Canada’s Defeat? How Trump’s Tariff Strategy Works

U.S. President Donald Trump has temporarily suspended the 25% tariff on Canadian and Mexican imports but kept the 10% tariff on Chinese goods. Canadian Prime Minister Justin Trudeau reacted on social media, but let’s break down what this really means:

1. Canada Talks Tough but Acts Cautiously

Despite strong words, Canada quickly adjusted once Trump was elected. They tightened border controls and even shared their progress with him. Trudeau personally met Trump at Mar-a-Lago, showing Canada’s willingness to cooperate on trade issues.

2. Tariffs Hurt Canada More Than the U.S.

The U.S. economy is much larger than Canada’s, so tariffs hit Canada harder. The trade relationship is not balanced, making Canada more vulnerable.

3. Trump Used Non-Economic Reasons for Tariffs

Trump justified the tariffs on Canada by citing illegal immigration—an issue that isn’t directly trade-related. This gave him two advantages:

He could use executive power to enforce tariffs under the pretext of a “national emergency.”
He could define “solving” the immigration problem however he wanted. Since the U.S.-Canada border isn’t a major source of illegal immigration, Canada could easily comply by showing effort rather than making real policy changes.

4. Trudeau’s Political Troubles

Trudeau is facing declining support in Canada, especially due to his immigration policies. Many critics blame him for worsening U.S.-Canada relations, arguing that his left-leaning policies caused unnecessary conflicts with Trump.

5. The U.S.-Canada Trade Relationship Is Deeply Connected

Canada supplies the U.S. with essential resources like oil, making them economically intertwined. Many U.S. refineries are specifically designed to process Canadian oil, and Trump supports the fossil fuel industry. So, despite tensions, a complete trade breakdown was unlikely.

6. Canada’s Concession Puts Pressure on Mexico

By resolving its tariff dispute with Trump, Canada left Mexico alone in negotiations. Smaller economies like Mexico can only stand up to the U.S. if they unite, but Trump’s strategy was to divide and conquer. With Canada cooperating, Mexico had fewer options.

7. Trump’s Focus: Fossil Fuels and Automobiles

Trump mainly cares about two industries: fossil fuels and cars. The U.S. auto industry relies heavily on Mexico for manufacturing and supply chains. If tariffs hit Mexico too hard, U.S. car companies and jobs would suffer, making it a politically risky move for Trump.

8. Trump’s Strategy Was Carefully Planned

Trump knew what he was doing by targeting Canada and Mexico first:

He linked tariffs to issues like immigration and fentanyl, which align with his political promises.
He set a precedent for using tariffs in non-trade disputes.
He picked economically weaker countries that depend on U.S. trade.
He wanted to show both U.S. voters and other countries that his tough trade policies work.

9. A Political Win for Trump?

If Canada and Mexico back down, it strengthens Trump’s position. However, this success comes at a cost: damaging alliances and breaking international trade rules.

10. The Bigger Picture: China Is the Real Target

Trump’s trade war isn’t just about Canada and Mexico—they were the warm-up. His real focus is China. While Canada and Mexico could be pressured individually, China will require a different strategy.

Key Takeaways:

Trump’s tariff strategy won’t improve U.S. relations with other countries.
Countries affected by U.S. tariffs will look for alternative trade partners.
The old global trade system, led by the World Trade Organization, has been disrupted.
U.S. isolation from allies could create more opportunities for China.

Now, the big question is: how will China respond?

Why Did Chinese Stocks Surge During the Lunar New Year Holiday?

Last night, four major events caught global attention, with one standing out: the impressive surge of Chinese stocks listed in the U.S. While the broader U.S. stock market remained volatile, Chinese stocks saw a strong rally.

1. Chinese Stocks Surged—Fueled by AI Developments

The rally was largely driven by the growing influence of DeepSeek, a rising AI player, and Alibaba’s latest AI model. Yesterday, Alibaba announced the open-source release of Qwen2.5-Max, an AI model reportedly on par with GPT-3.5. This move reinforced China’s competitive edge in developing high-performance AI at lower costs, prompting global investors to reassess Chinese tech stocks.

The numbers speak for themselves:

The Nasdaq Golden Dragon China Index, which tracks Chinese stocks listed in the U.S., rose 4.33%.
Alibaba jumped 6.22%.
The China Internet ETF saw $105 million in net inflows, the highest since October 2023.

With markets reopening after the Lunar New Year, investors may want to keep an eye on Chinese AI and tech stocks, especially those focused on AI applications.

2. U.S. Tariff Threats—Trump’s Plan to Tax Canada and Mexico

U.S. President Donald Trump announced plans to impose a 25% tariff on imports from Canada and Mexico starting February 1 (tomorrow!). If implemented, this could have several effects on global markets:

Positive for U.S. Stocks: Higher tariffs make American-made products more competitive.
Stronger U.S. Dollar: Past tariff hikes have triggered capital inflows to the U.S.; after the 2018 China tariffs, the U.S. Dollar Index climbed 4.1%.
Market Uncertainty: Trade tensions often push investors toward safe-haven assets like the US dollar.
Potential Fed Response: If tariffs drive inflation higher, the Federal Reserve may consider interest rate hikes, further strengthening the dollar.

3. Trump Criticizes the Federal Reserve Over Interest Rates

Shortly after the Federal Reserve decided to keep interest rates unchanged, U.S. President Donald Trump took to social media to directly blame Fed Chairman Jerome Powell for mismanaging inflation. Trump has a history of criticizing Powell—during his previous term eight years ago, he would call him out almost every ten days for not cutting interest rates.

Trump’s reasoning is simple: lowering interest rates would weaken the U.S. dollar, making American exports more competitive, boosting employment, and driving up the stock market—all of which could increase his political support.

4. Rising Uncertainty Boosts Gold Prices

Market uncertainty is pushing investors toward safe-haven assets like gold. The possibility of new tariffs on major trading partners could lead to trade tensions, while ongoing geopolitical conflicts add to economic unpredictability. In response, central banks worldwide are increasing their gold reserves, making a continued rise in gold prices highly likely.

Currently, gold is trading at around $2,800 per ounce, not far from Goldman Sachs’ target of $2,910. With gold prices up 8% this year and silver surging nearly 12%, the bullish trend is expected to continue.

CN250127-China’s AI Models Might Shake the U.S.

1. Chinese Stocks Surge Amid U.S. Market Slump

Last Friday, the U.S. dollar index took a dive, dropping 0.64% after a sharp 1.22% fall earlier in the week. The U.S. stock market with all three major indexes declining: the Dow Jones fell 0.32%, the Nasdaq 0.5%, and the S&P 500 0.29%.
In contrast, Chinese stocks listed in the U.S. skyrocketed. The China Stock Index surged by 4.25% in one night, reclaiming all its moving averages. Over the past eight trading days, it has gained 11.8%, signaling a strong rebound in Chinese assets.

2. China’s AI Models Spark Market Panic

Over the weekend, the Chinese AI company Deep Seek, a subsidiary of the quant fund giant High-Flyer Quant (幻方量化), caused a stir in Silicon Valley. The release of its open-source AI model, R1, just a month after unveiling its V3 model, sent shockwaves through the U.S. AI and stock markets.
Independent tests in the U.S. suggest that R1 even surpasses OpenAI’s latest model, o1, raising concerns about China’s rapid progress in AI development.

According to global AI model rankings, Deep Seek’s R1 ranks alongside OpenAI’s o1 as the best in the style-control category, with R1 slightly outperforming in specific benchmarks. Meta’s Chief AI Scientist stated that R1’s debut marks a turning point, showcasing how Chinese companies are not only catching up but surpassing their U.S. counterparts. Open-source models, like R1, are now proving more efficient than proprietary models.

What’s even more striking is the cost efficiency of R1. Deep Seek revealed that training R1 cost only one-thirtieth of what OpenAI’s latest model required—an astounding 98% reduction in expenses. This raises critical questions about the future of high-cost AI infrastructure. For example, NVIDIA, the U.S. leader in AI computing, might face significant setbacks if lower-cost alternatives dominate the industry. Similarly, the U.S.’s $500 billion “Stargate Project” for building AI infrastructure could lose relevance.

The unveiling of R1 caused ripple effects worldwide. SoftBank, a key player in the Stargate Project, saw its stock plummet nearly 6%, its largest single-day drop since November 1. U.S. stocks also took a hit—NVIDIA’s share price fell over 5% in after-hours trading, and Broadcom’s dropped more than 4%. Futures for the Nasdaq index fell over 1.2%, and even Chinese A-shares related to AI dipped after initial gains.

The current shifts might highlight a challenge to US: China has discovered a breakthrough in the AI race, challenging the dominance of U.S. companies. While this may create turbulence in global markets, it’s a long-term positive for Chinese assets. As approach the Lunar New Year, market sentiment remains cautious, but analysts predict a post-holiday rally fueled by both domestic and international investments.

The Hidden Player in U.S. Politics: The Rise of UAE’s Lobbying Power

The UAE has emerged as a significant player in shaping U.S. foreign policy, leveraging its lobbying efforts and influence in the Middle East.

A Key Beneficiary of Lobbying in the Middle East

In recent years, the UAE has expanded its influence across the Middle East while playing an active role in U.S. foreign policy decisions. Despite pledging to exit the ongoing conflict in Yemen in 2020, the UAE continues to maintain significant military influence in the region. Alongside other Gulf nations, the UAE normalized relations with Israel through the Abraham Accords, marking a milestone in Middle Eastern diplomacy. Additionally, the UAE remains a key recipient of U.S. military support, purchasing billions of dollars in weapons annually. Culturally, the nation also hosted the 2020 Dubai Expo, a global event that showcased its growing global presence.

Between 2020 and 2021, 25 organizations registered under the Foreign Agents Registration Act (FARA) to represent the UAE’s interests in the U.S. These groups reported over 10,700 interactions with U.S. policymakers and received $64 million for their services.

A well-organized lobbying team based in the U.S. has been instrumental in shaping U.S. policy toward the Middle East. In November 2022, The Washington Post revealed a classified intelligence report detailing the UAE’s extensive efforts—both legal and illegal—to influence U.S. politics in favor of its interests. The report, compiled by the National Intelligence Council, flagged these activities as a national security concern.

Although the full details of the report remain classified, the UAE’s influence operations have been well-documented. While the UAE has long been a U.S. partner on key foreign policy issues, it has employed a variety of strategies—both ethical and otherwise—to expand its sway in Washington. A notable case involved George Nader, a Lebanese-American businessman who admitted to funneling millions of dollars into U.S. elections on behalf of the UAE.

UAE has hired former U.S. military officials as contractors, including individuals who held high-ranking positions such as generals and admirals. Notably, Jims (or James) Mattis, who later became the U.S. Secretary of Defense, advised the UAE military before taking on the role. These individuals were awarded lucrative contracts, raising concerns about potential conflicts of interest—especially when they returned to positions within the U.S. government.

In addition, UAE has spent billions of dollars purchasing U.S. military equipment, making it the third-largest recipient of U.S. weapons in the past five years, behind Afghanistan and Saudi Arabia. However, UAE forces operating in Yemen have faced serious accusations of war crimes, including civilian casualties and torture. Even after withdrawing troops from Yemen in 2020, the UAE has continued to support non-state armed groups through training, logistical aid, and financial backing.

The UAE’s involvement in U.S. political and military affairs has become a recognized national security concern. While military cooperation remains a cornerstone of U.S.-UAE relations, the 2020 Abraham Accords further enhanced the UAE’s diplomatic reach. These agreements normalized relations between Israel, the UAE, Bahrain, Morocco, and Sudan. While presented as efforts to promote peace in the Middle East, the accords have been criticized for increasing the militarization of U.S. foreign policy in the region rather than reducing it.

So…Where Does UAE Lobbying Money Go?

The UAE has invested heavily in lobbying efforts, with companies registered under the Foreign Agents Registration Act (FARA) reporting a total income of nearly $64.5 million for their work on behalf of UAE clients. While more than 20 firms were involved, just five received the majority of the funds. The top recipients were:

Akin Gump: $13.5 million
Brunswick Group: $12.2 million
The Camstoll Group: $10.5 million
Teneo Strategy: $7.2 million
The Harbour Group: $6.6 million

Akin Gump, the top earner, is also one of the biggest contributors to U.S. political campaigns. The firm reported donating nearly $1.1 million—about two-thirds of the $1.65 million total donated by all UAE lobbying firms in 2020 and 2021.

It’s important to note these donations are entirely legal, as no foreign funds were used, complying with Federal Election Commission rules that ban contributions from foreign nationals.

The largest recipient was Terry McAuliffe (D-Va.), who received a $200,000 donation from Terakeet on August 31, 2021. Other prominent Democratic politicians linked to UAE lobbying efforts include Senate Majority Leader Chuck Schumer (D-NY) and House Majority Leader Steny Hoyer (D-MD).

While most of the contributions favored Democratic candidates, the lobbying activity itself was bipartisan. Over 450 political campaigns from both parties received contributions from firms working for UAE clients.

In many cases, donations were made to lawmakers directly involved in meetings with UAE representatives. For instance, Akin Gump reported contributing $528,461 to the campaigns of 104 members of Congress they had engaged on behalf of UAE clients. One notable example involved Senator Todd Young (R-IN), who met with Akin Gump on April 15, 2021. Just a week later, the firm donated $5,000 to his campaign.

Despite extensive lobbying efforts by UAE representatives targeting nearly every Congressional office, their main focus has been on key committees. Specifically, lobbyists working for the UAE contacted staff from the Senate Foreign Relations Committee and the House Foreign Affairs Committee more than 200 times.

One of the most frequently contacted individuals was Lee Zeldin (R-NY), a member of the House Foreign Affairs Committee and co-chair of the House Israel Caucus. Zeldin is a vocal supporter of the Abraham Accords, which established peace between the UAE and Israel. Senior members of political parties and leaders of influential committees have also been primary targets of UAE lobbyists.

The UAE’s lobbying efforts extended beyond Congress to include significant outreach to the media. Reports show that UAE representatives reached out to over 500 media outlets, focusing on major publications such as The New York Times (95 contacts), Forbes (61 contacts), and The Wall Street Journal (43 contacts).

Think tanks were another target, with UAE lobbyists contacting them at least 90 times. Notably, the think tanks contacted most frequently—such as the Middle East Institute, the Atlantic Council, and the Center for Strategic and International Studies—have received millions of dollars in donations from the UAE.

A-shares: The Only Trading Day This Week

With the Lunar New Year holiday, China’s A-shares market will only see trading today.

Besides, the spotlight is on the U.S. Federal Reserve, which will hold its first policy meeting of the year this week. Early Thursday (Beijing time), the Fed will announce its interest rate decision. Markets widely expect a pause in rate cuts for now.

In addition to the Fed, several other central banks, including the European Central Bank, Sweden’s Riksbank, the Bank of Canada, the Central Bank of Brazil, and the South African Reserve Bank, will also reveal their rate decisions in the coming days.

On top of that, U.S. earnings season is heating up. Major tech giants like Apple and Tesla are set to release their quarterly reports this week, drawing significant market attention.

A-shares: The Only Trading Day This Week

Due to the Lunar New Year holiday, today marks the only trading day for A-shares this week. Historically, the market tends to be quiet before the holiday as some investors adopt a cautious approach. However, after the holiday, the market often rebounds as these funds return.

According to Wind data, over the past decade (2015–2024), A-shares have shown a high probability of rising around the Lunar New Year:

5 trading days before the holiday: The market gained in 7 out of 10 years, with the largest increase of 3.92% in 2021.
5 trading days after the holiday: The Shanghai Composite Index rose in 70% of those years, with the biggest jump of 4.85% in 2024.
10 trading days after the holiday: The index continued to rise 70% of the time, with the highest increase of 7.10% in 2019.

Market Outlook and Opportunities

A report by Ping An Securities suggests that, with supportive domestic policies and easing external concerns, the market is expected to maintain an upward trend, with more structural opportunities emerging. Key areas to watch include:

Growth sectors such as advanced manufacturing and industries driven by new productivity.
High-quality companies benefiting from policies to expand domestic demand.
State-owned enterprise (SOE) reforms and opportunities in mergers and acquisitions.
Dividend strategies for long-term value.

Key Events to Watch

As the Lunar New Year holiday approaches, the following events could influence the market in the coming weeks:

China’s January Purchasing Managers’ Index (PMI) data.
Travel and consumer spending during the holiday.
The U.S. Federal Reserve’s interest rate meeting in January.
Updates on U.S. policies under Trump’s administration.

Spring Rally in Sight

A report by Haitong Securities notes that the “spring rally” is likely to unfold gradually. With policies taking effect throughout the year, the market could enter a new phase driven by fundamentals. Structurally, sectors like technology and manufacturing appear promising:

Technology: Supported by favorable policies, technological advancements, and an upturn in the industry cycle.
Mid-to-high-end manufacturing: Strong domestic supply and stable demand from both domestic and international markets suggest continued growth.

Meanwhile, consumer, pharmaceutical, and real estate sectors may experience shifts in expectations:

Real estate fundamentals and property prices are expected to stabilize, thanks to stronger fiscal support.
As household balance sheets improve and fiscal policies provide a boost, the consumer and pharmaceutical sectors could see upward momentum this year.

By monitoring these trends, investors can position themselves for opportunities during and after the holiday season.

CN250124-RMB Surges 300 Points, Major Chinese Stock Indices Rise

1. Global Stock Markets Rally

Global markets are seeing widespread gains. Expectations of potential interest rate cuts by the U.S. Federal Reserve have led to a weakening U.S. dollar, with the dollar index dipping below 108 today. Despite two days of weakness, the three major U.S. stock indices rallied overnight, with large-cap tech stocks driving the S&P 500 to a record high. Chinese stocks listed in the U.S. also stabilized, and the Nasdaq Golden Dragon China Index rose 0.13%. European and Asia-Pacific markets joined the global upswing, marking a positive day for equities worldwide.

2. Chinese Assets Make a Strong Comeback

The renminbi (RMB) surged this morning, rising sharply by 340 points in just over an hour between 9:40 AM and 11:00 AM (Beijing time). Meanwhile, the A50 futures index saw a dramatic turnaround, going from a slight dip (-0.06%) at 9:34 AM to a strong gain of over 1% by midday. Hong Kong’s Hang Seng Index emerged as one of the strongest performers in the Asia-Pacific region, climbing over 1.6% by midday, while the Hang Seng Tech Index surged by more than 3% during trading.

3. A-Share Indices Rise Across the Board

In the A-share market, the Shanghai Composite Index opened slightly lower due to weak sentiment but quickly rebounded. By midday, the Shanghai Composite and Shenzhen Component indices were up 0.73% and 1.13%, respectively. Tech stocks led the rally, with the ChiNext Index and STAR Market Composite Index rising 1.5% and 1.48%. The breadth of the market was impressive, with 3,515 stocks advancing and only 1,636 declining. Out of 56 industry sectors, 49 posted gains, while only 7 saw losses.

4. Timing is Key in Stock Investing

Reflecting on 2024, two significant market rallies stood out. The first began in late January, as I updated my research on January 23 to capture opportunities in specific state-owned enterprise sectors. This rally gained momentum through May. The second rally occurred in September, driven by tech stocks. Following a market bottom on September 18 at 2,700 points, tech stocks led a breakout rally. Both rallies highlight the importance of timing and seizing opportunities.

5. How to View the Current Market?

With only one and a half trading days left before the Lunar New Year, the anticipated “spring rally” is still a compelling opportunity. Key areas to watch include large-cap tech stocks and core assets in the mainboard market. Opportunities like this only came twice last year, and now, another chance is approaching.

Although trading volume this morning was modest, with turnover reaching just ¥737.2 billion, this suggests the rally is not yet driven by significant capital inflows. However, regulatory assurances of pre-holiday fund injections remain in play, and both policy and liquidity factors could support further gains in the coming weeks.

6. A Notable Update from Japan

Just before midday, the Bank of Japan announced a 25-basis-point rate hike, raising interest rates from 0.25% to 0.5%. This move could impact global capital flows, as it affects low-interest-rate arbitrage opportunities in Japan. Some of this capital might find its way into Chinese markets. Let’s wait and see how this unfolds.

Tesla, Xiaomi, and Other Automakers in China Issue Major Vehicle Recalls

On January 24, the China National Administration for Market Regulation’s Defective Product Recall Center website revealed multiple vehicle recalls from major automakers, including Tesla and Xiaomi. Notably, Xiaomi announced its first-ever vehicle recall since entering the automotive market.

Xiaomi Recalls Over 30,000 SU7 Electric Vehicles

Xiaomi is recalling approximately 31,000 SU7 Standard Edition electric vehicles, produced between February 6, 2024, and November 26, 2024. This recall includes three specific vehicle models:

BJ7000MBEVR2: 18,410 units
XMA7000MBEVR2: 12,117 units
XMA7000MBEVR5: 404 units

The issue stems from a software strategy problem that may cause timing synchronization errors. This could impact the smart parking assist system’s ability to detect static obstacles, increasing the risk of minor collisions or scrapes. Xiaomi will address this issue through a free over-the-air (OTA) software update, ensuring safety without requiring customers to visit a service center.

Xiaomi emphasized that user safety is its top priority, and although no physical parts need replacement, the recall follows strict regulatory procedures. This move aims to enhance the reliability of its smart parking assist system.

The recall also affects a batch of pre-launch test vehicles produced in February 2024. Xiaomi explained that these vehicles were part of extensive internal testing to ensure product quality before the SU7’s official release in March 2024.

Responding to questions about the delay in issuing the recall after an incident in November, Xiaomi stated it had immediately identified and resolved the issue with cloud services. However, further extensive testing and regulatory approval delayed the official announcement.

Xiaomi delivered over 135,000 vehicles in 2024 and has set an ambitious goal of 300,000 deliveries for 2025, as revealed by CEO Lei Jun in a New Year’s live stream.

Other Automakers Announce Recalls

On the same day, several other automakers in China also issued recall notices:

Tesla: Over 1.2 million Model S, Model X, Model 3, and Model Y vehicles due to potential software or hardware issues.
Chery Jaguar Land Rover: Nearly 110,000 Range Rover and Jaguar models due to safety concerns.
Hyundai: Over 69,000 Sorento and other models for defects related to manufacturing from 2010 to 2018.
SAIC Volkswagen: More than 330,000 Passat and Tiguan L models produced between 2015 and 2017.
Honda: Over 1.3 million vehicles, including CR-V and Civic models, for safety improvements.

These recalls reflect the industry’s commitment to addressing potential issues proactively, ensuring customer safety and trust.

AI & Government Layoffs: The Tech-Industrial Complex Shaping Trump’s America

Traditionally, it was said that American politics was influenced and dominated by the “military-industrial complex” – meaning that the United States’ geopolitics, foreign policy, and maintained international order reflected the interests of this complex. Trump’s political approach diverged dramatically from past practices, essentially abandoning the established model and reverting to an “isolationist” stance reminiscent of over a hundred years ago, focusing more on domestic concerns and avoiding military interventions in foreign affairs. The NATO alliance and regional military partnerships led by the US were also becoming unstable.

However, during Trump’s potential second White House term in 2024, a crucial new force emerged – what Biden termed the “tech-industrial complex” – where technology supersedes military power as the dominant force. The technological dimension joined the Trump/MAGA movement in a specific sequence: first Peter Thiel, then Elon Musk (representing the “tech right”), and finally Silicon Valley’s major corporations, entrepreneurs, and investors – from Zuckerberg and Bezos to Altman, Apple, and Google – who joined after Trump’s election.

These tech powers recognized that Trump fundamentally supports capital, deregulation, tax cuts, and mercantilism – allowing them to maximize their interests and shape America’s future under “Trump 2.0”. In this emerging order, the foundation shifts from military and defense to a global system powered by chips and artificial intelligence (with the understanding that these technologies can also have military applications).

Two recent US news stories illustrate this transformation, particularly regarding industry and investment within the tech-industrial complex.

On the second day of his White House tenure, Trump personally intervened to bring together Masayoshi Son (SoftBank), Larry Ellison (Oracle), and Sam Altman (OpenAI). These three announced the formation of a joint venture called “Stargate”, with a $500 billion investment aimed at building artificial intelligence infrastructure. Specifically, this primarily involves investing in data centers, with potential strategic investments along the AI ecosystem’s value chain, but the main focus remains data center infrastructure.

Recognizing this was a major investment project on Trump’s second day in office, he was extremely pleased, personally championing it and claiming the investment would create 100,000 jobs for the United States.

Can this be considered Trump’s achievement? Personally, while the AI trend has been ongoing for a couple of years and the Biden administration has been pushing industrial policies supporting key industries like semiconductors, the tech and industrial sectors still perceive the Biden/Democratic administration as overly regulatory and less friendly to businesses, capital, and technological innovation. If interviewed, most industry players would likely believe these industries would receive greater encouragement and development under a Trump administration.

At least in expectations, they believe a “golden age” has arrived.

For investment and entrepreneurship, expectations are crucial. Optimistic expectations motivate people to take more risks and be more willing to invest and start businesses.

Regardless of the US economic trajectory in the next one or two years, whether inflation can be controlled, or if manufacturing will truly return, for Silicon Valley entrepreneurs and investors in the new economy, the atmosphere has been set. People are indeed in a state of vibrant energy, eager to make significant moves. Undoubtedly, “Stargate” will intensify competitive pressures for all competitors, including Chinese entrepreneurs and businesses.

In this scenario, all parties emerge as winners. In fierce competition, OpenAI+Oracle welcome funding. SoftBank wants to ride the trend, repair relationships with investors, and prove itself again through the AI wave. Investors, despite being shrewd and visionary, also have a gambler’s side. So, they’re all in on AI, launching satellites as big as possible. Conveniently, Son has some connection with Trump and can leverage it. (During Trump’s first term, Son also launched a satellite by impulsively investing in WeWork).

As for Trump, he’s both a politician and the top investment attraction officer. He needs achievements, visual effects (“presence”), publicity, and demonstration. Thus, he’s naturally thrilled about “Stargate”. Especially since he recently discussed with Son investing $100-200 billion, giving this project a sense of immediate closure. However, what Trump values most isn’t the investment amount itself, but employment. He claims this will create 100,000 jobs (a number that can never be verified, nor needs to be).

The Japanese might feel somewhat conflicted. They see SoftBank still thriving in the US, leveraging American tech giants to invest in and build AI infrastructure and industrial chain positioning. Yet, a similar scenario is difficult to replicate in Japan—at least not at a comparable scale. Japan might believe it’s performing well in US-Japan alliance relations, but Trump won’t prioritize Japan—he’ll personally work to attract Japanese capital, industrial, and talent resources to the United States. This is an era of great power competition on geopolitical and economic foundations. Every country must determine whether they’re at the table or on the menu.

Of course, this job creation narrative has some issues, primarily because in an era where human technology is approaching Artificial General Intelligence (AGI) and Artificial Superintelligence (ASI), the relationship between AI and human labor is complex. It’s no longer simply about “new technology creating more jobs”, but about AI reconfiguring labor relations and productivity, potentially displacing or replacing human labor and pushing most workers to the lowest-value chain segments.

Regarding the investment by Softbank, OpenAI, and Oracle

Data centers themselves do not create many job opportunities, whether during the brief construction phase or in the operational stage, which requires minimal staffing.
While these data centers serve AI companies and may indirectly support the AI industry, several critical points emerge:
- First, the AI industry is capital and technology-intensive, not labor-intensive. It will not generate significant employment in absolute numbers.
- Second, the AI industry primarily requires high-end talent – highly educated elite engineers and technical specialists. This connects to the ongoing H-1B visa controversy in the United States, where: (1) Tech leaders like Musk advocate for more immigrant talent; (2) Trump’s base opposes this, viewing it as contrary to “America First” principles. This debate has created deep political divisions, with Vivek Ramaswamy’s recent political ousting being a notable example.
- Third, AI’s ultimate goal is developing artificial general intelligence (AGI) or superintelligence that will eventually replace most human labor, except for a few elite managers. Metaphorically, even the construction workers building these data centers are essentially helping to create the AI systems that will ultimately replace human workers. A poignant example is how autonomous driving companies hire human drivers to train AI, effectively teaching the technology that will eventually render those same workers unemployed. The underlying narrative suggests a transformative technological shift where AI progressively eliminates human labor across various sectors.

Therefore, this plan has no relevance to Trump’s MAGA base—white working-class individuals with high school or lower education—in the short, medium, or long term, and may even harm their interests. The primary beneficiaries are technology companies and capital.

It’s important to note that we’re examining this from a broader perspective of human society and historical trends in the 2020s, not making political criticism or value judgments. Artificial intelligence replacing human labor appears to be an inevitable future trend. If most people become unemployed due to AI, what solutions remain?

Therefore, government intervention becomes crucial. Potential strategies might include:

Creating employment opportunities
Implementing universal basic income

So a bold assertion emerges:

Future technology + capitalism = dystopia
Future technology + socialism = utopia

Similarly, an argument that “only socialism can save” a country (I’m not going to address which country) might stands from this perspective.

Trump issued an executive order to dismantle Diversity, Equity, and Inclusion (DEI) offices across federal government departments. The order mandates that DEI personnel begin paid leave by 5 PM Eastern Time on Wednesday and will subsequently be terminated. Additionally, agencies must shut down all DEI-related websites and social media accounts by the deadline.

DEI essentially provides special considerations and quotas for diverse and marginalized groups, including women, transgender individuals, and people of color, particularly in hiring, salary, and promotion processes. This is a core agenda of left-wing liberalism.

However, many argue that DEI has become excessive, potentially compromising fairness and efficiency. Critics contend that individuals might be hired based on gender, sexual orientation, or skin color rather than merit, which could be seen as a form of discrimination against more qualified candidates.

Educated metropolitan elites exposed to liberal ideologies tend to understand DEI’s principles, though they may not always agree with specific implementations. For many ordinary Americans, DEI represents a symptom of left-wing ideology and is viewed as a sign of social decay, with some even suggesting it’s part of a broader conspiracy to marginalize white populations.

Elon Musk’s “Department of Government Efficiency” (DOGE) aims to streamline government operations by reducing expenses, eliminating redundant regulations, simplifying structures, and optimizing processes. In practice, this often translates to workforce reduction.

From a corporate perspective, such efficiency drives are crucial. Reducing costs and increasing efficiency directly correlates with maximizing profits. Employees are seen primarily as tools for profit generation, and those perceived as surplus may be viewed as obstacles to financial performance.

The current global competitive landscape, compounded by artificial intelligence and automation, provides strong incentives for businesses to optimize workforce structures, potentially including replacing human labor with AI solutions.

Musk and his Silicon Valley peers are essentially applying corporate management strategies to reimagine federal government operations.

The DOGE on X platform gleefully announced the dissolution of the Diversity Officers Executive Council, noting that its webpage has been taken down. Elon Musk also enthusiastically reposted and commented, viewing the elimination as a DOGE achievement.

This council was a cross-agency federal government organization responsible for implementing and maintaining nationwide Diversity, Equity, Inclusion, and Accessibility (DEIA) strategies. Most federal DEI programs were created through Biden administration executive orders, making them an easy target for Trump, conservatives, and DOGE to dismantle.

It’s unclear whether Musk’s DOGE was directly involved in drafting the related executive order. However, it’s evident that DEI was already a prime target for elimination by Trump-aligned and mainstream Republican forces, with or without DOGE’s involvement.

In the United States, Diversity, Equity, and Inclusion (DEI) has been a significant direction and specialized field within human resources, even considered a critical component of corporate strategy. There are now MBA programs specifically focused on DEI. However, the current trend is shifting, with the federal government leading efforts to dismantle DEI initiatives, which is likely to influence local governments and private sectors to follow suit.

Consequently, professionals working in DEI should be concerned about job security in the coming years. A related field is “ESG” (Environmental, Social, and Governance), which is a Western-developed framework for assessing a company’s sustainability and ethical impact. The decline of DEI could have significant implications for ESG.

The government’s efficiency initiatives are not solely targeting DEI—they aim to dramatically reduce personnel across the federal government system, regardless of department or function—similar to Elon Musk’s approach when he acquired Twitter. Ultimately, Musk demonstrated that fewer people could accomplish the same or even more work.

In the ongoing technological evolution, the latest tech tools—from digitalization to artificial intelligence—will be powerful enablers. They can effectively improve human productivity and reduce the workforce needed to complete equivalent tasks. Artificial intelligence is precisely what pioneers like Masayoshi Son, Larry Ellison, Sam Altman, and other AI competitors are dedicated to pursuing.

Corporations fundamentally seek profit and capital return maximization, viewing personnel merely as a production factor. However, governments and private enterprises differ significantly. Public sectors must satisfy public interests, meet collective needs, and achieve broader societal goals. Labor efficiency is not just the primary objective of the public sector—it may not even be an objective at all.

While no one can accurately predict how far we are from artificial general intelligence (AGI) or superintelligence, or even provide universally accepted definitions, one undisputed fact remains: AI’s emergence will accelerate the potential replacement of human labor.

During this transition, profit-driven capitalists and businesses will undoubtedly embrace AI applications, substantially reducing human staff across various roles—from customer service and sales to middle management. As technological replacement expands, even low and medium-skilled jobs like drivers, delivery workers, service staff, and retail employees will be at risk.

Addressing potential widespread unemployment requires governmental intervention. Governments have two primary strategies:

Direct Income Provision: Implement universal basic income through tax and fiscal transfer mechanisms, redistributing profits generated by capital and technology to ordinary citizens.
Job Creation: Generate employment opportunities specifically to provide meaningful work. If private sectors cannot employ people, the government becomes the employer. Recognizing that humans are social beings who need purpose, community, and dignity, providing work that offers belonging and self-worth becomes crucial.

Ultimately, whether through income support or employment, the fundamental goal is ensuring social and political stability in an increasingly technology-driven landscape.

Lastly

In examining two recent news, what we’re seeing in the US is a new political-economic model pushed forward by middle and lower-class white voters: a “Technology-Industrial Complex” combined with conservative/right-wing economic principles.

Key characteristics include:

A foundational framework of free-market capitalism with small government, low taxes, and minimal welfare
Staunch opposition to socialism and left-wing economic theories
Technology companies and tech capital emerging as dominant forces, closely intertwined with political power and creating oligarchic and crony political structures

These tech enterprises not only directly influence government regulation of technological industries but can also potentially orchestrate large-scale downsizing and restructuring of government and public sector institutions.

This “Technology-Industrial Complex” paired with conservative economic ideology will likely lead to a “dystopian” future. While one potential outcome is social solidarity leading to revolutionary change, another bleak scenario suggests ordinary people might be reduced to surviving on minimal government subsidies while retreating into the metaverse, seeking meaning and value in virtual worlds.