Welcome back to Foreign Policy’s Situation Report, where our team has spent the last week taking turns falling sick. But don’t worry, we rallied so that we could bring you this week’s edition.
All right, here’s what’s on tap for the day: A Chinese AI conundrum in Washington, another potential Hormuz reopening, and the cost of Trump’s new battleships.
Here we go again.
No, we’re not talking about the latest U.S. attempt to reach a deal with Iran (though there’s more on that below). Instead, we’re talking about Washington’s latest freakout over China’s artificial intelligence capabilities.
Many people (us included) have spent years asking the question of which of the world’s two biggest economies is winning the AI race. The latest round of soul-searching has been sparked by a model named Kimi that was created by Chinese company Moonshot AI. The chatbot’s latest version, which released in July, showed capabilities that potentially rival the top U.S. models.
The prevailing wisdom indicates a U.S. lead at the cutting edge through Silicon Valley giants such as OpenAI and Anthropic. But China’s bigger innovation may be in how Kimi, DeepSeek, and its other models are taking over the market. Most top Chinese models are open-weight, meaning that anyone can download their building blocks of data and code to create bespoke versions of the model at a much lower cost. As Rishi wrote soon after Kimi’s new model launched, it’s a form of Chinese AI-maxxing that gives countries around the world an easier entry point into an AI ecosystem than the far more expensive (and increasingly unreliable) tech stack that Washington is exporting.
The choices that countries in Africa are making, for example, are particularly instructive. According to a new report in the New York Times, developers across Kenya, Uganda, Ghana, and Nigeria are increasingly opting for Chinese AI models over U.S. ones to build everything from business and legal tools to education applications.
Even U.S. startups are largely hooked on Chinese open-weight models, which resulted in a rather quick end to the Trump administration’s debate over whether they should be banned. Trump is reportedly set to exclude open models from an upcoming AI governance framework that could subject U.S. models to government review—exempting the kinds of models that China dominates and making U.S. restrictions against them less likely. Meanwhile, the administration appears to be tinkering around the edges, with an import ban last week on new Chinese humanoid robots and a possible ban on the use of some Chinese components in U.S. data centers.
Those are among a flurry of anti-China moves from U.S. regulators in recent days, and Beijing has retaliated with its own set of export restrictions on technologies such as drones—potentially making Chinese President Xi Jinping’s anticipated September trip to meet with U.S. President Donald Trump more awkward than Trump’s Beijing trip earlier this year.
But when it comes to AI, China may be playing a different game altogether.
Table stakes. In a must-read FP essay titled “America’s Cosmic Bet on AI,” Harvard University scholar Graham Allison examines the trillions of dollars that the United States has poured into maintaining its AI lead with more advanced chips, more capable models, and acres of new (and not always popular) data centers.
China, meanwhile, is simply doing more with less—though U.S. officials and executives have accused it of stealing their technology—and proliferating good-enough models at a miniscule fraction of the cost.
“The fact that the United States’ only credible competitor in AI—China—is taking such a strikingly different path should make Americans pause and think,” Allison wrote. “China’s strategy for becoming the world leader in AI reflects its basic strategy for achieving dominance in the production of everything. In essence, as we have seen in its domination of solar panels, fast trains, 5G, consumer electronics, and now increasingly electric cars, China begins by offering a product almost as good as the alternative but at a far more affordable price.”
His chosen analogy is one that will be familiar to anyone who uses a smartphone (so, almost everyone): The closed ecosystem that Apple offers in its iPhones vs. Google’s more open and replicable Android operating system. While both of those are U.S.-made, the results speak for themselves—Android is used in 70 percent of smartphones in the world and offers twice as many apps as Apple’s iOS.
Even without worrying about the rest of the world, the disproportionate role that investment in AI is playing in the overall U.S. economy right now prompts Allison to warn (as many have) of a bubble whose bursting would have catastrophic consequences for the global economy and U.S. national security.
The U.S. Centers for Disease Control and Prevention will finally have a Senate-confirmed director for the first time in nearly a year after the Senate on Wednesday confirmed Trump’s nominee for the role, Dr. Erica Schwartz, in a 51-44 vote.
On Tuesday, the Senate Judiciary Committee voted to advance Trump’s nominee for attorney general, Todd Blanche, after he formally pledged to scrap the administration’s controversial anti-weaponization fund. Blanche has been serving as acting attorney general since April, but his confirmation remains far from a sure thing given the pushback surrounding his nomination and the GOP’s razor-thin majority in the Senate. A vote in the full Senate could occur as soon as this week.
It’s also been another tricky week for the FBI that Blanche’s Justice Department oversees, with FBI director Kash Patel telling Reuters that the agency has started conducting joint operations with U.S. adversaries Russia and China. Separately, an FBI agent stands accused of stealing nearly $1 million in cryptocurrency from accounts that the agency was monitoring.
What should be high on your radar, if it isn’t already.
Hamas disarmament. Just days after Trump lauded a “historic” agreement for Hamas to disarm, Israel rejected the proposed framework this week. John broke down why Israel is against the U.S.-backed plan in his latest piece.
Once MOUre. Iran and Oman are close to agreeing a deal for commercial ships to transit through the Strait of Hormuz that separates both their coastlines—nearly two months after a memorandum of understanding between the United States and Iran pledged to open the crucial waterway. Under the reported terms of the deal—which Iran said the United States is not a part of—Iran would control the passageway to enter the Persian Gulf through the strait, while Oman would control the exit.
Trump, meanwhile, took to Truth Social to downplay reports that the U.S. military has depleted nearly all of its long-range missiles in the Iran war. “The U.S. has massive amounts of ‘munitions,’ especially of certain types,” he said, without sharing specifics. He went on to threaten “long term jail sentences” for those who leaked news of low stockpiles.
Air defense gap. Facing an intensifying Russian air campaign, Ukraine struck two oil refineries located hundreds of miles within Russian territory, Ukrainian President Volodymyr Zelensky posted on X on Thursday. The Ukrainian strikes come after Russian forces fired a barrage of missiles and drones at Kyiv on Wednesday, in a deadly attack that killed at least 17 people and wounded more than 40.
The onslaught of Russian attacks has spotlighted Kyiv’s urgent calls for more air defenses from its partners. For months, Zelensky has pleaded for more U.S. Patriot air defense missiles, which can intercept Russian ballistic missiles and which Washington has stopped donating to the country, as FP’s Alexandra Sharp has written. Making the situation even murkier, Trump recently pledged to share the technology underpinning the powerful missile system with Kyiv before swiftly backtracking on the promise.
Zelensky, for his part, has continued to sound the alarm. “Ballistic missile interceptors could have saved the lives of those killed today,” he posted on X on Wednesday. “It is very important that our partners understand that delays in supplying them, or an unwillingness to provide anti-ballistic systems, lead directly to such horrific casualties and destruction.” —FP’s Christina Lu
Members of Spain’s Civil Guard (USECIC) monitor migrants on Tarajal beach in Ceuta, Spain, on July 31. Adri Salido/Getty Images
Monday, Aug. 10: Legislative assembly elections in Pakistan-administered Kashmir are set to conclude.
Thursday, Aug. 13: Zambia holds a general election.
$275 billion—the total expected cost of the U.S. Navy’s new “Trump-class” battleship fleet, according to a report by the Congressional Budget Office.
“I’m glad he thinks I’m a lovely gentleman. A lot of people think so.”
—Abdul El-Sayed, a progressive candidate who won the Democratic nomination for Michigan’s Senate race, responding to Trump’s sarcastic use of that term to describe him in a speech on Wednesday.
What do actor John Cusack, NFL legend Brett Favre, and former U.S. Rep. Marjorie Taylor Greene have in common? For the right price, you can have them record a custom video greeting for yourself or your friends. Greene—one of Trump’s previously staunch supporters who very publicly broke with him over the Epstein files and the Iran war—recently joined Cameo, a service that allows users to pay for personalized video messages from celebrities.
