It’s an epochal moment as history’s latest general-purpose technology, AI, forms itself into an industry. Much depends on these early days, especially the fate of the industry’s leader by a mile, Open AI. In terms of the last general-purpose technology, the internet, will it become a colossus like Google or be forgotten like AltaVista?
No one can know, but here’s how to think about it.
OpenAI’s domination of the industry is striking. As the creator of ChatGPT, it recently attracted 78% of daily unique visitors to core model websites, with six competitors splitting up the rest, according to a recent 40-page report from J.P. Morgan. Even with that vast lead, the report shows, OpenAI is expanding its margin over its much smaller competitors, including even Gemini, which is part of Google and its giant parent, Alphabet (2024 revenue: $350 billion).
The great question now is whether OpenAI can possibly maintain its wide lead (history would say no) or at least continue as the industry leader. The answer depends heavily on OpenAI’s moat, a Warren Buffett term for any factor that protects the company and cannot be easily breached–think of Coca-Cola’s brand or BNSF Railroad’s economies of scale, to mention two of Buffett’s successful investments. On that count the J.P. Morgan analysts are not optimistic.
Specifically, they acknowledge that while OpenAI has led the industry in innovating its models, that strategy is “an increasingly fragile moat.” Example: The company’s most recent model, GPT-5, included multiple advances yet underwhelmed many users. As competitors inevitably catch up, the analysts conclude, “Model commoditization is an increasingly likely outcome.” With innovations suffering short lives, OpenAI must now become “a more product-focused, diversified organization that can operate at scale while retaining its position” at the top of the industry–skills the company has yet to demonstrate.
Bottom line, OpenAI can maintain its leading rank in the industry, but it won’t be easy, and betting on it could be risky.
Yet a different view suggests OpenAI is much closer to creating a sustainable moat. It comes from Robert Siegel, a management lecturer at Stanford’s Graduate School of Business who is also a venture capitalist and former executive at various companies, many in technology. He argues that OpenAI is already well along the road to achieving a valuable attribute, stickiness: The longer customers use something, the less likely they are to switch to a competitor. In OpenAI’s case, “people will only move to Perplexity or Gemini or other solutions if they get a better result,” he says. Yet that becomes unlikely because AI learns; the more you use a particular AI engine, the more it learns about you and what you want. “If you keep putting questions into ChatGPT, which learns your behaviors better, and you like it, there’s no reason to leave as long as it’s competitive.”
Now combine that logic with OpenAI’s behavior. “It seems like their strategy is to be ubiquitous,” Siegel says, putting ChatGPT in front of as many people as possible so the software can start learning about them before any competitor can get there first. Most famously, OpenAI released ChatGPT 3.5 to the public in 2022 for free, attracting a million users in five days and 100 million in two months. In addition, the company raised much investment early in the game, having been founded in 2015. Thus, Siegel says, OpenAI can “continue to run hard and use capital as a moat so they can do all the things they need to do to be everywhere.”
But Siegel, the J.P. Morgan analysts, and everyone else knows plenty can always go wrong. An obvious threat to OpenAI and most of its competitors is an open-source model such as China’s DeepSeek, which appears to perform well at significantly lower costs. The venture capital that has poured into OpenAI could dry up as hundreds of other AI startups compete for financing. J.P. Morgan and Siegel agree that OpenAI’s complex unconventional governance structure must be reformed; though a recently proposed structure has not been officially disclosed, it is reportedly topped by a nonprofit, which might worry profit-seeking investors.
As for moats, OpenAI is obviously in the best position to build or strengthen one. But looking into the era of AI, the whole concept of the corporate moat may become meaningless. How long will it be, if it hasn’t been done already, before a competitor asks its own AI engine, “How do we defeat OpenAI’s moat?”
Million Dollar Listing New York icon Fredrik Eklund came to NYC with no job, connections, or family help. He started off handing out paninis outside David Letterman’s late-night show, earning $15 hourly and one penny per sandwich, before a friend recommended real estate as a career. A boutique agency was “stupid enough” to hire him with no experience, and the rest is history. Now, his team of around 100 agents has closed more than $15 billion in property deals, and his celebrity clientele includes Sarah Jessica Parker, Jennifer Lopez, Nick Jonas, and John Legend.
Fredrik Eklund has made it in U.S. real estate—the Million Dollar Listing New York star has helped close more than $15 billion in sales all across the country.
But things looked a lot different just two decades ago when he first moved to the city. Eklund was handing out paninis in front of the Late Show withDavid Letterman for just $15 an hour before he got a shot at selling luxe apartments.
“This was at a time when New York—and I didn’t know it then—was very undervalued,” Eklund tells Fortune. “And it was about to explode in what I’ve been focusing on: new developments, and these new beautiful buildings.”
“I was a little bit lucky to happen to fall into it; I got my license at NYU and I got a job from someone stupid enough to hire me with no experience.”
Eklund now leads a real estate powerhouse of around 100 agents, the The Eklund|Gomes Team, at luxury firm Douglas Elliman. He leads offices in 10 markets, with celebrity clientele ranging from Jennifer Lopez to Joe Jonas, as he takes over America’s real estate scene. Aside from New York, the self-made millionaire also has his eyes set on Miami as a sales ambassador for a $2 billion luxury living project in Bahia Mar, working with real estate titan Jorge M. Pérez’s Related Group.
But his rise to fame in the industry—and on Bravo—was anything but meteoric. It took years to achieve success after Eklund cleaned his slate and moved from Stockholm to New York City with nothing. No connections, no business, and no clear plan of what he wanted to pursue.
“It was very scary to not really know the city, because I didn’t have any context here,” Eklund says. “Nobody would give me any business, because I didn’t know anybody.”
From handing out paninis outside David Letterman to helping close $15 billion in real estate
Needless to say, Eklund didn’t propel straight into a top real estate firm when trying to find his first gig in New York City.
“We were handing out paninis for free for one of those cafe restaurants right outside David Letterman,” Eklund recalls. “As part of the job, we got a penny a panini. I think we got $15 to $20 an hour, which is not bad. They had some free lunch.”
But Eklund was determined to not hand out paninis for life, and then a friend suggested real estate as a potential career path, fitting for Eklund’s outgoing persona. Intrigued by the idea, Eklund soon got his real estate license from New York University, and a boutique property agency offered him a role. Six months later, he landed his first client. And it was all thanks to his friend being perceptive on what profession Eklund could stand out in.
“After the paninis thing, I was like, ‘What am I actually going to really do?’” Eklund says. “A friend of mine told me that I would be really good at real estate, because I have this crazy persona—a very large, eccentric, entertaining, and bubbly personality. But I’m also super driven, cutthroat, and very competitive.”
Millions of viewers from across the country would soon tune into his competitive edge on Million Dollar Listing New York. Eklund was an original cast member when the Bravo show premiered in 2012, and stayed on for a full decade until his departure in 2022.
Ever since, Eklund had been building his own real estate empire, recording $3.77 billion in sales across New York, California, Florida, and Texas in 2023 alone. Notable clientele include Sex and the City icon Sarah Jessica Parker, as well as Hollywood power couple Chrissy Teigen and John Legend. And Eklund says he’s proud that he’s built his $15 billion empire from the ground-up.
“I didn’t have all those contacts, or a sort of easy beginning. Nobody did me a favor, or my dad or mom,” Eklund says. “I did it all by myself—I put it all on this one thing, and it worked.”
A word of caution to aspiring real estate millionaires: Success doesn’t come fast
While Eklund has two decades of accomplishments under his belt, he has a word of caution for other aspiring real estate agents looking to replicate his success. Becoming well established in the profession takes years to get there, and doubt creeps in along the way.
“I would say it takes five years to really make it,” Eklund warns. “It’s a very difficult industry because it’s super, super competitive, so you cannot give up like I almost did. I wanted to give up after two, three years. I was like, ‘This is not for me, I’m not doing well enough.’”
Being able to tough out the early years can lead to million-dollar closings across New York, Los Angeles, and Miami, but it takes a certain type of person to make the cut. While Eklund says he has the eccentric personality and drive to stand out, there’s another part of his persona that’s a double-edged sword in the job. It could be the trait that makes or breaks someone in real estate, but he leverages the perceived flaw to his advantage.
“[Real estate is] an art and a craft, and the only way to learn is the hard way. You cannot really learn it in school. [You’ve] gotta be out on the streets, the mean streets,” Eklund explains. “It takes a long time, and if you’re an impulsive and impatient person—which I am, and can make you even more successful at work—it’s very easy to kind of find a new hobby or a new thing.”
Fredrik Eklund moved to NYC from Stockholm with no job or connections, making a penny for every panini he passed out. Now, his real estate client roster includes Sarah Jessica Parker, Jennifer Lopez, Nick Jonas, and John Legend.
President Trump says his tariff revenues will both pay down America’s $37 trillion debt and possibly fund a public “dividend,” but Treasury data shows they fall short of even covering monthly interest costs. In exclusive interviews with Fortune, Wharton’s Professor Joao Gomes and AEI’s Desmond Lachman warned that while tariffs may slow debt growth, they won’t meaningfully reduce it. Markets are largely skeptical of Trump’s math despite some unconventional revenue wins.
President Trump has a two-pronged plan for the proceeds of his tariff regime. Firstly, he says, it’s going to pay down America’s $37 trillion national debt. Secondly, he’s considering sharing the spoils with the public.
“The purpose of what I’m doing is primarily to pay down debt, which will happen in very large quantity,” Trump told media earlier this month. “But I think there’s also a possibility that we’re taking in so much money that we may very well make a dividend to the people of America.”
The plan sounds welcome, in theory. But there’s just one problem. At present, tariff revenues don’t even cover the interest on the debt—let alone reduce its overall size.
According to Treasury data seen by Fortune, the accrued interest expense on Treasury notes in July alone was $38.1 billion. Add to that $13.9 billion in interest on Treasury bonds, $2.85 billion on Treasury Floating Rate Notes (FRN) and a total of $6.1 billion across Treasury Inflation-Protected Securities (TIPS) assets. The bill is eye-watering: The total comes to $60.95 billion for the month.
By contrast, Treasury statements show that tariffs only brought in $29.6 billion to offset it. An impressive figure, but still not enough to rival interest payments.
Of course, the White House could pay off some of its debt and reduce interest payments by deploying the tariff revenues directly to the bottom line. Governments have a number of ways to pay off debt, either by paying off bonds at maturity instead of rolling them over, or launching a buyback scheme in order to retire the bonds and reduce total outstanding debt.
It seems that the White House is not yet enacting a plan for the latter option. A tentative schedule of buyback operations for August 2025 shows the Treasury intends to spend nearly $40 billion buying back various security types and maturity ranges. However, compared to a similar schedule from August last year, this is $10 billion less than the Biden administration had accounted for.
Looking forward, if the Trump team does intend to pass through circa $30 billion a month toward offsetting the national debt, it would have accrued a gargantuan $360 billion payment over a year. This figure is less than 1% of America’s national debt, at the time of writing.
Of course, those on the bullish end of the economic scale are unconcerned by the notion of paying off national debt because a) the bond market forms a core part of the economy, b) the U.S. could grow its way out of any default or debt crisis, and c) the nation is in control of its own fate because its central bank has the ability to ease the cost of borrowing.
Nonetheless, warnings are coming from some of the most significant corners of the economy. In the private sector, JPMorgan Chase’s CEO Jamie Dimon believes America is barreling towards a predictable crisis; in the public sector, Fed chairman Jerome Powell believes it’s time to have an “adult conversation” about debt.
And the president himself is clearly aware of the issue, pushing efficiency and cost-cutting to bring down deficits. The only problem is, economists can’t quite figure out his maths.
The White House told Fortune: “America’s debt-to-GDP ratio has actually declined since President Trump took office – and as the administration’s pro-growth policies of tax cuts, rapid deregulation, more efficient government spending, and historic trade deals continue taking effect and America’s economic resurgence accelerates, that ratio will continue trending in the right direction.
“That’s on top of the record revenue that President Trump’s tariff policies are bringing in for the federal government, and cooled inflation paving the way for interest rate cuts.”
Offsetting, not repaying
By Professor Joao Gomes’s calculations, President Trump’s tariff regime is netting his expenditure at zero as opposed to improving the balance sheet.
The Wharton professor of finance and economics (at President Trump’s alma mater, the University of Pennsylvania) believes the tariff income will offset the costs of the Oval Office’s “One Big, Beautiful Bill Act”—estimated by the Congressional Budget Office to add $3 trillion to the debt by 2030—and not go much further.
“They leave the national debt picture similar,” Professor Gomes tells Fortune in an exclusive interview. “The idea that [tariffs are] going to pay down the national debt is of course greatly overstating it.”
That being said, Professor Gomes said tariffs are likely to have some useful dragging effects on the speed at which America’s national debt is accumulating. The White House said it expects its bill to reduce the much-watched debt-to-GDP ratio to 94% from its current standing of 121% by increasing economic growth.
“There’s no question of us paying down the debt,” Professor Gomes added. “Every year the government needs $1.8 trillion of net new borrowing, so that number could go down, but before we have any questions about repaying we first need to close that gap—and 1.8 trillion is impossible to close … the best we could hope for is if the tariffs turn out to generate enormous amounts of revenue [and] reduce that annual budget gap, which would make the debt grow less quickly.”
“The idea that somehow in the debt is gonna go down, we’re gonna start buying things back and so on and reduce the debt in dollar terms is just unimaginable. We’ll never get that much revenue.”
Professor Gomes was echoed by Dr Desmond Lachman, a senior fellow at the American Enterprise Institute. He told Fortune in an exclusive interview: “[For Trump] to say that he’s going to raise maybe $300 billion is a drop in the ocean in relation to the amount of red ink they’ve got. The country’s on a really dangerous debt trajectory.”
Signals to markets
How much of a problem national debt proves to be ultimately comes down to foreign investors, and their confidence in the U.S. government’s ability to pay its bills. Approximately 26% of America’s debt is held by foreign countries according to The Conference Board, presenting significant issues if those investors decide to take flight.
Dr Lachman believes that while President Trump may be framing tariffs as bringing back jobs or paying off debt to be more politically palatable, investors will see through the rhetoric. “Markets aren’t dumb. They can do the arithmetic and figure out that this is nonsense,” he said.
The former deputy director for the International Monetary Fund’s (IMF) Policy Development and Review Department added that the continued flight to gold (prices are up 27% over the past year) is indicative that markets no longer view U.S. Treasuries as the ultimate safe haven.
“People are worried that this government’s not serious about economic policy,” Dr Lachman said. “Trump can say what he likes. A comment I think is great is: One thing about the bond markets is that they can’t be primaried. In bond market, the money’s gonna move. People just want to protect their cash, they’re not afraid of being bullied by Trump if the numbers don’t add up.”
Counter to Dr Lachman’s point is the fact Treasury yields have stayed relatively flat over the past couple of years. 10-year is at around 4.3%, and was the same in late-October 2022, while 30-year has hung around the 4.8% mark since 2023.
Due to this, Professor Gomes believes the market isn’t alarmed by the Trump team’s unorthodox methods of balancing the debt. He said: “There’s interesting and peculiar things about this that we’ve all noticed. For example, the news earlier this week that Nvidia is gonna give effectively a 15% tax to the federal government for any exports to China certainly brings an extra source of revenue to the government that is not going to be small.”
“The ability of this president and this administration to find strange ways” to generate revenue may convince markets of Trump 2.0’s sincerity when it comes to the debt, Professor Gomes added, “I’m not sure I would discount that ability to continue to do things that I would not support, and I don’t think [are] great ideas, but at the end of the day, you cannot deny that they bring strange forms of revenue that do change the debt picture.”
And while there are two ends of the spectrum on who will end up paying for the tariffs (at one end Trump, saying it will be foreign nations, at the other end the likes of Goldman Sachs says the majority of the prices will be paid by U.S. consumers), the administration is proving it can “extract revenues.”
“Whatever you think of the methods,” Professor Gomes added, “If it’s an issue they can find ways to do this.”
A turning point?
National debt is often described as a game of chicken played by one administration then the next, adding to the debt and risking crisis instead of introducing potentially unpopular policy to address it (austerity).
Trump’s unusual approach to revenue generation shouldn’t be viewed as an end to that game, said Professor Gomes, but merely a delay of any reckoning. “It seems clear that suspicious as [markets] are of the policies they feel confident that that’s not going to happen at the moment,” the economist said. “We would need something, some other event of some type—a serious war or conflict—the things that really change paradigms” to prompt such a crisis, he added.
The Conference Board is not so convinced. “The debt crisis is here” it said in a note shared with Fortune, outlining a six-step program to reduce the debt-to-GDP ratio to 70% within 20 years. This includes, among a range of ideas, establishing a bipartisan committee for fiscal responsibility, enacting tax reform to increase revenues in a fair way, and develop a package of reform for social security.
President Donald Trump and his Justice Department have issued doomsday warnings recently on what would happen if a federal appeals court rules against the administration in a legal challenge to his so-called reciprocal tariffs. James Lucier at Alpha Capital Partners said the court could issue a ruling later this month or next month.
The Trump administration sees complete disaster for the U.S. economy if its reciprocal tariffs are struck down, revealing its level of concern as a court is expected to issue a critical decision soon.
On July 31, a federal appeals court heard arguments in a case challenging the tariffs’ legal basis under the International Economic Emergency Powers Act (IEEPA), and the judges expressed deep skepticism about the administration’s side.
In a note this past week, James Lucier at Capital Alpha Partners said a decision is expected by the end of September, but could come as soon as late August. A unanimous or near-unanimous ruling could give the Supreme Court cover to avoid taking the case immediately and reject the administration’s request to issue a stay that would keep the tariffs in place in the meantime.
The dire warnings also represent “a remarkable change in tune by the administration, which until now has always insisted that it had legal authority to get the deals done one way or another even if the IEEPA tariffs were struck down,” he added.
Trump’s “Liberation Day” tariffs helped leverage a series of trade deals, including an agreement with the European Union, which pledged to invest $600 billion in the U.S. and buy $750 billion worth of U.S. energy products, with “vast amounts” of American weapons in the mix. Similarly, the U.S.-Japan trade deal entails $550 billion of investments from Tokyo.
‘Financial ruin’
The U.S. hasn’t received immediate cash transfers in those amounts. Still, in a letter to the U.S. Court of Appeals for the Federal Circuit on Monday, Justice Department officials suggested the government would suddenly owe everyone money—leading to catastrophe.
“The President believes that our country would not be able to pay back the trillions of dollars that other countries have already committed to pay, which could lead to financial ruin,” wrote Solicitor General D. John Sauer and Assistant Attorney General Brett Shumate.
They also warned that unwinding the trade deals would lead to a “1929-style result.” That echoed a post from Trump on Truth Social days earlier, when he predicted another Great Depression would hit America if the court rules against his tariffs.
Sauer and Shumate turned up the volume even higher in their subsequent letter, elaborating further on the depression warning.
“In such a scenario, people would be forced from their homes, millions of jobs would be eliminated, hard-working Americans would lose their savings, and even Social Security and Medicare could be threatened,” they wrote. “In short, the economic consequences would be ruinous, instead of unprecedented success.”
‘The president is in a jam’
To be sure, the government has generated significant tariff revenue since April, and importers who paid the reciprocal duties could seek reimbursement if they are struck down.
But that’s only about $100 billion and also includes revenue from sectoral tariffs that were imposed under a separate legal basis that’s not at risk.
“The real problem, the letter implies, is that Trump does not have legal authority to replicate the IEEPA tariffs under other tariff statutes if the court strikes the IEEPA tariffs down,” Lucier explained. “In other words, the president is in a jam because if the court strikes down the IEEPA tariffs, his trade deals have no legal basis.”
A note from Yardeni Research on Wednesday also pointed out that the administration is becoming increasingly concerned about losing the court case.
The letter from the Justice Department officials appears to anticipate that they will lose the case as they are asking for a stay if the court goes against them.
There will be “messy” consequences if reciprocal tariffs are struck down, according to Yardeni, as Trump needs the revenue from tariffs to reduce the budget deficit and help to lower bond yields.
“If he loses in court, these yields might move higher. Stock prices might decline on this news initially due to a new round of policy uncertainty,” the note said. “So the dire tone in the letter is understandable, even though it is a wee bit over the top.”
Current and former OpenAI employees plan to sell approximately $6 billion worth of shares to an investor group that includes Thrive Capital, SoftBank Group Corp. and Dragoneer Investment Group, in a deal that values the ChatGPT maker at $500 billion, according to people familiar with the matter.
The talks are early and the size of the share sale could still change, said the people, who asked not to be identified discussing private information. The secondary share investment is on top of SoftBank’s commitment to lead OpenAI’s $40 billion funding round, which values the company at $300 billion, according to another person familiar with the deal. That round remains ongoing, with OpenAI recently securing $8.3 billion from a syndicate of investors.
Representatives for Dragoneer and Thrive didn’t respond to requests for comment. Spokespeople for OpenAI and SoftBank declined to comment. All three firms are existing OpenAI backers.
The secondary share sale, which was first reported by Bloomberg, will give OpenAI employees a chance to get cash-rich amid a high-stakes talent war in the artificial intelligence industry. Companies like Meta Platforms Inc. are offering massive salaries to recruit AI talent from OpenAI and other startups. This year, several OpenAI employees have exited for Meta, including Shengjia Zhao, a co-creator of ChatGPT.
Allowing employees to sell shares is an important tool for startups trying to retain top talent, without requiring the company to go public or be acquired. In some cases, early investors also use these deals to sell down their stakes, though OpenAI investors are not eligible to do so in this round, according to a person familiar with the matter. Current and former employees who spent at least two years at the company are able to participate.
With its participation in the share sale, as well as its previous commitments, SoftBank is making a pivotal bet on the success of OpenAI. In addition to those deals, the Japanese conglomerate headed by Masayoshi Son recently closed a separate $1 billion purchase of OpenAI employee shares at a $300 billion valuation, according to a person familiar with the matter. Negotiations for that deal started before talks around the $500 billion secondary valuation began, they said.
The $500 billion valuation would make OpenAI the world’s most valuable startup, surpassing Elon Musk’s SpaceX. The company expects revenue to triple this year to $12.7 billion, up from $3.7 billion in 2024, Bloomberg has reported. And the secondary deal talks come on the heels of the release of its highly-anticipated GPT-5 model.
This week, OpenAI chief Sam Altman sat down with a group of reporters and shared his vision for the company, including that it wants to spend trillions of dollars on the infrastructure required to run AI services in the “not very distant future.”
“You should expect a bunch of economists to wring their hands and say, ‘This is so crazy, it’s so reckless,’ and whatever,” Altman said. “And we’ll just be like, ‘You know what? Let us do our thing.’”
The latest consumer price index report showed airfares jumped 4% in July from the prior month, reversing a slump that began early this year. That’s as airlines are reducing the number of flights, easing a capacity glut, while demand has rebounded after President Donald Trump’s trade war slowed travel during the spring.
Supply and demand are coming back into balance in the airline industry, meaning airfares are shooting higher again after an extended downtrend.
The latest consumer price index report showed airfares jumped 4% in July from June, marking the first monthly increase since January.
For much of the peak travel season, consumers enjoyed lower prices. Airfares ticked down 0.1% in June and fell 2.7% in May from the prior month. But those days look to be over for now.
Airlines are trimming flights more aggressively than usual as the summer winds down. Domestic capacity among U.S. airlines has dropped 6% in August versus July, according to data from Cirium cited by CNBC.
That’s bigger than the cut of just over 4% during the same period a year ago as well as the 0.6% cut in 2023. And in the pre-COVID summer of 2019, capacity fell by 1.7% between July and August.
The strike at Air Canada could throw another wrench into capacity as the carrier suspends operations. Canada’s top airline operates around 700 flights per day.
Earlier this summer, airlines found themselves with too much capacity as their expectations at the start of the year for another travel boom slammed into President Donald Trump’s trade war in the spring.
After he unveiled much steeper-than-expected tariffs in April, demand for flights slowed as consumers turned cautious about the economy and their finances. To avoid flying empty planes, airlines slashed prices.
But Trump pulled back from his highest levies and signed several trade deals. With some uncertainty easing, airlines have reported that demand is rebounding. In fact, security screenings at airports in July and so far in August are up from a year ago.
“The world is less uncertain today than it was during the first six months of 2025 and that gives us confidence about a strong finish to the year,” United Airlines CEO Scott Kirby said last month.
The federal budget deficits caused by President Donald Trump’s tax and spending law could trigger automatic cuts to Medicare if Congress does not act, the nonpartisan Congressional Budget Office reported Friday.
The CBO estimates that Medicare, the federal health insurance program for Americans over age 65, could potentially see as much as $491 billion in cuts from 2027 to 2034 if Congress does not act to mitigate a 2010 law that forces across-the-board cuts to many federal programs once legislation increases the federal deficit. The latest report from CBO showed how Trump’s signature tax and spending law could put new pressure on federal programs that are bedrocks of the American social safety net.
Trump and Republicans pledged not to cut Medicare as part of the legislation, but the estimated $3.4 trillion that the law adds to the federal deficit over the next decade means that many Medicare programs could still see cuts. In the past, Congress has always acted to mitigate cuts to Medicare and other programs, but it would take some bipartisan cooperation to do so.
Democrats, who requested the analysis from CBO, jumped on the potential cuts.
“Republicans knew their tax breaks for billionaires would force over half a trillion dollars in Medicare cuts — and they did it anyway,” said Rep. Brendan F. Boyle, the top Democrat on the House Budget Committee, in a statement. “American families simply cannot afford Donald Trump’s attacks on Medicare, Medicaid, and Obamacare.”
Hospitals in rural parts of the country are already grappling with cuts to Medicaid, which is available to people with low incomes, and cuts to Medicare could exacerbate their shortfalls.
As Republicans muscled the bill through Congress and are now selling it to voters back home, they have been highly critical of how CBO has analyzed the bill. They have also argued that the tax cuts will spur economic growth and pointed to $50 billion in funding for rural hospitals that was included in the package.
President Donald Trump at a White House event on July 30 with Health and Human Service Secretary Robert F. Kennedy, Jr., left, and Administrator of the Centers for Medicare and Medicaid Services, Mehmet Oz, right.
President Donald Trump and Russian President Vladimir Putin ended their meeting in Alaska on Friday without a ceasefire deal. Despite Trump’s earlier threat that Moscow would face “very severe consequences” if the summit didn’t produce an agreement, he said he would hold off on imposing new sanctions. But a tougher U.S. crackdown on tankers delivering Russian oil would cripple Putin’s war machine, an expert said.
The U.S. holds immense leverage over Russia’s economy and ability to continue waging war on Ukraine, but President Donald Trump has backed off from earlier warnings that lack of progress on a ceasefire would result in harsh penalties for Moscow.
Trump and Russian President Vladimir Putin ended their highly anticipated meeting in Alaska on Friday without a deal. On Saturday, Trump shifted his stance toward reaching a more comprehensive peace agreement between Russia and Ukraine, mirroring Putin’s position, rather than a ceasefire.
That marked a big swing from his rhetoric leading up to the Alaska meeting, as he threatened “very severe consequences” for Russia if Putin didn’t agree to a ceasefire.
When asked why he didn’t follow through, Trump said he would hold off on any new penalties and suggested the threat remains on the table as diplomacy plays out.
“Because of what happened today, I think I don’t have to think about that now,” he told Fox News. “I may have to think about it in two weeks or three weeks or something, but we don’t have to think about that right now.”
Trump had previously warned Russia’s oil sector could face secondary sanctions. Oil and gas generate the bulk of the Kremlin’s revenue, and the U.S. could exploit this critical vulnerability.
In particular, cutting off the “shadow fleet” of tankers that deliver Russia’s oil under the radar would send the war economy into a “deep financial crisis,” according to Robin Brooks, a senior fellow at the Brookings Institution and former chief economist at the Institute of International Finance.
After the Biden administration sanctioned nearly 200 ships in January, just before Trump returned to office, their activity collapsed, he pointed out in a Substack post on Saturday.
But there are 359 more ships that have already been sanctioned by the European Union or United Kingdom, but haven’t been targeted yet by the U.S.
“Sanctioning these ships would be a hammer blow to the Russian war machine,” Brooks wrote. “There would undoubtedly be a sharp fall in the Urals oil price, reducing the flow of hard currency to the Russian state, and the Ruble would most likely depreciate significantly.”
Meanwhile, foreign policy expects have called the Alaska meeting a success for Putin as he was able to avoid severe consequences from Trump while also buying time for his military to make more battlefield gains in Ukraine.
But Melinda Haring, a nonresident senior fellow at the Atlantic Council’s Eurasia Center, also noted that Trump has significant leverage over Russia.
“Let’s hope that Trump sees through Putin’s endless appetite to talk and tires of the Russian dictator’s pseudo-historical lectures,” she wrote in a blog post. “Trump can squeeze the Russians; he seems to forget that the United States holds the cards, not Moscow.”
Oil and gas revenue tumbled 27% in July from a year ago, and Russia is running out of financial resources as war-related spending deepens its budget deficit.
The National Wealth Fund, a key source of reserves, has dwindled from $135 billion in January 2022 to just $35 billion this past May and is expected to run out later this year.
“Russia’s economy is fast approaching a fiscal crunch that will encumber its war effort,” economist and Russia expert Anders Åslund wrote in a Project Syndicate op-ed last week. “Though that may not be enough to compel Putin to seek peace, it does suggest that the walls are closing in on him.”
Kylan Darnell became an overnight celebrity in the TikTok niche that documents the glitzy, ritualistic recruitment process for sororities. As a 21-year-old rising senior four years later, she’s taking more of her sorority life offline.
Darnell has until now been the embodiment of RushTok, a week-long marathon that has teens at schools around the country meticulously documenting their efforts to land a cherished spot in a sorority during the colorful, girly and enigmatic recruitment process known as rush week.
Reactions to the content that once catapulted her to fame — depicting her life as a Zeta Tau Alpha member at the University of Alabama — had become so negative that it was affecting her mental health, she said.
“This year it was just like a whole different level of hate,” Darnell said.
Citing a need to protect prospects from harassment, many sororities have made similar moves, issuing a de facto ban against talking to the press or posting on social media during rush week at Alabama, where almost 13,000 students participate in the nation’s largest on-campus Greek life.
A centuries-old tradition
Across the country, rush is typically a 10-day event where “prospective new members” try out sororities through rounds of activities prescribing a strict slate of outfits and etiquette. In the lead-up, girls often submit “social resumes” and letters of recommendation from sorority alums.
Participation often requires an eye-opening price tag.
After spending sometimes tens of thousands of dollars on outfits, makeup and plane tickets, each of this week’s 2,600 recruits paid $550 to participate. It’s non-refundable if they don’t get picked. If accepted, they’ll pay an average $8,400 a semester to live in the sorority house, or $4,100 if they live elsewhere, according to the Alabama Panhellenic Association.
The pressure can be so intense that an industry of consultants now helps girls navigate the often mysterious criteria for landing a desired sorority. Some charge up to $10,000 for months of services that can begin in high school.
Throughout rush, many events are invite-only. At any point, girls can get a dreaded call informing them they’ve been dropped — that a sorority is no longer interested in letting them join. Matches are finally made on bid day as prospects rank top choices and sororities make offers.
Morgan Cadenhead, now 20, gained such an audience on RushTok despite being dropped that she covered most of her tuition with income from social media. Then came the social cost as she was slammed online for criticizing Greek life. Now the marketing major — featured on Lifetime’s “Sorority Mom’s Guide to Rush!” — said she’s looking for offline work.
A zealous TikTok following
A fixation with rush was renewed when sororities resumed in-person recruiting after the pandemic.
Social media became flooded with “outfit of the day” and “get ready with me” videos showing sorority members and recruits in well-lit rooms, sometimes flaunting exorbitantly priced designer wear or pieces purchased on Amazon, always precisely curated.
Alabama’s Greek life got attention before, when its traditionally white sororities racially integrated, accepting their first Black members in 2013. Targeted by protests following allegations of racial discrimination, the university agreed with the Justice Department in 2016 to encourage diversity. Today, Black students outside of traditionally Black sororities and fraternities represent 2% of the total Greek membership, the university website says.
Meanwhile, online attention to rush has led to books, a polarizing documentary and the reality television series, widening the appeal of sororities in the South in particular, according to Lorie Stefaneli, a New York City-based consultant who flies to Tuscaloosa each year for rush.
Stefaneli coaches girls from around the country, and about a third of her clients enroll at Alabama. She says many are drawn by the vibrant depictions of sisterhood, showing female friendships that can ensure girls feel seen and supported.
“That’s the reason why a lot of them want to go to Alabama, is because they see it on TikTok,” Stefaneli said.
Recruits told to stop posting — or else
If they gain enough followers to become social influencers, RushTok participants can earn ad revenue and brand deals. Darnell’s posts brought her financial independence, more than covering the $58,000 it costs her annually to attend Alabama from out-of-state.
Rush can be fun and help girls build confidence, but it’s also an “emotional rollercoaster,” especially for girls who feel they need to reveal themselves to a massive audience, Stefaneli said. She answers phone calls at all hours of the night during rush week.
“I’m literally a therapist, I’m talking these girls down from a ledge,” she said.
Numerous incoming freshmen told The Associated Press this week that they were expressly prohibited from speaking with the media or even posting about rush at Alabama. Darnell said the most selective “Old Row” houses will automatically drop prospects who do.
“Now a lot of girls just come to the university to be influencers,” she said. “It kind of gets in the way of sisterhood.”
Some incoming freshmen — including Darnell’s 19-year-old sister Izzy, with a vast social media following of her own — have chosen to post anyway, satisfying a demand that can reach millions of views within days.
Izzy Darnell — who wouldn’t share her choices for sorority ahead of Saturday’s bid day — said her older sister’s acumen has equipped her to navigate criticism and potentially predatory business deals. But she worries about how other girls might handle the fame and money.
“I just fear what some girls will do because they think they have to,” Izzy Darnell said.
Singer Sean Kingston was sentenced to three and a half years in prison Friday after being convicted of a $1 million fraud scheme in which he leveraged his fame to dupe sellers into giving him luxury items that he then never paid for.
Kingston, whose legal name is Kisean Paul Anderson, and his mother, Janice Eleanor Turner, were convicted in March by a federal jury of conspiracy to commit wire fraud and four counts of wire fraud. Turner was sentenced to five years in prison last month.
Before U.S. Judge David Leibowitz handed down Kingston’s sentence, the singer apologized to the judge in the South Florida courtroom and said he had learned from his actions. His attorney asked if he could self-surrender at a later date due to health issues, but the judge ordered him taken into custody immediately. Kingston, who was wearing a black suit and white shirt, removed his suit jacket and was handcuffed and led from the courtroom.
Assistant U.S. Attorney Marc Anton described Kingston as someone addicted to his celebrity lifestyle even though he could no longer afford to maintain it.
“He clearly doesn’t like to pay and relies on his celebrity status to defraud his victims,” Anton said Friday.
The federal prosecutor described a yearslong pattern by Kingston of bullying victims for luxury merchandise and then refusing to pay.
“He is a thief and a conman, plain and simple,” Anton said.
Defense attorney Zeljka Bozanic countered that the 35-year-old Kingston had the mentality of a teenager — the age he was when he vaulted to stardom. The attorney said Kingston had almost no knowledge of his finances, relying on business managers and his mother.
“No one showed him how to invest his money,” Bozanic said. “Money went in and money went out on superficial things.”
Bozanic said Kingston has already started paying back his victims and intends to pay back every cent once he is free and can start working again.
Leibowitz rejected the idea that Kingston was unintelligent or naive, but the judge said he gave Kingston credit for accepting responsibility and declining to testify rather than possibly lying in court. That was in contrast to Kingston’s mother, whose trial testimony Leibowitz described as obstruction.
Kingston and his mother were arrested in May 2024 after a SWAT team raided Kingston’s rented mansion in suburban Fort Lauderdale. Turner was taken into custody during the raid, while Kingston was arrested at Fort Irwin, an Army training base in California’s Mojave Desert, where he was performing.
According to court records, Kingston used social media from April 2023 to March 2024 to arrange purchases of luxury merchandise. After negotiating deals, Kingston would invite the sellers to one of his high-end Florida homes and promise to feature them and their products on social media.
Investigators said that when it came time to pay, Kingston or his mother would text the victims fake wire receipts for the items, which included a bulletproof Escalade, watches and a 19-foot (5.9-meter) LED TV, investigators said.
When the funds never cleared, victims often contacted Kingston and Turner repeatedly, but were either never paid or received money only after filing lawsuits or contacting law enforcement, authorities said.
Kingston, who was born in Florida and raised in Jamaica, shot to fame at age 17 with the 2007 hit “Beautiful Girls,” which laid his lyrics over Ben E. King’s 1961 song “Stand By Me.” His other hits include 2007’s “Take You There” and 2009’s “Fire Burning.”
US President Donald Trump on Saturday shifted his campaign to halt the Ukraine war to securing a full peace agreement after a summit with Russia’s President Vladimir Putin failed to secure a ceasefire.
Three hours of talks between the White House and Kremlin leaders at an Alaska air base produced no breakthrough but Trump and European leaders said they wanted a new summit that includes Ukraine’s President Volodymyr Zelensky.
Zelensky will now go to Washington on Monday while European leaders said they were ready to intensify sanctions against Russia after Trump briefed them on the summit.
Trump remained upbeat, calling the summit “a great and very successful day in Alaska!” in a Truth Social post. The US president added that European leaders had backed his plan for a new summit.
“It was determined by all that the best way to end the horrific war between Russia and Ukraine is to go directly to a peace agreement, which would end the war, and not a mere ceasefire agreement, which often times do not hold up,” he added.
Zelensky in Washington
He confirmed Monday’s meeting with Zelensky and said he hoped a Trump-Putin-Zelensky summit would follow. “Potentially, millions of people’s lives will be saved,” Trump commented.
Before the summit, Trump had warned of “severe consequences” if Russia did not accept a ceasefire.
When asked about this by Fox News after the talks, Trump said that “because of what happened today, I think I don’t have to think about that now”.
Putin has repeatedly said only a full peace deal could halt the war he ordered in February 2022, which has left tens of thousands dead and widespread destruction in Ukraine.
Putin again spoke of addressing the “root causes” of the conflict at the summit and some analysts said Trump may have conceded ground.
“Faced with what appears to be Putin’s stonewalling, lectures on history, or other dodges, Trump backed away again,” said Daniel Fried, a former US ambassador to Poland and now a fellow at the Atlantic Council think tank.
Flying back to Washington, Trump spoke first with Zelensky, the White House said.
British Prime Minister Keir Starmer, French President Emmanuel Macron, German Chancellor Friedrich Merz, NATO Secretary General Mark Rutte and European Commission president Ursula von der Leyen and other European leaders later joined the call, officials said.
The Europeans, who had been wary of the Alaska meeting, held their own talks on Saturday and afterwards expressed support for a new summit.
Their statement did not mention a ceasefire, just the need for more action to force Russia into “a just and lasting peace”.
“As long as the killing in Ukraine continues, we stand ready to uphold the pressure on Russia. We will continue to strengthen sanctions and wider economic measures to put pressure on Russia’s war economy until there is a just and lasting peace,” they said.
The war went on despite the summit. Ukraine announced Saturday that Russia launched 85 attack drones and a ballistic missile during the night. Russia said it had taken two more villages in Ukraine.
Trump and Putin emerged from their talks to offer warm words at a 12-minute press briefing but took no questions.
“We’re not there yet, but we’ve made progress. There’s no deal until there’s a deal,” Trump said.
He called the meeting “extremely productive” with “many points” agreed, but did not offer specifics.
‘Next time in Moscow’
Putin also spoke in general terms. “We hope that the understanding we have reached will… pave the way for peace in Ukraine.”
Putin warned Ukraine and European countries to “not create any obstacles” and not “make attempts to disrupt this emerging progress through provocation or behind-the-scenes intrigues”.
As Trump mused about a second meeting, Putin smiled and said in English: “Next time in Moscow”.
Putin warns Western allies
Trump, whose tone with Zelensky has changed since he berated the Ukrainian leader at the White House in February, told Fox that “Now it’s really up to President Zelensky to get it done”.
Zelensky, who has rejected Russian demands that Ukraine give up territory, was not invited to Friday’s talks. But he said Saturday that he supported the American efforts.
“It is important that America’s strength has an impact on the development of the situation,” he said.
Russia in recent days has made battlefield gains that could strengthen Putin’s hand in any negotiations.
Although Ukraine announced as Putin was flying in that it had retaken several villages, Russia’s army on Saturday claimed the capture of Kolodyazi in Ukraine’s Donetsk region and Vorone in the neighbouring Dnipropetrovsk region.
US President Donald Trump and Russian President Vladimir Putin shake hands at the end of a joint press conference after participating in a summit on Ukraine at Joint Base Elmendorf-Richardson in Anchorage, Alaska, on Friday.
A former police chief known as the “Devil in the Ozarks” spent months planning his escape from an Arkansas prison, and said lax security in the kitchen where he worked allowed the convicted murderer to gather the supplies he needed, an internal review by prison officials released Friday said.
The Department of Corrections’ critical incident review of Grant Hardin’s May 25 escape from the Calico Rock prison provides the most detailed description so far of his planning and the issues that allowed him to walk out of the facility.
Hardin was captured 1.5 miles (2.4 kilometers) northwest of the Calico Rock prison on June 6. Authorities said he escaped by donning an outfit he designed to look like a law enforcement uniform.
Hardin, who worked in the prison’s kitchen, said he spent six months planning his escape and used black Sharpie markers and laundry he found lying around the kitchen to create the fake uniform, according to the report. Hardin fashioned a fake badge using the lid of a can.
“Hardin stated he would hide the clothes and other items he was going to need in the bottom of a trash can in the kitchen due to no one ever shaking it down,” the report says.
Two prison employees have been fired for procedure violations that led to Hardin’s escape. They include a kitchen employee who allowed Hardin on a back dock unsupervised and a tower guard who unlocked the back gate that Hardin walked through without confirming his identity. Several other employees have been suspended and one demoted, lawmakers were told this week.
The kitchen’s staff was “very lax on security,” Hardin told investigators, allowing him to gather what he needed for his escape. Hardin said he didn’t have any help from staff or other inmates. Hardin had constructed a ladder from wooden pallets in case he needed to scale the prison fence but didn’t need it.
“(Hardin) stated when he walked up to the gate, he just directed the officer to ‘open the gate,’ and he did,” the report says.
After he escaped from the prison, Hardin survived on food he had smuggled out of the prison along with distilled water from his CPAP machine. Hardin also drank creek water and ate berries, bird eggs and ants.
“He said his plan was to hide in the woods for six months if need be and begin moving west out of the area,” the report says.
Hardin, a former police chief in the small town of Gateway, near the Arkansas-Missouri border, is serving lengthy sentences for murder and rape. He was the subject of the TV documentary “Devil in the Ozarks.”
The report is one of two reviews into Hardin’s escape, which is also being investigated by the Arkansas State Police. A legislative subcommittee has also been holding hearings about the escape.
Republican Rep. Howard Beaty, who co-chairs the Legislative Council’s Charitable, Penal and Correctional Institutions Subcommittee, said the panel hoped to discuss both reports with officials at a hearing next month.
Republican Sen. Ben Gilmore, who sits on the panel, said he didn’t think the department’s review took a thorough enough look at the systemic issues that enabled Hardin’s escape.
“They have focused on the final failure instead of all of the things that led up to it,” he said.
The report also cites confusion among corrections officials in the early stages of Hardin’s escape about which law enforcement agencies had been notified, the report says.
“It is obvious there was a lot of confusion during the beginning stages of opening the command center and of notifications being made,” the report says.
Hardin had been misclassified and shouldn’t have been held at the primarily medium-security prison, according to the review. After he was captured, Hardin was moved to a maximum-security prison. He has pleaded not guilty to escape charges, and his trial is set for November.
Hardin’s custody classification hadn’t been reviewed since October 2019, the report says.
The Department of Corrections’ review says officials had taken several steps since Hardin’s escape, including removing the electric locks from the gates to prevent someone from walking out without an officer present.
The report also calls for additional cameras after finding a blind spot on the dock Hardin used, and for any “shakedown” searches for contraband to include mechanical rooms and side rooms.
This combo of images released by the Arkansas Department of Corrections shows the recapture of escaped inmate Grant Hardin, an ex-police chief and convicted killer, by Arkansas law enforcement officers and the U.S. Border Patrol, June 6, 2025, near Moccasin Creek in Izard County, about 1.5 miles (2.4 kilometers) northwest of Calico Rock prison. in Calico Rock, Ark.
Greg Iles, the Mississippi author of the “Natchez Burning” trilogy and other works, has died. He was 65.
Iles died Friday after a decades-long battle with the blood cancer multiple myeloma, his literary agent Dan Conaway posted Saturday on Facebook.
Initially diagnosed with the incurable condition in 1996, he kept his illness private until completing his final novel, “Southern Man,” which was published in 2024.
Iles was born in Germany but moved to Natchez, Mississippi, with his family when he was just three years old and developed a deep connection with the region. Many of his stories are set in Mississippi, including the “Natchez Burning” trilogy, historical fiction suspense novels exploring race and class in the 1960s Jim Crow South.
Conaway described Iles as “warm, funny, fearless, and completely sui generis.”
“To be on the other end of the phone as he talked through character and plot, problem-solving on the fly, was to be witness to genius at work, plain and simple,” he wrote on Saturday. “As a writer he fused story-craft, bone-deep humanity, and a growing sense of moral and political responsibility with the ferocious precisions of a whirling dervish or a master watchmaker.”
In March 2011, Iles suffered a ruptured aorta and a partial leg amputation and spent eight days in a medically induced coma after another driver struck his car on Highway 61 near Natchez. He eventually recovered.
Iles performed with the musical group The Rock Bottom Remainders along with popular authors Stephen King, Amy Tan and others.
New York Times best-selling author Greg Iles of Natchez, Miss., states the need for a change of the Mississippi state flag during the seventh annual Statehood Day celebration Thursday, Dec. 10, 2015, in Jackson, Miss.
Canada’s government forced Air Canada and its striking flight attendants back to work and into arbitration Saturday after a work stoppage stranded more than 100,000 travelers around the world during the peak summer travel season.
Federal Jobs Minister Patty Hajdu said now is not the time to take risks with the economy, noting the unprecedented tariffsthe U.S. has imposed on Canada. The intervention means the 10,000 flight attendants will return to work soon.
The government’s action came less than 12 hours after workers walked off the job.
“The talks broke down. It is clear that the parties are not any closer to resolving some of the key issues that remain and they will need help with the arbitrator,” Hajdu said.
Hajdu said the full resumption of services could take days, noting it is up to the Canada Industrial Relations Board. Meanwhile, Wesley Lesosky, president of the Air Canada Component of the CUPE union, accused the government of violating the flight attendants’ constitutional right to strike — and decried Hajdu for only waiting hours to intervene.
“The Liberal government is rewarding Air Canada’s refusal to negotiate fairly by giving them exactly what they wanted,” Lesosky said.
Air Canada did not immediately have additional comments when reached Saturday afternoon. But Air Canada Chief Operating Officer Mark Nasr previously said it could take up to a week to fully restart operations. It’s likely that travelers will continue to see disruptions in the coming days.
Existing agreement will stay in place through arbitration
The shutdown of Canada’s largest airline early Saturday is impacting about 130,000 people a day, and some 25,000 Canadians may be stranded. Air Canada operates around 700 flights per day.
According to numbers from aviation analytics provider Cirium, Air Canada had canceled a total of 671 flights by Saturday afternoon — following 199 on Friday. And another 96 flights scheduled for Sunday were already suspended.
Hajdu ordered the Canada Industrial Relations Board to extend the term of the existing collective agreement until a new one is determined by the arbitrator.
“Canadians rely on air travel every day, and its importance cannot be understated,” she said.
Union spokesman Hugh Pouliot didn’t immediately know what day workers would return to work. “We’re on the picket lines until further notice,” he said.
The bitter contract fight escalated Friday as the union turned down Air Canada’s prior request to enter into government-directed arbitration, which allows a third-party mediator to decide the terms of a new contract.
‘Such little progress has been made’
Flight attendants walked off the job around 1 a.m. EDT on Saturday. Around the same time, Air Canada said it would begin locking flight attendants out of airports.
Ian Lee, an associate professor at Carleton University’s Sprott School of Business, earlier noted the government repeatedly intervenes in transportation strikes.
“They will intervene to bring the strike to an end. Why? Because it has happened 45 times from 1950 until now,” Lee said. “It is all because of the incredible dependency of Canadians.”
Last year, the government forced the country’s two major railroads into arbitration with their labor union during a work stoppage. The union for the rail workers is suing, arguing the government is removing a union’s leverage in negotiations.
The Business Council of Canada had urged the government to impose binding arbitration in this case, too. And the Canadian Chamber of Commerce welcomed the intervention.
“With valuable cargo grounded and passengers stranded, the government made the right decision to refer the two sides to binding arbitration,” said Matthew Holmes, the executive vice president for the Chamber of Commerce — adding that “close to a million Canadians and international visitors could be impacted” if it takes Air Canada a week to be fully operational again.
Hajdu maintained that her Liberal government is not anti-union, saying it is clear the two sides are at an impasse.
Passengers whose flights are impacted will be eligible to request a full refund on the airline’s website or mobile app, according to Air Canada.
The airline said it would also offer alternative travel options through other Canadian and foreign airlines when possible. Still, it warned that it could not guarantee immediate rebooking because flights on other airlines are already full “due to the summer travel peak.”
Many travelers expressed frustration over Air Canada’s response to the strike.
Jean‐Nicolas Reyt, 42, said he had heard little from Air Canada just hours before his upcoming flight from France scheduled for Sunday.
“What’s stressful is to not hear anything from Air Canada,” said Reyt, who is trying to return to Montreal, where he is an associate professor of organizational behavior at McGill University. He said he only received one email from the airline on Thursday warning of potential strike disruptions, but had no further information as of Saturday evening in Cannes, where he was visiting family.
Reyt assumes his upcoming flight could be canceled — much like the scores of other lengthy disruptions this weekend. “I’m just very surprised that Air Canada let it go this far,” he said. “It’s really a bit disheartening that they fly you somewhere abroad and then they just don’t fly you back.”
Jennifer MacDonald, of Halifax, Nova Scotia, expressed similar frustration. She has been trying to help her brother and cousin get home to Edmonton, Alberta since the second leg of their Air Canada trip was canceled during what was supposed to be a 1-hour layover in Montreal on Friday night.
The two had to pay $300 out of their own pocket for a hotel, MacDonald said. All Saturday morning, they tried to look for rebooking options, but everything was sold out, she added. Eventually, they opted to book a new flight for Aug. 22 out of Halifax, with another family member volunteering to make an eight-hour drive to pick them up in Montreal and bring them back east on Saturday.
“It will be a multiday ordeal and a multi thousand dollar trip,” MacDonald said. But as stressful as the disruptions have been, she added that her family stands in solidarity with the flight attendants. “We hope that Air Canada lifts the lockout and negotiates fairly.”
Following the news of the Canadian government forcing arbitration on Saturday, Reyt also expressed concern for Air Canada’s flight attendants. “I think the flight attendants are making some reasonable arguments,” he said, adding that he hopes the intervention isn’t “a way just to silence them.”
Sides are far apart on pay
Air Canada and the Canadian Union of Public Employees have been in contract talks for about eight months, but they have yet to reach a tentative deal.
Both sides say they remain far apart on the issue of pay and the unpaid work flight attendants do when planes aren’t in the air.
“We are heartbroken for our passengers. Nobody wants to see Canadians stranded or anxious about their travel plans but we cannot work for free,” Natasha Stea, an Air Canada flight attendant and local union president, said before the government intervention was announced.
The attendants are about 70% women. Stea said Air Canada pilots, who are male dominated, received a significant raise last year and questioned whether they are getting fair treatment.
The airline’s latest offer included a 38% increase in total compensation, including benefits and pensions over four years, that it said “would have made our flight attendants the best compensated in Canada.”
But the union pushed back, saying the proposed 8% raise in the first year didn’t go far enough because of inflation.
The U.S. plans to build a $750 million factory in southern Texas to breed billions of sterile flies, ramping up its efforts to keep flesh-eating maggots in Mexico from crossing the border and damaging the American cattle industry.
Secretary Brooke Rollins announced Friday that the U.S. Department of Agriculture hopes to be producing and releasing sterile male New World screwworm flies into the wild within a year from the new factory on Moore Air Base outside Edinburg, Texas, about 20 miles (32 kilometers) from the border. She also said the USDA plans to deploy $100 million in technology, such as fly traps and lures, and step up border patrols by “tick riders” mounted on horseback and train dogs to sniff out the parasite.
In addition, Rollins said the U.S. border will remain closed to cattle, horse and bison imports from Mexico until the U.S. sees that the pest is being pushed back south toward Panama, where the fly had been contained through late last year through the breeding of sterile flies there. The U.S. has closed its border to those imports three times in the past eight months, the last in July, following a report of an infestation about 370 miles (595 kilometers) from the Texas border.
American officials worry that if the fly reaches Texas, its flesh-eating maggots could cause billions of dollars in economic losses and cause already record retail beef prices to rise even more, fueling greater inflation. The parasite also can infest wildlife, household pets and, occasionally, humans.
“Farm security is national security,” Rollins said during a news conference at the Texas State Capitol in Austin with Texas Gov. Greg Abbott. “All Americans should be concerned. But it’s certainly Texas and our border and livestock producing states that are on the front lines of this every day.”
The pest was a problem for the American cattle industry for decades until the U.S. largely eradicated it in the 1970s by breeding and releasing sterile male flies to breed with wild females. It shut down fly factories on U.S. soil afterward.
The Mexican cattle industry has been hit hard by infestations and the U.S. closing its border to imports.
Mexico’s Agriculture ministry said in a statement Friday that Mexico Agriculture and Rural Development Secretary Julio Berdegué Sacristán and Rollins signed a screwworm control action plan. It includes monitoring with fly-attracting traps and establishing that livestock can only be moved within Mexico through government-certified corrals, the statement said.
And on the X social media platform, Berdegué said, “We will continue with conversations that lead to actions that will permit the reopening of livestock exports.”
The new fly-breeding factory in Texas would be the first on U.S. soil in decades and represents a ramping up of the USDA’s spending on breeding and releasing sterile New World screwworm flies. The sterile males are released in large enough numbers that wild females can’t help but mate with them, producing sterile eggs that don’t hatch. Eventually, the wild fly population shrinks away because females mate only once in their weekslong lives.
In June, Rollins announced a plan to convert an existing factory for breeding fruit flies into one for breeding sterile New World Screwworm flies, as well as a plan to build a site, also on the air base near Edinburg, for gathering flies imported from Panama and releasing them from small aircraft. Those projects are expected to cost a total of $29.5 million.
The Panama fly factory can breed up to 117 million flies a week, and the new Mexican fly factory is expected to produce up to 100 million more a week. Rollins said the new Texas factory would produce up to 300 million a week. She said President Donald Trump’s administration wants to end the U.S. reliance on fly breeding in Mexico and Panama.
“It’s a tactical move that ensures we are prepared and not just reactive, which is today what we have really been working through,” Rollins said.
The U.S. has spent billions to bring broadband to rural communities—but many of the people it’s meant to help still aren’t logging on.
Unless governments focus on adoption—not just access—they risk funding infrastructure that goes unused, while rural Americans remain cut off from healthcare, education,and the growing remote job market that today represents nearly a quarter of the U.S. workforce.
Most public discussion around rural broadband has centered on availability. Federal and state programs have rightly prioritized reaching remote areas, building towers, and upgrading last-mile delivery. But access doesn’t guarantee uptake. Across rural America, broadband networks are expanding—yet adoption remains stubbornly low in many regions.
As recently as 2021, nearly one in five rural households did not subscribe to a broadband service. Among those, nearly 25% said they simply weren’t interested. This wasn’t about affordability or technical skill—it was a matter of relevance.
By 2023, broadband adoption had surpassed 80% among younger rural adults, but dropped sharply with age. Just 68% of rural adults over 75 had broadband. Among those aged 65–74, adoption hovered around 71%, compared to over 80% for adults under 50.
This divide is as generational as it is geographic. Most younger residents are already online. What remains are older Americans who haven’t found a reason to change long-standing habits.
Even in communities where broadband is already available, uptake lags for reasons that go beyond infrastructure or cost. Without demand, access doesn’t translate into impact.
These usage patterns reflect long-established habits. A study of broadband deployment in rural Missouri found that most early adopters used their new connection primarily for entertainment. Only half engaged with applications like telehealth or remote work. Even after access is delivered, usage often stays stuck in the past.
The cost of disconnection
The economic implications are real. Counties with high broadband adoption see stronger job growth, higher self-employment, and greater income gains.Nationally, about 22% of the workforce—roughly 32 million Americans—now works remotely at least part of the time, compared to just 6% before the pandemic. While the Covid-era boom in remote or hybrid work has cooled, the share of remote-capable jobs remains an enduring opportunity for rural communities positioned to take advantage of it. But while three-quarters of mid-career rural workers say they’re willing to train for those jobs, most say they haven’t taken any courses to do so — often because they lack the broadband access to even start.
We’ve seen this before. In the mid-20th century, rural electrification and telephone service faced similar hurdles. Infrastructure wasn’t enough. Outreach, financing, and cultural adaptation were required — especially to reach older residents. It took years of effort to shift behavior and build trust.
There are modern parallels. The Affordable Connectivity Program helped low-income households get online—but it didn’t close the gap. Those who benefited most were already inclined to value broadband. The people who remained offline tended to be older, more isolated, and less convinced of its relevance.
Rural clinics have seen this firsthand. Many invested in telehealth platforms—only to find older patients still preferred phone calls. Even basic digital engagement, like using patient portals, lags in many areas. In Ohio and West Virginia, providers report low digital adoption among seniors despite widespread broadband availability.
Local employers face similar challenges. Remote roles go unfilled because applicants lack digital confidence. Older caregivers often struggle to support kids’ online homework. In parts of Appalachia, internet access exists, but without digital literacy, it remains underused. These are behavioral problems. They have nothing to do with infrastructure.
The real last mile
Solving the broadband adoption gap must begin at the local level. National subsidies help build networks, but the harder work happens in places where trust already exists and outreach can take hold — in neighborhoods, schools, libraries and clinics. These places and resources serve as anchors in many rural communities and are well positioned to explain how broadband supports everyday needs.
Some states have created digital navigator programs that train local leaders to help residents use the internet with confidence. And here’s an idea that’s as simple as it gets: why not offer a year of free service to help people figure out how broadband fits into their daily lives? If relevance is the hurdle, trial access may be the bridge. Both strategies focus on showing value through use, not just access.
But without local engagement, the gap is likely to grow. Young people may leave in search of digital opportunity. Older adults may become more isolated. The economic benefits of broadband depend on broad participation. If large portions of a community remain offline, the return on investment will fall short.The federal government has laid the physical foundation. The next phase requires a social strategy—one that supports education, outreach, and trial access. Residents need more than the option to connect. They need a reason to log on,whether it’s talking to a doctor from home, helping their child with homework, or landing a remote job that pays a city salary from the kitchen table.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
In a speech last month, President Donald J. Trump outlined three executive orders he signed to promote American dominance of AI technology. He promised, in fact, that as America is the country that started the AI race, “I’m here to declare that America is going to win it!”
To do so, his executive orders would make it easier for companies to build AI infrastructure, speed up the permitting process by doing away with any oversight and safeguards he believed to be onerous, and push the exporting of America-manufactured AI products.
This is just the latest salvo in what is now a global AI arms race, backed by billions of dollars in investment by tech companies and venture capital firms big and small here in the U.S. and across the globe. I’ve conducted academic research on responsible AI for over 35 years, I have been at the forefront of operationalizing AI — from pioneering academic research to leading enterprise adoption of analytics and AI across industries. I’m concerned about a catastrophe in the making, with giant tech firms winning the battle of the current AI arms race but most assuredly losing the war in terms of creating an utterly destructive impact on society.
Not to be left behind, the EU recently mobilized billions of euros to finance and build AI gigafactories, with the goal of becoming a global leader in the field. Said Commission President Ursula von der Leyen, “AI will improve our healthcare, spur our research and innovation and boost our competitiveness. We want AI to be a force for good and for growth… ”
Then, there’s India. The national IndiaAI Mission, launched last year, has a budget outlay of approximately $1.3 billion over the next five years directed toward AI infrastructure and financing startups, with a smaller portion allocated to research and development and centers of excellence, focusing on sustainability, healthcare, and agriculture as priority areas.
And we can’t ignore the once “sleeping giant,” China, which has the singular goal of achieving global AI leadership by 2030, when its vast investments would value its AI market at some $1.4 trillion!
The return on investment on all this money is hard to predict, other than the fact that Big Tech will become Colossal Tech the world over. Ultimately, though, success will be measured not by how much money companies and countries invest and earn but how all this AI is used and what protections will be enacted to ensure that its myriad uses are constructive rather than destructive.
For now, there are so many unanswered questions to ponder, questions that few have ventured to honestly and thoroughly answer because there is both too much unknown and for the most part the industry is totally unfettered.
Employment crisis brewing
Consider as but one example, the employment factor. In other words, who are all the people who will work on the plethora of AI initiatives present and future. A shortage of trained personnel is already acute in the tech industry, with a study by Randstad, the international human resources consulting firm, finding that just over a third of employees at the companies examined saying they have received any AI training in the past year. Only one in five Baby Boomers have had access to AI upskilling opportunities. And quite alarming, more than seven out of 10 workers who say they are skilled in AI are men, while only 29% are women.
This scarcity of AI skilled workers does not factor the rapid advancements in the technology in relation to the time it takes to train an individual in that technology. While it can vary significantly, depending on the complexity of the AI model, training one person can take many months. Workers don’t just have to learn new AI concepts and models, they must “learn how to learn” in a world where AI innovations are coming fast and furious. For companies, this is another significant financial investment in education and training — a totally wasteful one because there is no predictable ROI.
Then there’s the perception that AI will displace humans in the workforce because it is faster, cheaper, and more efficient and effective. Companies that even consider such a mindset are headed towards oblivion. In fact, to companies that are striving to do more with less manpower by using AI assistants to develop code, I say good luck. You still need skilled software engineers and always will. Yet, a recent report shows that there has been an alarming 34% drop in the demand for software engineers since a 2021 peak.
So, rather than focusing so much on embracing autonomy, companies must look at AI as augmentation, a collaboration between machine and human. If not, they may win the battle in the current AI arms race but they will most assuredly lose the war because the impact on society will be nothing short of catastrophic.
The matter of emissions
There is also another catastrophe in the making. According to the World Economic Forum, tech companies are spewing out more emissions from running the massive data centers necessary to power the AI systems. Microsoft announced recently that its emissions from carbon dioxide had surged nearly 30% since 2020 due to the expansion of its data centers, which are powered by oil and gas. Energy consumption is blowing up and there doesn’t seem to be an end in sight. It’s a toxic equation: more power, more air pollution. Ironically, it comes at the same time these tech companies — like those in so many other sectors that drive world economies — had pledged net zero carbon footprints over the next two decades, if not sooner.
Sure, at some point, as alternative power sources such as solar, wind and nuclear become more prevalent, these outputs may diminish. And AI has the potential to play a critical role in reducing carbon footprints, optimizing energy efficiency, and accelerating green technology. Indeed, while it seems like only a fractional amount, AI has the potential to cut global carbon dioxide emissions by 4% by 2030, according to a report from the World Economic Forum.
Moreover, AI has other societal benefits. It is accelerating research and innovation across various scientific disciplines, leading to significant breakthroughs in areas such as drug discovery and materials science. Researchers at MIT have developed AI models that improve the accuracy of climate predictions by analyzing vast datasets, aiding in better understanding and mitigation of climate change impacts. Further, the integration of AI in climate science has led to a 30% improvement in the accuracy of weather forecasting models, enhancing the ability to predict and respond to extreme weather events.
With such conflict between the potential for societal good and that for great harm, many wonder if there is a middle ground, and does it lay with unified global regulation of the entire AI industry. The fact is the cat is already out of the bag — every country has AI. So, I would argue that it is less about regulation and more about using AI responsibly while earning the trust of users. In other words, there still needs to be some regulation but it must be combined with common sense. It must be advanced at a pace that society finds acceptable and earns the trust of individuals and the collective whole about the short-term and long-term impacts of the technology, rather than having it shoved down their throats.
The air safety model that was adopted after World War I and that has evolved in the years since serves as an ideal corollary. Back then, as commercial air travel became a transportation option, safety measures were limited by the existing technologies, leading to many accidents that could have been prevented. But these accidents served as valuable lessons for aviation experts. In 1926 came the establishment of the Federal Aviation Administration, which was charged with improving flights both domestically and internationally. Rules were established for airways and air traffic. Licensing for pilots and maintenance technicians became mandatory, as did certification of repair stations and their crews. Manufacturing standards for air worthiness were developed. And the designs of the planes themselves were greatly enhanced with innovations such as radar systems, cabin pressurization, communication technology, and even AI itself. Today, airline travel is the safest mode of transportation.
AI could eventually be the safest mode of innovation on multiple levels and in industries across the board. But it does need to be really safe and it needs to be secure, like a plane’s black box. Only then will it be adopted by all sectors and the ROI will have real value.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
SoundHound AI CEO Keyvan Mohajer built his Star Trek-inspired $6.5 billion company in his Stanford dorm room—but even before then, he already had three software startups under his belt. They weren’t all unicorns, but the willingness to pursue big ideas despite the risk of failure is a lesson Gen Z founders can embrace, he tells Fortune.
As someone who immigrated from Iran at age 17 knowing little English, becoming a tech entrepreneur one day may have seemed like a far-fetched dream. But Keyvan Mohajer always kept the mindset: You cannot hit big unless you try.
And try he did. By the time he walked across the stage at the University of Toronto to receive his bachelor’s degree in engineering, Mohajer already had three software companies to his name. Each later became profitable and helped seed the voice-AI project he began in his Stanford dorm room in 2004—which evolved into SoundHound AI.
Today, the AI-voice communication company is worth more than $6.5 billion and has landed deals with clients including Nvidia, Snapchat, Mercedes-Benz, and more.
For Mohajer, who serves as CEO, failure has only ever served as motivation. And, it’s a lesson Gen Z eager to launch side gigs can learn from: The willingness to go out on a limb and build a company from scratch may sound intimidating—but it only takes one good idea to explode into major success.
“Every attempt, you should think of it as this is the one that’s going to succeed… Don’t just throw darts randomly at the target. For every attempt, you should use everything you’ve learned from past attempts and then there will be one that’s going to get the bullseye,” Mohajer tells Fortune.
From dorm room to the boardroom
Mohajer grew up always fascinated by two things: movies and robots. So, after first seeing Star Trek, he always dreamed of how to bring computerized voice systems into the real world. But only after meeting his later cofounders, James Hom and Majid Emami, during his Stanford electrical engineering doctoral program did he realize he could be part of the team to make it a reality.
Their first product was simple: query by humming. Two weeks prior to Christmas, the team didn’t leave their dorm room until they could build a product that could take their database of 20,000 media files and detect what song was being hummed. But by December 24, the code was cracked.
“It was on Christmas Eve that I finally hummed this Godfather soundtrack, and it told me, ‘You’re singing The Godfather,’” he said to the Iranian Students of California’s The Tale of a Success series.
His pitch to investors became simple: AI-powered voice is the future. “In 20 years we will talk to computers and they will talk back to us and that will change computing.”
And while it took years for SoundHound to get up off the ground, he tells Fortune finding his passion, or what makes his “heart beat faster,” has been core to his success today.
“You can do things and go through life and get by and check boxes and be average,” he says. “But I really wanted to be excellent, and I wanted to push boundaries. I want to go to places others haven’t gone before, and that gave me the drive to be an entrepreneur and just push the limits and combining the two.”
While SoundHound’s market performance has had dramatic ebbs and flows, the stock price is up over 200% in the past year. This is thanks in part to a better-than-expected earnings report from earlier this month; the company’s revenue is up 217% year-over-year. Its market cap is over $6.5 billion.
Founders who got their start in the dorm room
At a time when college students are questioning the value of a degree, SoundHound’s founding story is another reminder of the innovation that often spurs across college campuses—even if it is just from cofounders meeting for the first time.
Companies such as Databricks, a $62 billion data software company, as well as Google, worth over $2.4 trillion, also planted roots in college. Both sets of founders met on Stanford’s campus.
But there perhaps is no more famous company that spurred from the college experience than Facebook. Mark Zuckerberg met his cofounders, Eduardo Saverin, Dustin Moskovitz, and Chris Hughes at Harvard University and built the foundation of the social platform now known as Meta (now worth nearly $2 trillion).
The billionaire returned to his alma mater in 2017 and said he never expected to be such an entrepreneurial success story.
“The thing is, it never even occurred to me that someone might be us,” Zuckerberg said. “We were just college kids. We didn’t know anything about that. There were all these big technology companies with resources. I just assumed one of them would do it.”
“We’ve all started lifelong friendships here, and some of us even families,” he added. “That’s why I’m so grateful to this place. Thanks, Harvard.”
Editor’s note, Aug. 16, 2025: This article has been updated to clarify a quote from CEO Keyvan Mohajer, who misspoke earlier.
“We negotiated a little deal,” President Donald Trump told reporters on August 11, about the developing situation with leading chip makers Nvidia and AMD continuing to do business in China. He explained that he originally wanted a 20% cut of Nvidia’s sales in exchange for the company obtaining export licenses to sell H20 chip to China, but he was persuaded to settle at 15%. The H20 chip is “obsolete,” Trump added … “he’s selling a essentially old chip.”
The chips do appear to be quite significant to China, considering that the Cyberspace Administration of China held discussions with Nvidia over security concerns that the H20 chips may be tracked and turned off remotely, according to a disclosure on its website. The deal, which lifted an export ban on Nvidia’s H20 AI chips and AMD’s MI308, and followed heated negotiations, was widely described as unusual and also still theoretical at this point, with the legal details still being ironed out by the Department of Commerce. Legal experts have questioned whether the eventual deal would constitute an unconstitutional export tax, as the U.S. Constitution prohibits duties on exports. This has come to be known as the “export clause” of the constitution.
Indeed, it’s hard to find much precedent for it anywhere in the history of the U.S. government’s dealings with the corporate sector. Erik Jensen, a law professor at Case Western Reserve University who has studied the history of the export clause, told Fortune he was not aware of anything like this in history. In the 1990s, he added, the Supreme Court struck down two attempted taxes on export clause grounds (cases known as IBM and U.S. Shoe). Jensen said tax practitioners were surprised that the court took up the cases: “if only because most pay no attention to constitutional limitations, and the Court hadn’t heard any export clause cases in about 70 years.” The takeaway was clear, Jensen said: “The export clause matters.”
Columbia University professor Eric Talley agreed with Jensen, telling Fortune that while the federal government has previously applied subsidies to exports, he’s not aware of other historical cases imposing taxes on selected exporters. Talley also cited the export clause as the usual grounds for finding such arrangements unconstitutional.
Rather than downplaying the uniqueness of the arrangement, Treasury Secretary Scott Bessent has been leaning into it. In a Bloomberg television interview, he said: “I think you know, right now, this is unique. But now that we have the model and the beta test, why not expand it? I think we could see it in other industries over time.”
Bessent and the White House insist there are “no national security concerns,” since only less-advanced chips are being sold to China. Instead, officials have touted the deal as a creative solution to balance trade, technology, and national policy.
How rare is this?
The arrangement has drawn sharp reaction from business leaders, legal experts, and trade analysts. Julia Powles, director of UCLA’s Institute for Technology, Law & Policy, told the Los Angeles Times: “It ties the fate of this chip manufacturer in a very particular way to this administration, which is quite rare.” Experts warned that if replicated, this template could pressure other firms—not just tech giants—into similar arrangements with the government. Already, several unprecedented arrangements have been struck between the Trump administration and the corporate sector, ranging from the “golden share” in U.S. Steel negotiated as part of its takeover by Japan’s Nippon Steel to the federal government reportedly discussing buying a stake in chipmaker Intel.
Nvidia and AMD have declined to comment on specifics. When contacted by Fortune for comment, Nvidia reiterated its statement that it follows rules the U.S. government sets for its participation in worldwide markets. “While we haven’t shipped H20 to China for months, we hope export control rules will let America compete in China and worldwide. America cannot repeat 5G and lose telecommunication leadership. America’s AI tech stack can be the world’s standard if we race.”
The White House declined to comment about the potential deal. AMD did not respond to a request for comment.
While Washington has often intervened in business—especially in times of crisis—the mechanism and magnitude of the Nvidia/AMD deal are virtually unprecedented in recent history. The federal government appears to have never previously claimed a percentage of corporate revenue from export sales as a precondition for market access. Instead, previous actions took the form of temporary nationalization, regulatory control, subsidies, or bailouts—often during war or economic emergency. Examples of this include the seizure of coal mines (1946) and steel mills (1952) during labor strikes, as well as the 2008 financial crisis bailouts, where the government took equity stakes in large corporations including two of Detroit’s Big three and most of Wall Street’s key banks. During World War I, the War Industries Board regulated prices, production, and business conduct for the war effort.
Congress has previously created export incentives and tax-deferral strategies (such as the Domestic International Sales Corporation and Foreign Sales Corporation Acts), but these measures incentivized sales rather than directly diverting a fixed share of export revenue to the government. Legal scholars stress that such arrangements were subjected to global trade rules and later modified after international complaints.
Global lack of precedent
The U.S. prohibition on export taxes dates back to the birth of the nation. Case Western’s Jensen has written that some delegates of the Constitutional Convention of 1787, such as New York’s Alexander Hamilton, were in favor of the government being able to tax revenue sources such as imports and exports, but the “staple states” in the southern U.S. were fiercely opposed, given their agricultural bent, especially the importance of cotton at that point.
Still, many other countries currently have export taxes on the books, though they are generally imposed across all exporters, rather than as one-off arrangements that remove barriers to a specific market. And many of the nations with export taxes are developing countries who tax agricultural or resource commodities. In several cases (Uganda, Malaya, Sudan, Nigeria, Haiti, Thailand), export taxes made up 10% to 40% of total government tax revenue in the 1960s and 1970s, according to an IMF staff paper.
Globally, most countries tax profits generated within their borders (“source-based corporate taxes”), but rarely as a direct percentage of export sales as a market access precondition. The standard model is taxation of locally earned profits, regardless of export destination; licensing fees and tariffs may be applied, but not usually as a fixed percent of export revenue as a pre-negotiated entry fee.
Although the Nvidia/AMD deal doesn’t take the usual form of a tax, Case Western’s Jensen added. “I don’t see what else it could be characterized as.” It’s clearly not a “user fee,” which he said is the usual triable issue of law in export clause cases. For instance, if goods or services are being provided by the government in exchange for the charge, such as docking fees at a governmentally operated port, then that charge isn’t a tax or duty and the Export Clause is irrelevant. “I just don’t see how the charges that will be levied in the chip cases could possibly be characterized in that way.”
Players have been known to “game” the different legal treatments of subsidies and taxes, Columbia’s Talley added. He cited the example of a government imposing a uniform, across-the-board tax on all producers, but then providing a subsidy to sellers who sell to domestic markets. “The net effect would be the same as a tax on exports, but indirectly.” He was unaware of this happening in the U.S. but cited several international examples including Argentina, India, and even the EU.
One famous example of a canny international tax strategy was Apple’s domicile in Ireland, along with so many other multinationals keeping their international profits offshore in affiliates in order to avoid paying U.S. tax, which at the time applied to all worldwide income upon repatriation. Talley said much of this went away after the 2018 tax reforms, which moved the U.S. away from a worldwide corporate tax, with some exceptions.
The protection racket comparison
If Trump’s chip export tax is an anomaly in the annals of U.S. international trade, the deal structure has some parallels in another corner of the business world: organized crime, where “protection rackets” have a long history. Businesses bound by such deals must pay a cut of their revenues to a criminal organization (or parallel government), effectively as the cost for being allowed to operate or to avoid harm.
The China chip export tax and the protection rackets extract revenue as a condition for market access, use the threat of exclusion or punishment for non-payment, and both may be justified as “protection” or “guaranteed access,” but are not freely negotiated by the business.
“It certainly has the smell of a governmental shakedown in certain respects,” Columbia’s Talley told Fortune, considering that the “underlying threat was an outright export ban, which makes a 15% surcharge seem palatable by comparison.”
Talley noted some nuances, such as the generally established broad statutory and constitutional support for national-security-based export bans on various goods and services sold to enumerated countries, which have been imposed with legal authority on China, North Korea, Iraq, Russia, Cuba, and others. “From an economic perspective, a ban on an exported good is tantamount to a tax of ‘infinity percent’ on the good,” Talley said, meaning it effectively shuts down the export market for that good. “Viewed in that light, a 15% levy is less (and not more) extreme than a ban.”
Still, there’s the matter, similar to Trump’s tariff regime, of making a legal challenge to an ostensibly blatantly illegal policy actually hold up in court. “A serious question with the chips tax,” Case Western’s Jensen told Fortune, “is who, if anyone, would have standing to challenge the tax?” In other words, it may be unconstitutional, but who’s actually going to compel the federal government to obey the constitution?
Donald Trump’s decision to let Nvidia and AMD export AI processors to China in exchange for a cut of their sales will have repercussions far beyond the U.S.
The semiconductor supply chain is global, involving a wide array of non-U.S. companies, often based in countries that are U.S. allies. Nvidia’s chips may be designed and sold by a U.S. company, but they’re manufactured by Taiwan’s TSMC, using chipmaking tools from companies like ASML, which is based in the Netherlands, and Japan’s Tokyo Election, and using components from suppliers like South Korea’s SK Hynix.
The U.S. leaned on these global companies for years to try to limit their engagement with China; these efforts picked up after the passage of the CHIPS Act and the expansion of U.S. chip-export controls in 2022. Washington has also pressured major transshipment hubs, like Singapore and the United Arab Emirates, to more closely monitor chip shipments to ensure that controlled chips don’t make their way to China in violation of U.S. law.
Within the U.S., discussion of Trump’s Nvidia deal has focused on what it means for China’s government’s and Chinese companies’ ability to get their hands on cutting-edge U.S. technology. But several other countries and companies are likely studying the deal closely to see if they might get an opening to sell to China as well.
Trump’s Nvidia deal “tells you that [U.S.] national security is not really the issue, or has never been the issue” with export controls, says Mario Morales, who leads market research firm IDC’s work on semiconductors. Companies and countries will “probably have to revisit what their strategy has been, and in some cases, they’re going to break away from the U.S. administration’s policies.”
“If Nvidia and AMD are given special treatment because they’ve ‘paid to play’, why shouldn’t other companies be doing the same?” he adds.
Getting allies on their side
The Biden administration spent a lot of diplomatic energy to get its allies to agree to limit their semiconductor exports to China. First, Washington said that manufacturers like TSMC and Intel that wanted to tap billions in subsidies could not expand advanced chip production in China. Then, the U.S. pushed for its allies to impose their own sanctions on exports to China.
“Export controls and other sanctions efforts are necessarily multilateral, yet are fraught with collective action problems,” says Jennifer Lind, an associate professor at Dartmouth College and international relations expert. “Other countries are often deeply unenthusiastic about telling their firms—which are positioned to bring in a lot of revenue, which they use for future innovation—that they cannot export to Country X or Country Y.”
This translates to “refusing to participate in export controls or to devoting little or no effort to ensuring that their firms are adhering to the controls,” she says.
Paul Triolo, a partner at the DGA-Albright Stonebridge Group, points out that “Japanese and Dutch officials during the Biden administration resisted any serious alignment with U.S. controls,” and suggests that U.S allies “will be glad to see a major stepping back from controls.”
Ongoing trade negotiations between the U.S. and its trading partners could weaken export controls further.
Chinese officials may demand a rollback of chip sanctions as part of a grand bargain between Washington and Beijing, similar to how the U.S. agreed to grant export licenses to Nvidia and AMD in exchange for China loosening its controls on rare earth magnets.
Japan and South Korea may also bring up the chip controls as part of their own trade negotiations with Trump.
‘Expect continuing diversions’
A separate issue are controls over the transfer of Nvidia GPUs. The U.S. has leaned on governments like Singapore, Malaysia and the United Arab Emirates to prevent advanced Nvidia processors from making their way to China.
Scrutiny picked up in the wake of DeepSeek’s surprise AI release earlier this year, amid allegations that the Hangzhou-based startup had trained its powerful models on Nvidia processors that were subject to export controls. (The startup claims that it acquired its processors before export controls came into effect).
As of now, the two chips allowed to be sold in China–Nvidia’s H20 and AMD’s MI308–are not the most powerful AI chips on the market. The leading-edge processors, like Nvidia’s Blackwell chip, cannot be sold to China.
That means chip smuggling will continue to be a concern for the U.S. government. Yet “enforcement will be spotty,” Triolo says. “The Commerce Department lacks resources to track GPUs globally, hence expect continuing diversions of limited amounts of GPUs to China via Thailand, Malaysia, and other jurisdictions.”
Triolo is, instead, focused on another loophole in the export control regime: Chinese firms accessing AI chips based in overseas data centers. “There is no sign that the Trump Commerce Department is gearing up to try and close this gaping loophole in U.S. efforts to limit Chinese access to advanced compute,” he says.
How much will the global supply chain change?
Not all analysts think we’ll see a complete unraveling of the export control regime.
“The controls involve a complex multinational coalition that all parties will be hesitant to disrupt, given how uncertain the results will be,” says Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology. He adds that many of these chipmakers and suppliers don’t have the same political heft as Nvidia, the world’s most valuable company.
Yet while these companies may not be as politically savvy as Nvidia, they’re just as important. TSMC, for example, is the only company that can manufacture the newest generation of advanced chips; ASML is the only supplier of the extreme ultraviolet lithography machines used to make the smallest semiconductors.
“I don’t believe it’s leverage that the Trump administration will easily give away,” says Ray Wang, a semiconductor researcher at the Futurum Group.