Has American Soft Power Peaked?
Tying together DeepSeek open source week, the Oval Office meltdown, and TSMC’s new investment
Three seemingly unrelated recent events might have marked the peak of American soft power: DeepSeek’s open source week, the Oval Office meltdown between Presidents Trump and Zelensky, and TSMC’s $100 billion additional investment commitment to the US of A.
How so?
Let’s start with the most recent one: TSMC.
From TSMC to ASMC
It is no longer a facetious joke to suggest that the Taiwan Semiconductor Manufacturing Company (TSMC) will look more like the America Semiconductor Manufacturing Company (ASMC). While TSMC’s new $100 billion commitment (raising its total to $165 billion) is eye-catching, the manner in which it came about over the last five years is what may mark the peak of American soft power.
The “soft power” or “carrot” way would be willingly or positively incentivized to build in the US for economic and commercial motivations. Instead, TSMC is being threatened to relocate its most advanced technology to the US to avoid punishments – high tariffs on chips and the prospect of no US defense if a war breaks out between China and Taiwan. This “hard power” or “stick” approach is not new to Trump’s second term. TSMC’s original commitment to building in Arizona came during the waning days of Trump's first term. The Biden administration continued that policy, but included some “carrot” to the equation in the form of various subsidies and incentives appropriated via the CHIPS Act. However, the overtone of TSMC’s investment during the Biden era was still more punitive than pure incentives – yes, Uncle Sam will give you some money and tax breaks, but if you don’t build here, things will get worse. Of course, Trump 2.0 threw even those few carrots out of the window and went the full “my way or the highway” way. Neither Trump nor his Commerce Secretary, Howard Lutnick, was shy about communicating that message to TSMC—and to the world—on camera.
TSMC’s journey in America dates back decades and was not always a victim of hard power flexing. It built its first American fab in Camas, Washington in 1995. Its founder and then-CEO, Morris Chang, acted on his dream to expand into America, which was where he spent most of his adult life and professional career at that point. Being able to plant a flag in America and serve its customers more locally was attractive. Part of the allure was also from America’s soft power at a time when that power was in its ascendency.
However, the expansion ran into a myriad of cost problems, people problems, and cultural problems, rendering the project a disaster. It is a disaster that Chang readily admitted during his speech at the TSMC’s Arizona fab “tool-in” ceremony two years ago, where he also proclaimed that “globalization is dead”. Biden was in the audience.
Many of the problems that TSMC encountered in Camas almost thirty years ago still exist today. What no longer exists is a multinational company’s freedom to build wherever it makes the most sense economically, without consideration for geopolitics. Instead of letting economics and soft power dictate where a factory ought to be built, these decisions are being made with a proverbial tariff gun pointed at the executive's head.
If what happened in the Roosevelt Room with TSMC was a civil version of American soft power peaking, what happened in the Oval Office with Ukraine President Volodymyr Zelenskyy was anything but civil.
Oval Office Meltdown with Ukraine
By now, I’m sure most people who track the news have seen the on-camera meltdown between Trump and Zelenskyy last Friday. I don’t know enough about Ukraine, Russia, NATO or other issues related to the ongoing war in Europe to speculate on whether this meltdown will prolong the war or is a peace agreement still intact.
My wheelhouse is in tech, business, and US-Asia relations. However, before those subjects became part of my expertise, I was a young staffer working in the White House Press Office when Obama was president. Part of my albeit narrow expertise back then was orchestrating one of these Oval Office media pool sprays (that’s the lingo) when a foreign leader visits the White House. During my time there, I was part of at least five or six of these visits. Here’s a picture of the one with King Abdullah II of Jordan.
These Oval Office media pool sprays are a somewhat routine element of what my colleagues and I did, though they were always a bit chaotic. The Oval Office is small. When you have a throng of media members from both the US and the visiting country’s press corp with their cameras, boom mics, and other equipment shoved into a tight horseshoe shape in front of the two leaders, things always get chaotic and physical. And when the two leaders stop talking, no one wants to leave, everyone is shouting questions, and myself and other staffers have to respectfully but forcefully escort everyone out of the Oval Office.
Thinking back, the only thing that kept every one of these media pool sprays from going haywire, like what happened last Friday, was the aura of the Oval Office. A baseline decorum of human behavior was always maintained simply because this was the Oval Office – a symbol of American power that is not backed up by tanks and missiles, but openness, civility, and a benign sensitivity that just because you are weaker (let's be honest, most visiting countries are objectively weaker) don’t mean you will get bullied.
In other words: soft power. The Trump-Zelenskyy meltdown shattered that aura of the Oval Office.
DeepSeek Open Source Week
While these events were unfolding, DeepSeek, everyone’s favorite new AI startup to either celebrate or dunk on, was doing its best to maximize its own soft power with “open source week” – a made-up event where the AI lab open sources something each day for a week.
Open source is the equivalent of soft power in tech, like how movies and food is often the source of soft power in foreign relations. Having the confidence, generosity, and self-assuredness to share technology for free and show people how to build their own version of it may seem like a dumb business decision, but it is a brilliant way to accrue mindshare, build a lasting brand, increase your install base, and, frankly, just do something good for the world.
DeepSeek’s open source week may be a made-up event, but the content of the technology being open sourced was anything but that. From its parallel training pipeline to its library that enables more efficient Mixture-of-Expert training and inference in floating point 8 (FP8) format, DeepSeek open sourced many of the software-to-hardware optimization technologies that has been one of its three main idiosyncratic advantages. I won’t dive into the technical details of open source week’s projects in this post, but the headline takeaway is: DeepSeek open sourced the good stuff and did not hold much back.
Adding insult to injury (if you are on Team America) is OpenAI’s GPT 4.5 model release – its best one yet – that has an exorbitant price tag of $150 USD per 1 million output tokens. During open source week, DeepSeek announced a price discount that pegs its V3 model at $0.55 per 1 million output token during off peak hours. (GPT 4.5 is not a reasoning model, thus it should be compared to V3 not R1.)
GPT 4.5 may be the beginning of bigger and better things to come for OpenAI and propel it to reach AGI before anyone else. Until that is demonstrably true, however, the trend of global AI competition is DeepSeek becoming more affordable and more open, while OpenAI is becoming more expensive and more closed.
A closed, state-of-the-art AI model may still be the winner in benchmarks. But an open, state-of-the-art AI model accrues soft power and wins the mindshare of talent everywhere over time – a long-term advantage that cannot be underestimated. That advantage is currently and decidedly tilting towards DeepSeek.
Peaking is Not Losing (Yet)
Putting these three disparate events together suggests to me that America’s soft power is at its peak and waning, not just in the realm of diplomacy and foreign policy, but also in technology.
However, that does not mean America is losing. Hard power – military might, advanced weapons, and, yes, tariffs, which Warren Buffett calls “an act of war” – is a perfectly legitimate, if not more dangerous and damaging, power to wield to get what you want. You and I may not like it. But the current White House clearly likes it.
Ditching soft power for hard power is also being rewarded so far. Mr. Market rewarded TSMC with a 4+% bump the day after it announced its $100 billion investment under duress at the White House, not to mention a State of the Union address shoutout from the president himself. OpenAI will likely get an eye-popping $340 billion valuation after its next fundraise, while its similarly closed source competitor, Anthropic, has secured a $61.5 billion valuation in its latest round. Their models will be adopted in all countries who don’t dare misalign with America, even though the programmers in those countries might prefer the cheaper and more open alternative. And Zelenskyy may be back in the Oval Office again soon to “make things right” after last week’s meltdown to end the war more on America’s (and Russia’s) terms.
If you are on the side of hard power, things are working out just fine, at least for now. It may very well continue to work in the next four months or the next four years. But soft power tends to be the more peaceful, respected, enduring, and sustainable power that lasts decades. It is also hard to build and easy to destroy, as we are witnessing right now.
If I’m right that America’s soft power has peaked (and I really don’t want to be right on this one), then would any new progress that we see in America simply be a function of hard power’s transactional short-term nature, as the civilization heads toward long-term decline?
p.s. Just because America may leave a soft power vacuum globally doesn't mean that vacuum will be automatically filled by another power, namely China. Soft power is organically earned, not tactically filled. Another topic for another day.
To me, I feel like Trump is cashing out American’s soft power, like maxing out the credit of a credit card called Soft Power, which takes centuries to build American’s credit among international communities and allies, even among enemies and opponents.
It's going to take a lot of time to come back from Trump's foreign relations. It represents a period of incredible opportunity for China.