Gina Raimondo on How European Industry Is Getting Crushed

The relationship between the US and Europe is deteriorating along both security and economic dimensions. The Trump administration has imposed tariffs, while also being sharply critical of NATO allies. So what are European leaders to do? Hope things go back to normal in the US? Or perhaps become closer with China? Our guest on this episode says the latter would be a grave mistake. This episode was recorded live on April 1 at the DC headquarters of the Council on Foreign Relations. We spoke with Gina Raimondo, now a CFR Distinguished Fellow, who previously served as the commerce secretary in the Biden Administration, and prior to that was the governor of Rhode Island. She discusses her view that European industry is being hollowed out by China, and that the only path forward is a global, unified, non-China trading bloc, which is an idea that's being thwarted by the Trump administration. We also talk about the legacy of the CHIPS Act, and her fears about AI creating mass unemployment and destabilizing our democracy. Read more:US Lawmakers Propose Crackdown on Chip Tool Sales to ChinaCheap Chinese Cars Are Waiting on Detroit's Doorstep Only http://Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

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• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

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  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:08Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

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• 2:38Joe Weisenthal?

  Hello and welcome to a live episode of the Outlaws Podcast. I'm Joe Weisenthal.

• 2:43Tracy Alloway?

  And I'm Tracy Alloway.

• 2:45Joe Weisenthal?

  So for, I guess for listeners who are hearing this here at CFR, I need to talk about, truly do have the perfect guest with us. We're going to be speaking with CFR distinguished fellow, Gina Raimondo, previously the Commerce Secretary, previously Governor of Rhode Island. So Gina, looking forward to chatting.

• 3:03Speaker 05

  Me too. Thank you for having me.

• 3:05Joe Weisenthal?

  There's so much, there's so much to talk about. By the way, what's the date today? It's April 1st. We always make a note of that these days.

• 3:12Speaker 05

  You better add in the time.

• 3:13Joe Weisenthal?

  Yeah. 11:45 because so much is liable to change by the time other people hear this episode. But I want to start, I saw a headline this morning, President Trump, he's said to give a speech tonight related to the war in Iran. And according to a report, I think it was a Reuters report, he's going to criticize NATO heavily. They haven't gotten involved in the war, etc. Maybe threaten to pull out of NATO yet again. And I'm curious from your perspective, you know, how thick is the ice right now between the US and Europe? And how much, how much more is there for it to thin?

• 3:51Speaker 05

  Yes, such a good question. It does, it does make sense. Hello, everybody. It's great to be here. It's great to be on the show. I don't think it's that thick. The last time I was in Europe was, I guess, a month and a half ago for the Munich Security Conference and spent a lot of time with European ministers, military leaders, CEOs. And I think their patience is wearing thin with us, somewhat justifiably. So I don't think it's very thick. Listen, I understand the President's point if he thinks European countries aren't pulling their weight or doing their fair share as it relates to investing in their military capacity and participating in NATO.

• 4:31Speaker 05

  That being said, I mean, it's not clear to me that before we invaded, we had a strategic plan with our European allies to get involved.

• 4:40Speaker 06

  Right.

• 4:41Speaker 05

  And so, you know, it's like a lot of things with this administration, maybe not a terrible idea, but very poor execution.

• 4:49Tracy Alloway?

  So I know when you were Commerce Secretary, you obviously spent a lot of your time thinking about the US versus China technology situation. And I know you argued also that we actually need Europe when we think about that, because if we're going to have something like export controls in the US, it doesn't really work if Europe doesn't come along with us. When you think about economic security in the context of, let's just say, fraying US-European relations, where are we headed?

• 5:20Speaker 05

  I think we're in a bad place. I don't think we can effectively compete with China economically, technologically, without allies. Right? They're just too big. They're too big, they're too determined. And so, we need allies, including Europe. By the way, including Southeast Asia, including the Global South. And so, if you were to say to me, "Hey, what do you think is the biggest mistake about how this administration is handling China and their China strategy?", I would say, "Pissing off all our allies." It's just not a good idea. By the way, it's not good for Europe. You know, when I was in Europe, in Munich,

• 6:05Speaker 05

  what I would say to the Europeans is, "I know you're unhappy with us, but we're your closest ally, and it isn't good for you to cozy up to China." I mean, if you look at now what China is doing to Europe, it's terrible for Europe. The Chinese imports to Europe have surged. I can't remember the exact number, but it's like 20, 30% more imports from China to Europe this year, year-to-date, versus last year.

• 6:40Speaker 05

  The German industrial base is going to get crushed. Like, this is China's play. They run the play over and over again. They subsidize, they dump cheap products into the global market, in this case, Europe, also Africa, distort the price, and it makes it impossible to compete. So, that's bad for America. It weakens our allies in Europe. By the way, it's bad for Europe. And that's why the ice is thinning. But, you know, my point to Europe is, okay, your feelings are hurt, but China's not your friend.

• 7:12Joe Weisenthal?

  Yeah, let's talk about this a little bit more, because this phenomenon is like, all right, Germany has an incredible history of chemical giants and automotive giants, obviously, and so forth. And there's a lot that gets talked about in the US-Europe relationship these days, primarily centered on defense and NATO spending, et cetera. But it does feel to me like there is comparably less attention paid to just, what is industrial Europe even going to be in the future? Because they don't have our tech, right? They don't have our Metas and Alphabets and OpenAIs to the same degree.

• 7:48Speaker 05

  I could not agree more. And, you know, I was Commerce Secretary, so my focus is economic security, economic alliances, technology security. So, again, I personally think a weak European economy and a weak European technology sector is definitely bad for them, but also bad for us. We want strong allies. And so, when I was in Munich, while the talk was, of course, around NATO and their military capacity, every speech I gave a person I spoke with, I talked about their supply chains, their industrial base, the fact that it'll be almost impossible for them to compete

• 8:32Speaker 05

  if China continues to, like I said, distort the global market and take advantage of them. And the- Particularly Germany, you talk about the chemical companies and the auto companies. The damage China is doing right now for their industrial base is significant. So I wish people would talk more about it. Of course, all the focus is on NATO, it's a shiny object, everyone's focused on the military, which is very important. But, you know, it's just like supply chain in America. It's like the frog's boiled and doesn't know it. For decades, we allowed our supply chains to wither and atrophy, and then you wake up 20, 30 years later and you're massively reliant on China.

• 9:16Speaker 05

  So let's wake up today and do something about it.

• 9:19Tracy Alloway?

  Yeah, the European situation, I mean, it does come up depending on what the talking point du jour is. So if it's AI, people are like, well, Europe is behind in AI. And then I was reading a note just yesterday from credit sites talking about petrochemicals and saying, well, Europe is in a really bad place when it comes to petrochemicals. US a little bit more insulated, and China is basically almost like 100% self-reliant for some things, which is pretty amazing if you think back to the situation just 20 or 30 years ago. When it comes to building up European strategic industry, let's say, or technology, what role do you see for the US in that? Because it feels like everyone's trying to do the same thing at the same time.

• 10:03Tracy Alloway?

  The US is trying to develop its own ecosystem of, you know, either industry or strategic technology. China is trying to do it. Europe maybe should be trying to do it. But how is everyone doing it at the same time? And what should the US actually be advocating for here?

• 10:18Speaker 05

  We should be working with our allies to shore up all of these supply chains. Listen, I don't think America needs to be, can be, or should try to be

• 10:31Speaker 05

  Mining everything, making everything that we need. Japan is a juggernaut in chemicals. That's okay, they're one of our closest allies. Europe has had a long, successful industrial base. So as long as we have some diversification, that's a good thing. And as long as we're working with allies and have allies, that's a good thing. The scary things are when we are overly dependent on one country, especially if the country is China. Like, I personally think it is bad for America, and the world, and Europe, that they have such an anemic technology ecosystem.

• 11:15Speaker 05

  And that, you know, there's a lot of reasons they have that, it's overregulated, they don't have a capital market, they, this, you know, I thought the Draghi report kind of was excellent, laid it out, and they need to act on it. But my point is, you know, why can't we work more closely with Europe to shore up our supply chain? Good for them, good for us. By the way, the Philippines has nickel, Indonesia has critical minerals. You know, there's some things we do need to work with allies, and China is all over those countries. I think the most frustrating thing I hear, and it's a political argument, and I'm a politician, or former politician, and it drives me bananas, when I have quiet meetings

• 11:59Speaker 05

  with very senior people in Europe, ministers, prime ministers, CEOs, I say to them, "You're cozying up with China because you're mad with how Trump's behaving. Okay, I understand why you'd be mad. Cozying up with China is bad for you. Arguably, it's worse for you than us. Why are you doing that?" And they would say, "Well, we feel like we have to, but you pushed us into that corner", which is things politicians say. Like, okay, you can be self-destructive because it saves face, but I don't think it's a good idea.

• 12:36Tracy Alloway?

  I feel like that's one thing I have to push back on there. As a former European capital markets correspondent, Europe does have capital markets. They're just not as robust as some others, for sure, for sure.

• 12:48Speaker 05

  They're not deep, they're not dynamic.

• 12:50Tracy Alloway?

  I just don't want to get angry emails from my former contacts going.

• 12:54Speaker 05

  Don't be mad at me, not you.

• 12:56Joe Weisenthal?

  But like, how much of it is sort of classic politics? Like, the people who you're talking to, like, they have to get re-elected. And there's one guy on their TVs who continues to insult them frequently and instigate and etc. And that's Trump. And there's someone else who, as I know, never publicly says anything negative about Europe. And that's Xi Jinping. Like, they have to get elected, right? And so, you could say logically, look, it doesn't, long-term, maybe the US-Europe relationship will change and so forth, but like, they were politicians like you once were.

• 13:35Speaker 05

  Yeah, yeah, yeah. So, I hear that. I do hear that. And that's why I said, I think probably the biggest mistake of the current administration's China strategy is hurting our relationship with allies. I don't, I don't see a path to pushing back on China effectively unless we work with our allies. So, I hear, I do, I hear you.

• 14:04Speaker 05

  I guess, now everyone can laugh at me, I guess I still hold, you know, politicians to a higher standard. I mean, their job isn't actually to get re-elected. Their job is to do the job and serve the people that elected them. And when I, even, you know, when I was Secretary, I would frequently talk to members of Congress who would say, "I know you might be right, but I can't be with you, I'll lose a primary." And having been on the ballot and stood for election many times and had brutal primaries, my reply is always, "Isn't that a badge of honor? Go down doing the right thing. Be a public servant, not a quote-unquote politician."

• 14:49Speaker 05

  But I hear, it's a lot of traditional what politics is.

• 15:08Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 15:35Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 16:17Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.

• 16:58Tracy Alloway?

  Setting politics aside for a second, because I imagine it's going to recur in this conversation. When you talk to businesses, so executives, I mean, a lot of them still see China as the second biggest economy in the world, which it is, and this huge destination market. And even now, when it comes to maybe more sensitive technologies like AI, we are seeing people, for instance, a lot of big businesses in the US opt to use something like Quen, the Chinese open source model. How do you talk to executives who are maybe worried about their share price, worried about the bottom line, and tell them, like, oh, wait a second, maybe there are other reasons not to engage with China in this way?

• 17:39Speaker 05

  Yeah. So, look, I actually, I mean, again, I think trade with China is a good thing. I think trade is a good thing. It creates jobs in America. It allows our companies to compete. I think our trading relationship with China is, you know, it's hundreds of billions of dollars. The vast majority of that is in products that have nothing to do with national security. In fact, when I was secretary, I create, I, to make this point, that trade is a good thing, I started an export promotion initiative for health and beauty products. Like, my theory was, no one could say lipstick, perfume, blush, eyeliner is a national security

• 18:24Speaker 05

  issue. If we sell more of our stuff to China, it makes great jobs in America. And also, I do think engagement, commercial engagement, diplomatic engagement, does reduce the probability of conflict. So I'm for all that. The, like, the challenge is in, like, selling our most sophisticated, leading-edge chips to China, or certain AI, or hypersonics. Like, when you get into that, well, then, then that's a very different thing. But, by the way, that is a tiny, as far as I'm concerned, the more stuff American companies can sell to China that doesn't hurt our national security interests is a good thing. I want American companies to be, you know, profitable and successful.

• 19:09Tracy Alloway?

  Right. But if you have large corporations in the US who are using an open source model developed in China, like Quen, is that something that would concern you?

• 19:18Speaker 05

  I mean, it's open source. It is, as you say, it's open source. It's hard to put that genie back in the bottle. And so I I'm not sure exactly, I think that's less concerning. Uh, as long as there are other controls. You know, these companies have to have their own.

• 19:39Joe Weisenthal?

  Right.

• 19:39Speaker 05

  Data controls, privacy controls, cyber controls, et cetera.

• 19:43Joe Weisenthal?

  Let's talk about AI a little bit more because you've been writing about it. You've been talking to people about it. What are you working on these, what have you been working on?

• 19:51Speaker 05

  You know.

• 19:52Joe Weisenthal?

  What have you been up to?

• 19:53Speaker 05

  I'm remarkably busy for someone who, you know, doesn't have a single job. Uh, well, since Mike Froman, who runs the Council is there, I'll say I spend a lot of time helping the Council on Foreign Relations. Uh, actually, in all seriousness, we put out a report that I'm proud of as it relates to economic security.

• 20:10Joe Weisenthal?

  Uh huh.

• 20:11Speaker 05

  And it really, it had to do with AI. And the whole point of it, I strongly believe, trying to slow China down is a fool's errand. Let's invest and beat them by innovating faster in core technologies like AI, quantum and biotech. The thing I'm spending the most time on is the issue of how do we get through the transition to an AI economy? And I want to talk for just a second on this. I appreciate you asking.

• 20:44Joe Weisenthal?

  Sure.

• 20:44Speaker 05

  So here's how I see it. And maybe your listeners will push back or like it. Right now, most Americans, when they hear AI, they get afraid. Right? The vast, vast majority of Americans, AI equals anxiety. I'm going to lose my job. I get that. You know, people are scared. I think it would be a huge mistake to like retard our AI progress with overregulation. Just talked about China. I want to win the AI race. I want America to lead the AI world. And I think when we get to the fifth or sixth inning of this AI revolution, whatever you

• 21:26Speaker 05

  want to call it, I firmly believe there will be, there will be more jobs. I do. I think there'll be new industries, new companies, new products and services. I'm an optimist.

• 21:38Speaker 05

  I am pretty worried about getting from the first inning to that inning. So what I am spending my time on is how do we create support systems, transition systems, incentives for companies not to just do these big rifts? Because here's my view. Yes, we want to win the AI race. Yes, we want to be the leader in the world on AI. We will not do that. Even if we have, if all we have is the best models, the best chips, the biggest data centers, but sky-high unemployment and no transition system, that's not winning. That's automating America's decline.

• 22:21Speaker 05

  So as much effort as we're putting into winning the chip, AI, and data center race, we better putting that same amount of urgency, effort, and innovation into coming up with systems to cushion us through the transition. Otherwise, we won't win. We won't win. Civil unrest, political violence, 15% unemployment rate, that's not winning the AI race. And so let's get practical. What are the new policies and new systems and new training and new incentives for companies to get us there so we can win?

• 22:54Tracy Alloway?

  I know you're thinking about this now, but do you have any idea of what that could actually look like? Because I think, I don't often sympathize that much with large tech companies, but you know, if I'm

• 23:06Speaker 05

  Neither do I.

• 23:07Tracy Alloway?

  Right. If I'm like a Meta or a Google or whoever, and I'm being told that like not only am I in an existential race with every other tech company out there to win on AI, but I am also in an existential tech race with China on behalf of the US. And also, I now have to think about the social implications of what I'm doing, and maybe I have to think about ways to either, you know, slow it down or manage it in a better way for society. That's a lot to put on a private company.

• 23:37Speaker 05

  Yeah, by the way, I don't think it should just be put on them. In no way am I saying, by the way, I mean, I'm not sure why we would blame them. I mean, if they create a new technology and every company in America adopts it, who do you, who do you quote unquote blame? I, I wouldn't put it in terms of blame. Like, I love it that American companies are winning the race, are leading. We have, we do, we do. We, we design the best chips, we have the best models. That's a great thing. I just think this is a all hands on deck moment for the government at the state, federal and local level, for every company in America, for policymakers, for AI companies

• 24:21Speaker 05

  to say, what does it really mean to win the AI race? Because I don't, I mean, winning isn't just innovating the technology at breakneck speed if you create, you know, incredible social, political and economic unrest. You know, like, agents don't buy things, right? Every company needs human beings with money in their pocket to buy things. This is in their interest too. So I think we just have to come together and create different set of incentives. I don't even, right now, you may not agree with me, if you're the CEO of an American

• 25:01Speaker 05

  company and you fire however many thousand people, it's a little hard to blame them because every incentive in our system says, your job is to maximize short-term share price. So I think it's time to experiment with some new policies that align incentives to win. I also think this, and this is my view, I think China, you know, with climate, with a lot of things, with, say, pulling hundreds of millions of people out of poverty, China said, industrialize, create the pollution, we'll clean up the mess later.

• 25:46Speaker 05

  They could be doing that with AI. That doesn't work in America. In a democratic society, putting tens of millions of Americans out of work precipitously will create the end of democracy.

• 26:01Speaker 05

  Will not win the AI race. And so we just got to get to work and be innovative.

• 26:06Joe Weisenthal?

  You know, these comments that you make about potential civil unrest, 15% unemployment, end of democracy. It strikes me that the only people I, other people that I hear really talking about this seriously are the heads of the major AI labs themselves, who seem very attuned to this risk. Setting aside European politi, setting aside politicians, like just domestic American politicians, do you think they're sufficiently homed in on the risks that you're thinking about right now about the potential for domestic destabilization as a result of AI in a fairly short period of time?

• 26:43Speaker 05

  I do, but I think they're overcome with and seized by anxiety and fear and not sufficiently seized by, okay, what are we going to do about it? Yeah, I mean, look, I talk to a lot, I know, you know, most of the governors, having been a governor, and on both sides of the aisle, what do they hear from their constituents? Fear, anti-data center.

• 27:08Joe Weisenthal?

  It manifests itself in anti-data center stuff, and that obviously is taken off and there's some, but, but what you've been talking about is, like, that's not going to cut it.

• 27:19Speaker 05

  Yeah, I agree.

• 27:20Joe Weisenthal?

  Like, yeah.

• 27:20Speaker 05

  So what, what, like, what should they be doing? The question everyone says is, okay, what are the new jobs?

• 27:27Joe Weisenthal?

  Right.

• 27:27Speaker 05

  Yeah. The only people who know the answers to that, to the extent anyone does, are companies that are using the AI to grow, and AI company, you know, regular company, and AI companies that are developing the new stuff. So the number one thing is, how do we incentivize them to really lean in to start investing some of the gains that they make from AI efficiency into new job creation? Right now, and my view for a long time has been, post-high school education in America mostly doesn't work. It mostly doesn't work. We can argue with me about it, that's my long-held view. I was a governor who oversaw colleges.

• 28:13Speaker 05

  A lot of people who start college don't finish. They wind up with a degree, a bundle of loans, and then become a barista or something like that.

• 28:20Tracy Alloway?

  I became a podcaster.

• 28:21Speaker 05

  You became, well, you know, you couldn't get a job at Starbucks.

• 28:24Tracy Alloway?

  People think I'm joking. I dropped out of Columbia. I don't think I've ever said that publicly.

• 28:27Joe Weisenthal?

  Oh, really?

• 28:28Tracy Alloway?

  Yeah, after two weeks, I was like, I can't believe I'm spending this much money and

• 28:31Joe Weisenthal?

  That was wise.

• 28:32Tracy Alloway?

  And I left.

• 28:32Speaker 05

  You see, you're smart. That's, you're smart. But anyway, so what's my point? Like, let's go, people.

• 28:37Joe Weisenthal?

  Columbia Journalism School, you got your undergrad.

• 28:40Tracy Alloway?

  I did undergrad.

• 28:41Joe Weisenthal?

  Yeah, that's what I'm saying.

• 28:42Tracy Alloway?

  Yeah, okay, I'm, yeah.

• 28:42Joe Weisenthal?

  You're completed. I just don't.

• 28:44Tracy Alloway?

  This was a master's degree in journalism.

• 28:45Joe Weisenthal?

  Creating some big myth of like, okay, you like have a regular degree and then

• 28:50Tracy Alloway?

  Thank you for the fact checking, Joe.

• 28:52Speaker 05

  But by the way, who cares if she didn't?

• 28:54Joe Weisenthal?

  No, no, no, it's great. It's great. I just want to, you know.

• 28:56Speaker 05

  She can do the job. So I think, you know, we have, we have so many systems in this country that were just created for a different time. Like, truthfully, I'm excited about the potential of AI and how productive and healthy we could be using it. The thing that scares the [bleep] out of me is the systems in America that are unemployment insurance doesn't really help white collar worker. If you make, you know, six figures a year, unemployment insurance is not that helpful. We have really no, what I would call, transition insurance to get from one subsidy or something, wage subsidy to get from one job to another.

• 29:41Speaker 05

  Adult education is essentially either nonexistent, poor quality, or stigmatized. Companies have precious little incentive to redeploy people instead of just laying them off. So I'm highly interested to work at the state and local level where things can happen with employers, who I would argue have the most to gain, and governments to get to the business of trying new things. And by the way, we can, America rises to the challenge in times of crisis. Why do we have unemployment insurance? Because we had the Great Depression. Why do we have the GI Bill?

• 30:23Speaker 05

  Because we had a Second World War and we wanted to shove everybody to college. And it worked. Ten times as many people go to college today than they did then. Let's get ahead of this crisis and do the change that's necessary now so we can thrive in an AI economy.

• 30:40Joe Weisenthal?

  When you talk to businesses, or particularly local businesses or small businesses, when you're doing your work like at the state level, et cetera, we know the polls about AI and they're, as you mentioned, they're very dismal. But like, do you, are there entrepreneurs, are there people who are not at AI companies, who are like, right now today, very excited about what AI can do for them?

• 31:01Speaker 05

  Say that again.

• 31:01Joe Weisenthal?

  At the non-AI labs, like just the companies that are like, using AI tools, when you go around, big or small, do you encounter a fair number of managers, CEOs, small business owners, who are excited about what they're able to do now with the technology?

• 31:16Speaker 05

  Yes, yes, I do. I'm spending some time working with the former governor of Indiana, Eric Holcomb, on this issue, and he and I worked together when we were governors. So, anyway, last week, we spent some time in Indiana, talking to people. He organized a couple of roundtables to talk to people. It was amazing to me, they were mostly small business owners, okay? It was incredible to me how, here how optimistic they were. You know, I'm using AI and I've doubled my business. I'm able to be so much more productive. A woman providing healthcare consulting services said, "I'm able to serve a lot more customers and I haven't raised the price."

• 32:00Speaker 05

  Big company CEOs, who I also talk to, interestingly, big company CEOs, are not as convinced as the AI company CEOs, that they're going to be laying off huge portions of their workforce.

• 32:15Joe Weisenthal?

  Yeah.

• 32:16Speaker 05

  They think it takes time.

• 32:18Joe Weisenthal?

  Right.

• 32:19Speaker 05

  Big enterprises don't move on a dime. And when, you know, a lot of CEOs I talk to say, "Yeah, we're gonna cut, we're gonna cut over here, because we wanna grow over here." That, I think, could happen. "We're gonna cut here to grow here." So, it's a mix, it's a mix, it's a, no one knows. I think anyone who tells you they know is... Either delusional or lying, or something in the middle.

• 32:45Joe Weisenthal?

  Yeah.

• 32:47Speaker 05

  Nor do I know, okay? But what I do know is, we're not going to solve the problem by admiring it and being afraid. We're not going to solve the problem by stopping AI innovation. We're sure as hell not going to stop the problem by paying every American to stay home and not work. We're not going to solve the problem by giving business a free ride. Like, get in the boat and let's go and fix it.

• 33:11Tracy Alloway?

  Yeah, we have been asking everyone on the show who says that new jobs are going to be created as a result of AI, what those jobs would actually look like. And you're absolutely right, no one seems to know at the moment. So, I won't ask you that question because you already said that you don't know.

• 33:24Speaker 05

  I have one little theory.

• 33:25Tracy Alloway?

  Okay, go on.

• 33:27Speaker 05

  I do have one theory, which, again, I'll also say, I don't know, but I have a theory. I think you could see an explosion of new, small companies.

• 33:41Speaker 05

  And I'm hearing that from a lot of people. It's much easier to start your own business, uh, because of AI tools.

• 33:49Joe Weisenthal?

  Yeah.

• 33:50Speaker 05

  So like now, lots and lots of people make the living with a restaurant, or a coffee shop, or whatever. I think it's possible we see a real explosion of online, like, new services, new online products, because people can start a business with AI. So, let's say I'm right. Like, let's say we do the work and it turns out to be a decent theory. Okay, so then what do we do about it? How about we create an initiative at a state or local level where we say, "Hey, uh, if you're a call center worker, you're an accountant, you're going to get laid off. Here's a new initiative. We're going to allow you to collect unemployment insurance while you start your new business.

• 34:36Speaker 05

  Plus, we're going to give you a subsidy to help start that business. Plus, the company you just got laid off from is going to kick in, I don't know what, a little bit more of a severance, help you to start your job." Like, we have to get from here to there, and we have to start experimenting with some new stuff.

• 35:10Speaker 01

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• 35:52Speaker 01

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• 36:34Tracy Alloway?

  Since we're on the topic of AI and since you are the former Commerce Secretary and you instituted a lot of the CHIPS controls that Joe and I spent many years talking about Trying to understand, yeah. Yeah. I'm really curious, but when you were instituting those controls, did you have AI coming down the line like so quickly in your mind? Or were you thinking about AGI? Or, whoa, you know, with the benefit of hindsight, No. Were you right?

• 37:01Speaker 05

  I mean, define right. Like, I think we were like more right than wrong in the world of non-perfection. I did. Now, you can choose to believe that or not, but I don't know if any of my former team is here. A lot of people would say, a lot of people would say to me, "Hey, Secretary, you're shoveling tens of billions of dollars of taxpayer money into the chip industry. The chip industry is famously cyclical. Are you worried that right when

• 37:42Speaker 05

  you put this money in, there's going to be a down cycle in the chip industry?" And I would say then, "I don't think so because of AI." Now, I would say, years ago, I would say at that time, different now, I'd say, you know, only about a third of American businesses at that time were even in the cloud. You know?

• 38:05Joe Weisenthal?

  Yeah.

• 38:06Speaker 05

  They're still like using Excel and on-prem storage. Saying, "So, we need a lot of chips for traditional data centers." And I say, "And then on top of that AI." So, I always felt that the bottom wasn't going to fall out of the chip industry because of AI. On the controls, yeah, I had a thought that the AI race would be the race and I wanted to win it. So, like I say, throwing sand in the gears of China's operation felt like a good thing to me.

• 38:37Joe Weisenthal?

  It's pretty incredible on the cloud thing you mentioned. We did an episode recently, and we were talking to an executive, and he mentioned something about the length of time of a recent cloud migration project they were doing. And in my head, I was like, "It's 2026, and large companies still have..." Like, we just sort of take it for granted that everything is going to be in some cloud, AWS, whatever.

• 39:00Speaker 05

  That was Marco Argenti.

• 39:01Joe Weisenthal?

  Yeah, right, right.

• 39:02Speaker 05

  Goldman Sachs.

• 39:03Joe Weisenthal?

  Yeah, and so, to this day, there's still huge cloud migration projects that are happening.

• 39:10Speaker 05

  Which is why...

• 39:11Joe Weisenthal?

  Yeah.

• 39:12Speaker 05

  I'm not certain we're going to see this 50 million people laid off tomorrow. Like...

• 39:19Joe Weisenthal?

  Yeah, that's a good indicator of how slow these things can move.

• 39:22Speaker 05

  Turning, pick your big, favorite big company. Turning those companies, it's like a little bit like government. You can't turn on a dime. If you have companies that are moving from Excel and all these different databases to a fully agentic system, it takes years, not months, which means we have a minute to figure it out. Now, say, Gina, what are you most worried about? I'm most worried that we do what we've often done, which is wait for the crisis before we have some solution, wait for mass unemployment before we get serious about preparing. And, well, you know what I think?

• 40:04Speaker 05

  If that happens, I think there will be regulations to stop AI, and I think it'll be bad.

• 40:08Joe Weisenthal?

  Let's actually talk a little bit more about the CHIPS Act since we have you here. And one of the concerns, it's like, OK, people would say, this is, you know, this is a type of industrial policy that we haven't done in a while in the United States. And one of the questions is whether our political system allows for that because we had an election and the incumbent party lost, and then new people came in, et cetera. Where do, sort of like, looking back now, those CHIPS investments that were made, can we say they survived the transition? And how did the transition affect the trajectory of this broader endeavor to have more domestic semiconductor manufacturing?

• 40:53Speaker 05

  Yeah. My biggest lesson from the CHIPS program is when you do something like that, make sure it's bipartisan.

• 41:01Joe Weisenthal?

  Mm-hmm.

• 41:02Speaker 05

  It has mostly survived, actually. Now, TSMC is making leading-edge chips in Arizona, the same way they are in Taipei, Taiwan, and they're going to expand. And this administration is, like, helping, not hurting that. The same thing with Intel and all these other companies. So it is surviving, and I think it's because it was bipartisan. There were a lot of leading Republican senators who really wanted it to happen. And I'm, in contrast to, say, like, the Inflation Reduction Act.

• 41:44Speaker 05

  Which you could argue was also a little bit of industrial policy insofar as it was meant to accelerate our path to a cleaner economy. That was immediately undone because it was passed on partisan lines. Meanwhile, we couldn't have gotten it done otherwise, so in no way am I criticizing.

• 42:03Speaker 06

  Yeah.

• 42:03Speaker 05

  I'm just saying, I learned the reality that if we have any hope of having continuity, it better be bipartisanly popular, beginning, middle, and end. And my team, to whom I give great credit, pushed me to spend a lot of time on Capitol Hill, even after we got the money, to constantly update Republican members of the Congress to maintain its popularity. And I think that I learned a big lesson with that.

• 42:33Tracy Alloway?

  How should we evaluate the success of the CHIPS Act? Because the headlines nowadays are all about Iran and the closure of the Strait of Hormuz.

• 42:42Speaker 05

  Yeah.

• 42:42Tracy Alloway?

  And everyone's minds are currently very focused on choke points in the world. And one of those major choke points would be if anything were to happen between China and Taiwan.

• 42:53Speaker 05

  Yeah.

• 42:54Tracy Alloway?

  And so I'm very curious, if we had a situation like that, would the US be self-sufficient? I'm not sure if that's the right word, but self-sufficient in its supply of chips? What should we be aiming for here if we're thinking about global choke points for strategic tech?

• 43:09Speaker 05

  This is the question. When you say, "Did you get it right?", I'm like, directionally, yes. Perfectly, no. The answer is no. This is not going to happen. But if theoretically, possibly, next year, China has Taiwan and they cut off supply of our chips, I don't think either of those things would happen. But theoretically, it would be apocalyptically bad, right? Like, that would be very bad. We're producing some chips in the US. Our goal was to get from 0% of leading-edge chips in the US to, I think, 20% of global capacity by 2030. We're on path to hit that goal. But again, 20%.

• 43:53Speaker 05

  So that's why, number one, I think we need to de-escalate, have stability and a floor under our relationship with China. It's good for them, it's good for us. But also, we have to work with our allies. We cannot, it is not possible. One of the arguments I used to get into with my old boss, President Biden. Called me Gov. He's like, Gov, why can't we make everything in America? Like, the President cannot. We don't have enough people. That's inflationary. We don't have enough. Not a good goal. We don't have enough land. We don't have enough energy. We should make the most critical things and work with our allies. And I had that argument with him, maybe 10 times. I lost every time. Uh, no. He's like, I don't like that. I want to make everything in America.

• 44:38Speaker 05

  But, this gets to my point. Like, not to alarm you further, but, okay, let's say we did great with the Chips Act. We're on our path. We're making memory chips here. Everything here. We still don't really do what's called advanced packaging.

• 44:56Joe Weisenthal?

  Yeah. They leave, right? We make the chips and then they head out.

• 44:59Speaker 05

  Correct. Not to be too much of a nerd here, but...

• 45:03Joe Weisenthal?

  No, this is important.

• 45:04Speaker 05

  Pack, just, you know, and by the way, packaging isn't put the chips in a box. Packaging is how they layer the chips, which is incredibly sophisticated to get enough compute on a chip. Even though we're making them in Arizona, they go back to Taiwan for packaging. Problem. Got to get that in America. I think it's 30% of printed circuit boards, we import from China. Almost all of the chemicals, substrates, inputs, that go into making chips, come from China or Asia. If you did like a supply chain breakdown of an AI data center, you know, the cables,

• 45:46Speaker 05

  the wires, the chemicals, the this, the that, I think you'd be not happy with how much of that still comes from China. So, okay, so what do you do about it? Diversify. Sufficiently. Diversify sufficiently here and with allies, so that China doesn't have so much leverage over us. That is the thing.

• 46:11Joe Weisenthal?

  We did an episode, I think, late last year, Mike Froman, who is in the audience. We chatted with him, and I don't think he expected us to like turn the title. He had one sentence that then we like used as clickbait and turned it into the title. But he described the emerging polyamorous global trading order. And I thought that was a very compelling word to describe all sorts of, you know, on the fly, different arrangements. When you think about where we should be going in the future, like, assuming this administration will continue to antagonize allies, should the goal really be to just like build some clean blocks again, build some clear blocks, not polyamorous trading, but rebuild sort

• 46:55Joe Weisenthal?

  of unambiguous partnerships with clear lines and clear borders?

• 47:00Speaker 05

  I don't want to disagree with Mike, but...

• 47:03Joe Weisenthal?

  He didn't. I'm not saying he was advocating that. I think he was describing the direction that things seem to be going.

• 47:09Speaker 05

  What would the opposite of polyamorous be?

• 47:12Joe Weisenthal?

  Well...

• 47:13Speaker 05

  In other words?

• 47:14Joe Weisenthal?

  Monogamous?

• 47:15Speaker 05

  No, not monogamous, except in marriage. I'm not for that in this example. But in case my husband's listening, I'm strongly for monogamy in other parts of life. I think it's more like we need to be more practical and get along insofar as we can keep commerce going, avoid kinetic conflict, and have a measure of, you know, national security. So, for instance, as Secretary, I frequently advocated within our team a closer relationship with Indonesia and the Philippines for nickel...

• 48:03Speaker 05

  Or other countries with cobalt, et cetera. And was frequently pushed back on that, you know, those countries don't hew to our labor standards, they don't hew to our environmental standards, they're in China's backyard. True, but we don't live, like, the world of love is different. Rationality can maybe go out the window. This is the real world here. I would rather have a relationship with, like, it's, it's, you have to balance, you have to balance. This question of balance and practicality. Fine. You don't want to work with Indonesia because you don't like that? I hear that, I hear that. Is it better to buy everything from China?

• 48:47Speaker 05

  I don't think so. So, true, I think we have to kiss and make up with Europe. It's in our interest. Yes, we, we have stronger relationships with countries that share our values, that are democracies, that have a rule of law. I don't think in my lifetime we're ever going to have a close relationship with China, Russia, and North Korea, and we should call it as it is. I think we have to work a hell of a lot harder to increase our economic ties with Southeast Asia, with countries in Africa, with countries in Latin America, and be, you know, maybe

• 49:29Speaker 05

  not, we don't have to love them, we got to work with them. Because it's in our interest and it's in the world's interest to de-escalate.

• 49:37Joe Weisenthal?

  Gina Raimondo, thank you so much. That was a fan, that was fantastic.

• 49:41Speaker 05

  Thank you.

• 49:57Tracy Alloway?

  All right, shall we leave it there?

• 49:58Joe Weisenthal?

  Let's leave it there.

• 49:59Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at TracyAlloway.

• 50:04Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our guest Gina Raimondo at GinaRaimondo. Follow our producers, Carmen Rodriguez at CarmenArmin, Dashal Bennett at Dashbot, and Kell Brooks at KellBrooks. And a big thank you to CFR. And for more Odd Lots content, go to Bloomberg.com/oddlots, where we have a daily newsletter and all of our episodes. You can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 50:28Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we do live events, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 51:17Speaker 07

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