Trump's AI Agenda: Removing Regulatory Barriers in the AI Race with China

firstcounsel.ai
May 29, 2025
10 min read

House Passes 10-Year Moratorium on State AI Regulation as Administration Prioritizes Competition with China over Safety

Donald Trump's "One Big Beautiful Bill" includes a sweeping 10-year ban on all state-level AI regulation.

United States · Los Angeles · May 28, 2025

In the most significant federal action on AI policy in decades, the House of Representatives narrowly passed President Trump's "One Big Beautiful Bill" on May 22, 2025, which includes a sweeping 10-year ban on all state-level AI regulation.

The 1,116-page budget reconciliation package, passed by just one vote (215-214), contains a provision that would prohibit states from enforcing "any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems" for a decade. This federal preemption would nullify existing state AI laws in Colorado, California, New York, Illinois, and Utah, while blocking enforcement of over 1,000 pending AI bills across state legislatures.

The move represents the culmination of the Trump administration's deregulatory approach to AI, which began with Executive Order 14179 on January 23, 2025, aimed at "Removing Barriers to American Leadership in Artificial Intelligence" in the competitive race with China. The federal legislation follows a pattern of state-level defeats for AI regulation advocates, exemplified by Virginia Governor Glenn Youngkin's veto of an AI discrimination bill on March 24, 2025, following intense lobbying by tech companies and venture capitalists who warned such regulations would stifle American innovation and competitiveness.

The Trump AI Strategy: Deregulation and Global Dominance

President Donald Trump has made American leadership in AI a cornerstone of his administration's technology policy, framing AI development as a critical matter of national competitiveness and economic strength. On January 23, 2025, Trump signed Executive Order 14179, "Removing Barriers to American Leadership in Artificial Intelligence," which explicitly revoked President Biden's previous AI executive order and signaled a dramatic shift in federal AI policy.

"With the right Government policies, we can solidify our position as the global leader in AI and secure a brighter future for all Americans," states the executive order, which directs federal agencies to identify and remove regulatory barriers to AI innovation and development. The order emphasizes that AI systems must be "free from ideological bias or engineered social agendas" and positions deregulation as essential to maintaining American technological supremacy.

This executive action was part of a broader strategy that began on Trump's first day in office, when he rescinded President Biden's "Executive Order on the Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence" — which had established a comprehensive framework for responsible AI development across federal agencies.

The China Competition Factor

The Trump administration has explicitly framed its AI strategy as a response to the competitive threat posed by China. In January 2025, the White House announced "Stargate," a partnership planning to invest $500 billion in AI infrastructure in the United States. According to President Trump, the goal is to "keep [AI technology development] in this country" amid intensifying competition from China.

The emergence of Chinese AI applications like DeepSeek has further accelerated this sense of urgency. The Chinese app's breakthrough prompted criticism from the Trump administration, with Victoria LaCivita, a spokeswoman for the White House Office of Science and Technology Policy, stating that the previous administration had "failed to limit access to American technology and created an opportunity for China and other foreign adversaries in AI development."

The House Select Committee on the Chinese Communist Party has called for stronger export controls on technologies underpinning Chinese AI development, stating: "The U.S. cannot allow CCP models such as DeepSeek to risk our national security and leverage our technology to advance their AI ambitions."

State-Level Impact: Virginia's Vetoed AI Bill

Virginia's now-vetoed bill would have required companies developing and deploying high-risk AI systems to implement measures protecting consumers from algorithmic discrimination. The legislation defined "consequential decisions" as those affecting critical areas of citizens' lives, including parole and incarceration, education enrollment, employment, financial services, healthcare, housing, and insurance.

In his veto statement on March 24, 2025, Governor Youngkin argued that the bill would create a "burdensome artificial intelligence regulatory framework" that would stifle innovation and economic growth. He emphasized that such regulations "would harm the creation of new jobs, the attraction of new business investment, and the availability of innovative technology in the Commonwealth of Virginia."

This rationale closely mirrors the Trump administration's objections to restrictive AI regulations. The veto followed an intense lobbying campaign by tech companies, venture capital firms, and industry associations. The Chamber of Progress, a tech industry coalition, claimed that compliance with HB 2094 could cost Virginia's AI stakeholders nearly $290 million, with the founder and CEO Adam Kovacevich warning that the bill risked turning Virginia "from an AI hub into a ghost town." Industry analysts estimated the legislation would saddle AI developers with approximately $30 million in compliance costs, particularly impacting startups and smaller tech firms.

The R Street Institute, a think tank, characterized the bill as a "heavy-handed effort to regulate artificial intelligence systems" that was "burdensome and unnecessary," explicitly linking its opposition to the Trump administration's vision for AI policy. In their letter to Governor Youngkin, they noted that the bill's approach ran counter to the new vision set forth by the Trump administration to ensure American competitiveness against China.

According to the Transparency Coalition, Youngkin's veto came "amidst a massive push by corporate tech and Silicon Valley-based venture capital firms to stop the creation of any safeguards around AI," with the election of President Trump and the increased influence of tech companies in his administration resulting in "an escalation of tech lobby money and demands at the state level." Venture capital firm Andreessen Horowitz (A16Z), with $45 billion under management, was specifically cited as "an especially aggressive lobbying force" in these efforts.

The U.S. Chamber of Commerce explicitly urged Governor Youngkin to veto the bill, warning it would "have an outsized negative impact on small businesses" and potentially transform Virginia "from an AI hub into a ghost town."

The Shifting State AI Regulatory Landscape

Virginia's bill was part of a broader state-level push to establish AI guardrails in the absence of federal legislation. However, all of these state-level efforts now face potential nullification if Trump's "One Big Beautiful Bill" passes the Senate, as the federal moratorium would pre-empt existing state laws and prevent enforcement of new ones for a decade.

Currently, the AI regulatory landscape across states includes:

Colorado: Passed the nation's first comprehensive AI law in 2024 with Senate Bill 205 (the Colorado AI Act), focused on preventing algorithmic discrimination in high-stakes decisions. This law would be nullified under the federal moratorium.
California: The California Privacy Protection Agency (CPPA) is pursuing regulations on Automated Decision-Making Technology (ADMT) through its rulemaking authority. In September 2024, Governor Gavin Newsom vetoed Senate Bill 1047, an AI safety bill that would have required safety testing of certain high-risk AI models. California's existing AI regulations would be unenforceable under the federal ban.
Connecticut: Senate Bill 2 (An Act Concerning the Regulation of Certain Artificial Intelligence Systems) is considered a priority for the state's Democratic legislators in 2025. If passed, this law could not be enforced under the federal moratorium.

Other states with pending AI legislation include Massachusetts, New York, and Illinois. However, the prospect of federal pre-emption may influence whether these states continue pursuing their own AI legislation, particularly as Republican-led states increasingly align with the Trump administration's deregulatory approach while the federal moratorium would render any such efforts moot regardless of political alignment.

The Innovation vs. Regulation Dilemma

The Virginia veto highlights the fundamental tension in AI governance that mirrors the federal approach under the Trump administration:

Potential Risks of Inadequate Regulation:

Algorithmic discrimination in critical areas like housing, employment, and healthcare
Lack of transparency in how AI makes consequential decisions affecting citizens
Disparate impacts on vulnerable populations

Concerns About Excessive Regulation:

Hampering U.S. competitiveness in the global AI race, particularly against China
Creating compliance burdens that disproportionately affect startups and smaller companies
Establishing a patchwork of state regulations that creates confusion and compliance challenges

Federal Approach to AI Under Trump

The Trump administration has taken several distinct actions that form its AI policy framework:

Regulatory Rollback: The immediate rescission of Biden's Executive Order 14110 on AI safety and the issuance of a new order focused on removing regulatory barriers.
Investment Strategy: The "Stargate" initiative, a $500 billion investment plan for AI infrastructure in the United States to compete with China.
Export Controls: Maintaining restrictions on sending advanced AI chips to China while developing a new bilateral approach to AI chip exports that could make advanced AI technology a bargaining chip in international trade negotiations.
Education Focus: A recent executive order directing the Secretary of Labor to leverage authorities and financial incentives to increase participation in AI-related apprenticeships and directing the Department of Education to prioritize AI in teacher training programs.
Proposed Federal Preemption: Most significantly, the Trump administration has proposed sweeping federal legislation that would ban all state-level AI regulation for a decade.

Trump's "One Big Beautiful Bill": Federal Preemption of State AI Laws

On May 22, 2025, the House of Representatives narrowly passed Trump's comprehensive budget reconciliation package, officially titled the "One Big Beautiful Bill Act" (H.R. 1), by a vote of 215 to 214. Buried within the 1,116-page legislation is Section 43201(c), which establishes a sweeping 10-year federal moratorium on state AI regulation.

The provision states that "no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act." The only exceptions allow for state-level rules that "remove legal impediments" to operating AI systems and streamline their adoption.

If enacted, this moratorium would effectively nullify existing state AI laws in Colorado, California, New York, Illinois, and Utah, as well as prevent enforcement of more than 1,000 pending AI bills across state legislatures. This would include Virginia's vetoed bill and similar comprehensive AI legislation pending in Connecticut, Massachusetts, and other states.

Timeline and Senate Prospects: The bill now moves to the Senate, where Republicans hold a narrow majority. Treasury Secretary Scott Bessent has urged lawmakers to pass the bill before July 4, 2025, to avoid a potential debt default, as the legislation also includes a $4 trillion increase in the debt ceiling. However, the bill faces potential challenges under the Byrd Rule, which requires budget reconciliation measures to have a direct budgetary impact rather than being primarily regulatory.

Several Republican senators have already expressed concerns about the AI provision. Senator Marsha Blackburn (R-Tennessee) stated that "until we pass something that is federally preemptive, we can't call for a moratorium," citing Tennessee's ELVIS Act protecting artists from AI-generated deepfakes. Senate Majority Leader John Thune indicated that the bill would likely see minimal changes in the Senate to preserve the "delicate balance" achieved in the House.

Opposition and Support: The AI provision has generated significant opposition, with more than 140 organizations writing to congressional leadership urging reconsideration of the measure. Forty state attorneys general, including both Democrats and Republicans, have expressed concerns about the federal overreach. Critics argue that the moratorium would leave consumers vulnerable to AI-related harms without any federal protections in place.

Supporters, including the U.S. Chamber of Commerce and tech industry groups, argue that the provision would prevent a confusing patchwork of state laws and provide Congress time to craft comprehensive federal AI legislation while preserving American technological leadership against China.

The Path Forward

As the AI regulatory landscape continues to evolve under the Trump administration, businesses developing or deploying AI systems will need to carefully monitor developments at both state and federal levels. The signal from Virginia's veto is clear: Republican-led states are increasingly likely to align with the federal approach of prioritizing innovation and competitiveness over regulatory frameworks focused on preventing discrimination and ensuring safety.

Industry experts note that this could lead to increased regulatory fragmentation, with Democratic-led states implementing their own rules while Republican states follow the federal lead in minimizing regulation. This patchwork approach may create additional compliance challenges for companies operating across multiple jurisdictions.

The Trump administration's AI agenda represents a decisive break from previous approaches, emphasizing American technological leadership and the competitive race with China while deprioritizing concerns about algorithmic bias and discrimination. As demonstrated by Virginia's veto, this federal approach is already having significant influence on state-level AI governance, with potentially far-reaching implications for how AI will be developed and deployed across the United States in the coming years.