America Can Still Lose the AI Race

Hidden behind the United States’ strategy in the unfolding trade war, tariffs, and rapid restructuring of the world’s economic system lie two uncomfortable truths. 

First, rapid artificial intelligence (AI) advancements are redefining the world’s digital future. As recently discussed by the New York Times: “The Government Knows A.G.I. Is coming.” Second, while the United States has historically enjoyed a global leadership position in technological development and diffusion, this is no longer guaranteed.

In fact, without substantial changes, a techno-authoritarian future is far more likely. China is increasingly outperforming the United States and its allies, thanks to its embrace of a digital, automated, and interconnected world and its capacity to export low-cost technological solutions abroad. 

Now, more than ever, America must work with its allies to forge new technological partnerships that reflect liberal and democratic values in order to counter and outcompete a formidable digital China in its aim to establish a techno-authoritarian global order.

The AI Control Agenda

In 2022, President Biden initiated efforts to curb China’s AI capabilities and temper its global digital ambitions. This strategy of control employed targeted export controls to restrict China’s access to the advanced chips necessary for AI training. In 2025, the United States intensified these efforts by announcing a new “Diffusion Rule” that categorized countries into Tier 1, Tier 2, and Tier 3. This effectively defined who the U.S. believed should be able to develop cutting-edge AI systems. Unfortunately, many U.S. allies were categorized as “Tier 2,” which subjected them to stringent restrictions and prompted significant diplomatic backlash. 

This strategy was adopted to ensure that – in the short term – America would retain its leading position over China in the development of cutting-edge AI systems, up to and including the development of the first Artificial General Intelligence (AGI). However, exporting and building a new global AI ecosystem that would depend on American AI for its foundations was also essential for this strategy to be effective.

The U.S. has not only failed to build such alliances but has also actively pushed its allies away, potentially leading to significant risks to the country in the long term. Instead, concerns about the global influence of the American tech ecosystem run rampant. Countries are now actively working to push American tech players out in favor of their local options, even if those options are not yet ready. This is a direct consequence of poorly communicated export controls; new trade disputes have further intensified these tensions.

China’s AI Ambitions

China is poised to take advantage as countries begin to reduce their reliance on the American tech industry. Historically,  China has relied on initiatives like the Belt and Road Initiative and the Digital Silk Road to grow its global digital presence. This was achieved by constructing essential telecommunications networks, smart cities, data centers, and other digital infrastructure worldwide. 

When combined with other strategic moves by China to improve its global image, increase its soft power, and bolster its influence within international organizations, demand for the country’s technology is on the rise. China is leveraging these foundations to influence international developments as global interest in AI grows.

Caught off guard by the release of ChatGPT’s launch in late 2022, China appeared to be significantly behind American advancements. Today, the situation is clearly different. In spite of ever-increasing export controls, China’s AI industry is exploding, not slowing. Due to enforcement challenges and smuggling efforts, China still has access to the computing that it needs. In the near future, due to increasing investment, it will also likely be able to manufacture these capabilities domestically. China remains the only country able to match the scale of America’s technological capabilities.

In contrast to the control-based approach that the U.S. is adopting for AI, China is concentrating on developing and releasing an onslaught of new open source AI models. Many of these models continue to approach parity with their closed source American competitors. As China continues to release its AI models to the world, such as Qwen and DeepSeek, many countries are turning away from the U.S. to orient themselves towards Beijing instead. The launch of the latter solution has been described as a  “wake-up call” and a “Sputnik moment” for the U.S. due to how it challenges America’s self-perceived technological superiority. 

In response, the U.S. and its allies are increasing the world’s awareness about the risks linked to using Chinese AI models. For many countries, the affordability and accessibility of these open-source AI models – especially without American alternatives – make them an appealing option even if there may be legitimate risks associated with their use.

Unleashing American AI Innovation

Efforts to undermine China’s ambitions will play a significant role in the AI race, but as the global shift away from American technology systems continues, these efforts alone will not suffice. The U.S. must prioritize policies that emphasize promoting, competing, and diffusing its innovations to counter Chinese competition. Failing in this endeavor will almost certainly ensure that it is China, rather than the U.S., that builds out the foundations for a future AI-infused world. 

Acknowledging this, Michael Kratsios, Director of the White House Office of Science and Technology Policy, recently laid out the groundwork for the Trump administration’s AI strategy, stressing that the U.S. aims to “make it as easy as possible… for [the United States] to export [its] technology to like-minded partners.” Achieving this will require the U.S. to address the ongoing backlash against its technology sector, which remains a fundamental source of American power and influence. 

This demands clearer communication from the administration regarding export control policies, particularly about the diffusion rule. Equally critical is the role of open source AI; the U.S. must actively support and promote American open source AI solutions. This effort could be part of a broader initiative to engage on the topic of digital public infrastructure, creating new opportunities to increase American investment in key markets that China is currently courting. 

Finally, as China integrates domestic AI solutions across all sectors of its economy, the U.S. must do the same and lead by example: by developing effective AI applications, accelerating their domestic diffusion (including within the government itself), and fostering new ecosystems and partnerships that can scale American innovation globally. 

Without such concerted efforts, America and the world risk letting China race ahead in the most significant technological revolution of modern times greatly extending its global influence in the process.

Co-author Dr. Keegan McBride is a lecturer in AI, Government, and Policy at the Oxford Internet Institute, University of Oxford.