Technology companies will be in for a bumpy ride in the second Trump Administration.  President-elect Trump has promised to adopt policies that will accelerate the United States’ technological decoupling from China.  However, he will likely take a more hands-off approach to regulating artificial intelligence and reverse several Biden Administration policies related to AI and other emerging technologies.

On the campaign trail, President-elect Trump made clear he intends to employ industrial policy tools, including tariffs, outbound investment restrictions, export controls, and other economic and national security levers that will further decouple technological supply chains, restrict cross-border innovation, and limit commercial activity with Chinese entities or with entities in China, including U.S. entities.

The President-elect’s strict decoupling approach to China will likely represent an escalation of the Biden Administration’s two-part strategy to out-innovate China in the United States and restrict the flow of critical technologies to “countries of concern.”  Under President Biden, the Commerce Department recently concluded a comment period on a proposed rule regulating connected vehicle technologies, continuing work that began in President Trump’s first term.  Similarly, the Justice Department recently published a proposed rule regarding access to sensitive personal and government data in “countries of concern.”  And the Treasury Department recently finalized its long-anticipated rule restricting outbound investment. 

In Congress, the House Select Committee on Strategic Competition Between the United States and the Chinese Communist Party served as a successful bipartisan clearinghouse for recommending policies aligned with this two-part strategy in the 118th Congress.  Although the Select Committee lacked legislative jurisdiction, House Speaker Mike Johnson has announced that it will continue to hold hearings and conduct broad investigations into U.S. business activity in China in the next Congress.

When President-elect Trump assumes office, we expect him to continue this two-prong strategy, although he will place greater emphasis on restricting foreign technologies than on promoting U.S. innovation.

For example, his proposed tariffs on imports from China would impose increased costs on Chinese products while also increasing prices for American consumers (and for American businesses that rely on input goods from China).  Moreover, House of Representatives Republicans have shown significant appetite for two successive Congresses to enact comprehensive outbound investment, sanctions, and export-controls legislation.  House leaders are debating whether to append provisions related to Uyghur forced labor, supply-chain restrictions, outbound investment notice requirements, and other controls to the FY25 National Defense Authorization Act, which is likely the last significant legislative vehicle of the 118th Congress.  The outbound investment legislation would be a notable inclusion, given that the Treasury Department’s final rule is scheduled to take effect on January 2.

On the domestic front, Trump may seek to roll back aspects of the CHIPS and Science Act, a bipartisan hallmark achievement of the Biden Administration.  In a preelection gaffe, Speaker Johnson said that Republican lawmakers would “probably” try to repeal the CHIPS Act, though he quickly walked his comments back.  Ultimately, while the Commerce Department under Trump will likely reverse Biden Administration policies requiring CHIPS Act funding applicants to make childcare and workforce development commitments, Republicans appear largely aligned on the strategic priority of bolstering advanced manufacturing capacity in the United States.  Rather than repeal the CHIPS Act, a Trump Administration may seek to repurpose unspent CHIPS Act funds (which would require congressional approval) to other priorities or refocus funding exclusively on U.S.-based companies instead of bolstering companies based in allied countries.

Even with the change in party control of the White House and Senate, artificial intelligence regulation is likely to remain a significant policy priority at the federal and state levels.  The Republican governing trifecta is likely to continue promoting AI development and deployment with a possibly greater risk tolerance for the nascent technology.

President-elect Trump pledged to immediately revoke the Biden Administration’s Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence and implement an AI policy “rooted in free speech and human flourishing.”  This suggests a comparably laissez-faire approach to regulating AI, and we expect the incoming Congress and administration to most emphasize private AI innovation as opposed to government use and management of AI.

Both the House and Senate have invested ample time and resources in the 118th Congress to hold hearings and introduce legislation related to AI.  Still, significant AI bills have not advanced on the floor of either chamber.  Bills that have advanced through committee tend to relate to the government’s own evaluation, procurement, and use of AI, or to providing resources to support AI research and development.  Congress will likely continue to pursue these priorities while also taking cues from the new administration.

Meanwhile, states will work in parallel to regulate AI and privacy, as we view preemptive federal legislation to be unlikely.  Even though high-profile AI safety bills, like California SB 1047, were not enacted, lawmakers in California, Colorado, Texas, and other states will continue to pursue comprehensive legislation to impose standards and guardrails on the most sophisticated and high-risk systems.

Finally, Congress and the Trump Administration will likely renew efforts to strengthen the cryptocurrency industry.  Both the Trump campaign and congressional Republicans have expressed strong support for allowing digital currencies to grow, opposing Securities and Exchange Commission Chair Gary Gensler’s efforts to regulate the industry.  Shortly after Election Day, House Majority Leader Steve Scalise included the creation of a “regulatory framework that allows digital assets to grow with certainty” on a list of House Republican priorities for the first 100 days of the next Congress.

Tags: Artificial Intelligence (AI), China, Congress
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Holly Fechner Holly Fechner

Holly Fechner advises clients on complex public policy matters that combine legal and political opportunities and risks. She leads teams that represent companies, entities, and organizations in significant policy and regulatory matters before Congress and the Executive Branch.

She is a co-chair of…

Holly Fechner advises clients on complex public policy matters that combine legal and political opportunities and risks. She leads teams that represent companies, entities, and organizations in significant policy and regulatory matters before Congress and the Executive Branch.

She is a co-chair of the Covington’s Technology Industry Group and a member of the Covington Political Action Committee board of directors.

Holly works with clients to:

  • Develop compelling public policy strategies
  • Research law and draft legislation and policy
  • Draft testimony, comments, fact sheets, letters and other documents
  • Advocate before Congress and the Executive Branch
  • Form and manage coalitions
  • Develop communications strategies

She is the Executive Director of Invent Together and a visiting lecturer at the Harvard Kennedy School of Government. She serves on the board of directors of the American Constitution Society.

Holly served as Policy Director for Senator Edward M. Kennedy (D-MA) and Chief Labor and Pensions Counsel for the Senate Health, Education, Labor & Pensions Committee.

She received The American Lawyer, “Dealmaker of the Year” award in 2019. The Hill named her a “Top Lobbyist” from 2013 to the present, and she has been ranked by Chambers USA – America’s Leading Business Lawyers from 2012 to the present. One client noted to Chambers: “Holly is an exceptional attorney who excels in government relations and policy discussions. She has an incisive analytical skill set which gives her the capability of understanding extremely complex legal and institutional matters.” According to another client surveyed by Chambers, “Holly is incredibly intelligent, effective and responsive. She also leads the team in a way that brings out everyone’s best work.”

Read more about Holly FechnerEmail
Show more Show less
Photo of Matthew Shapanka Matthew Shapanka

Matthew Shapanka practices at the intersection of law, policy, and politics, advising clients on important legislative, regulatory and enforcement matters before Congress, state legislatures, and government agencies that present significant legal, political, and business opportunities and risks.

Drawing on more than 15 years…

Matthew Shapanka practices at the intersection of law, policy, and politics, advising clients on important legislative, regulatory and enforcement matters before Congress, state legislatures, and government agencies that present significant legal, political, and business opportunities and risks.

Drawing on more than 15 years of experience on Capitol Hill, private practice, state government, and political campaigns, Matt develops and executes complex, multifaceted public policy initiatives for clients seeking actions by Congress, state legislatures, and federal and state government agencies. He regularly counsels businesses—especially technology companies—on matters involving intellectual property, national security, and regulation of critical and emerging technologies like artificial intelligence and autonomous vehicles.

Matt rejoined Covington after serving as Chief Counsel for the U.S. Senate Committee on Rules and Administration, where he advised Chairwoman Amy Klobuchar (D-MN) on all legal, policy, and oversight matters before the Committee, particularly federal election and campaign finance law, Federal Election Commission nominations, and oversight of the legislative branch, including U.S. Capitol security after the January 6, 2021 attack and the rules and procedures governing the Senate. Most significantly, Matt led the Committee’s staff work on the Electoral Count Reform Act – a landmark bipartisan law that updates the procedures for certifying and counting votes in presidential elections—and the Committee’s joint bipartisan investigation (with the Homeland Security Committee) into the security planning and response to the January 6th attack.

Both in Congress and at Covington, Matt has prepared dozens of corporate and nonprofit executives, academics, government officials, and presidential nominees for testimony at congressional committee hearings and depositions. He is a skilled legislative drafter who has composed dozens of bills and amendments introduced in Congress and state legislatures, including several that have been enacted into law across multiple policy areas. Matt also leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory policy matters and managing state advocacy efforts.

In addition to his policy work, Matt advises and represents clients on the full range of political law compliance and enforcement matters involving federal election, campaign finance, lobbying, and government ethics laws, the Securities and Exchange Commission’s “Pay-to-Play” rule, and the election and political laws of states and municipalities across the country.

Before law school, Matt served in the administration of former Governor Deval Patrick (D-MA) as a research analyst in the Massachusetts Recovery & Reinvestment Office, where he worked on policy, communications, and compliance matters for federal economic recovery funding awarded to the state. He has also staffed federal, state, and local political candidates in Massachusetts and New Hampshire.

Read more about Matthew ShapankaEmail
Show more Show less
Photo of Samuel Klein Samuel Klein

Samuel Klein helps clients realize their policy objectives, manage reputational risks, and navigate the regulatory environment governing political engagement.

As a member of Covington’s Election and Political Law practice, Sam assists clients facing Congressional investigations and offers guidance on ethics laws; with the…

Samuel Klein helps clients realize their policy objectives, manage reputational risks, and navigate the regulatory environment governing political engagement.

As a member of Covington’s Election and Political Law practice, Sam assists clients facing Congressional investigations and offers guidance on ethics laws; with the firm’s Public Policy group, Sam supports strategic advocacy across a breadth of policy domains at the federal, state, and local levels.

Sam spent one year as a law clerk at the Federal Election Commission. His prior experience includes serving as an intern to two senior members of Congress and helping clients communicate nuanced policy concepts to lawmakers and stakeholders as a public-affairs consultant.

Read more about Samuel KleinEmail
Show more Show less