The idea of nations collectively creating policies to slow AI development for safety is naive. Game theory dictates that the immense competitive advantage of achieving AGI first will drive nations and companies to race ahead, making any global regulatory agreement effectively unenforceable.

The US President's move to centralize AI regulation over individual states is likely a response to lobbying from major tech companies. They need a stable, nationwide framework to protect their massive capital expenditures on data centers. A patchwork of state laws creates uncertainty and the risk of being forced into costly relocations.

A draft executive order aimed at preempting state AI laws includes deadlines for nearly every action except for the one tasking the administration to create a federal replacement. This strategic omission suggests the real goal is to block both state and federal regulation, not to establish a uniform national policy.

Contrary to their current stance, major AI labs will pivot to support national-level regulation. The motivation is strategic: a single, predictable federal framework is preferable to navigating an increasingly complex and contradictory patchwork of state-by-state AI laws, which stifles innovation and increases compliance costs.

The expected outcome will maintain Mexico's critical tariff-free access to the U.S., supporting current manufacturing. However, it will fall short of providing the strategic updates needed to catalyze a full-scale acceleration of near-shoring.

Investors should not over-react to congressional turbulence. Many of the most market-relevant policies—on trade, regulation, industrial strategy, and AI—are executed via executive authority, not congressional action. This means their trajectory is unlikely to be altered by events like a shutdown or shifting political dynamics in Congress.

The idea of individual states creating their own AI regulations is fundamentally flawed. AI operates across state lines, making it a clear case of interstate commerce that demands a unified federal approach. A 50-state regulatory framework would create chaos and hinder the country's ability to compete globally in AI development.

The review is expected to maintain the core trade agreement and resolve disputes, but ambitious updates on AI, critical minerals, or China will be postponed or handled via less formal side agreements, thus limiting the full potential of near-shoring.

Advocating for a single national AI policy is often a strategic move by tech lobbyists and friendly politicians to preempt and invalidate stricter regulations emerging at the state level. Under the guise of creating a unified standard, this approach effectively ensures the actual policy is weak or non-existent, allowing the industry to operate with minimal oversight.