware, and the like will also make it more expensive to build data centers. And taxing consumer electronics, like laptops and phones, will make it harder for citizens to learn and use AI.
With regard to data-center buildouts, another silver lining is that, with the rise of generative AI, data gravity has decreased because compute processing costs are much greater than transmission costs, meaning it’s more feasible to place data centers anywhere in the world rather than only in close proximity to end-users. Even though many places do not have enough trained technicians to build and operate data centers, I expect tariffs will encourage data centers to be built around the world, creating more job opportunities globally.
Finally, tariffs will create increased pressure for domestic manufacturing, which might create very mild tailwinds for robotics and industrial automation. As U.S. Vice President J.D. Vance pointed out in 2017, the U.S. should focus on automation (and education) rather than on tariffs. But the U.S. does not have the personnel — or know-how, or supply chain — to manufacture many of the goods that it currently counts on allies to make. Robotics can be helpful for addressing a small part of this large set of challenges. Generative AI’s rate of progress in robotics is also significantly slower than in processing text, visual data, audio, and reasoning. So while the tariffs could create tailwinds for AI-enabled robotics, I expect this effect to be small.
My 4-year-old son had been complaining for a couple of weeks that his shoes were a tight fit — he was proud that he’s growing! So last Sunday, we went shoe shopping. His new shoes cost $25, and while checking out, I paused and reflected on how lucky I am to be able to afford them. But I also thought about the many families living paycheck-to-paycheck, and for whom tariffs leading to shoes at $40 a pair would mean they let their kids wear ill-fitting shoes longer. I also thought about people I’ve met in clothing manufacturing plants in Asia and Latin America, for whom reduced demand would mean less work and less money to take home to their own kids.
I don’t know what will happen next with the U.S. tariffs, and plenty of international trade will happen with or without U.S. involvement. I hope we can return to a world of vibrant global trade with strong, rules-based, U.S. participation. Until then, let’s all of us in AI keep nurturing our international friendships, keep up the digital flow of ideas — including specifically open source software — and keep supporting each other. Let’s all do what we can to keep the world as connected as we are able.
Love,
Andrew