Let’s Foster, Not Stifle, Innovation

As political leaders work to remake the global trade framework, they shouldn’t neglect one of the … More most powerful drivers of economic growth: innovation.

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In my last column, I talked about how innovation from the fintech sector has helped companies in financial services and other industries, and how companies can apply lessons from fintech to accelerate their own technology development efforts. Since then, markets have been upended by the announcement of a set of historic new tariffs that is creating an unprecedented modern world saga. Although most of those tariffs are now “on pause,” and may even be successfully negotiated, it appears that the world is moving away from the globalization model that has dominated international relations for the past 20+ years.

I have no doubt that successful companies and smart business professionals around the globe will continue revolutionizing the world with new products and discoveries—regardless of what the future economic order looks like. But given the importance of innovation as a source of growth in today’s economy, political leaders setting new rules for trade should consider how policies will impact innovation. At the very least, they should ensure new rules don’t stifle corporate research and development investments. In a best-case scenario, political decision-makers should make it a point to include policies that encourage innovation at a global level. Whether this is via government co-investment, tax or trade policy, or downright innovation sharing (public domain), it is critical that innovation is encouraged at the highest level.

Innovation Helps Drive Growth

Over the past decade, innovation has been a major driver of both economic growth and financial market performance. For proof, just look at the so-called Magnificent Seven, which make up nearly one-third of S&P 500 valuation. Even though those stocks have been beaten up over the past several months, these leaders in artificial intelligence, electric vehicles, e-commerce, communications and other innovative technologies still drive global stock markets.

Globalization has helped fuel the innovation that has driven the Mag 7 and other tech companies to current valuations. Access to global markets allows companies to invest heavily in R&D, confident that they will be able to attract the capital needed to support these efforts, and that demand for products from companies and consumers around the world will make these investments worthwhile. Prior to the start of the current trade war, these factors were helping encourage companies around the world to spend more on innovation. For example, in 2024, financial service companies participating in Broadridge’s Digital Transformation & Next-Gen Technology Study were devoting 22% of their tech budgets to innovation. In 2025, that share jumped to 29%.

The DeepSeek Example

Globalization has also ensured that even the biggest and most innovative companies will face fierce competition, leading to better products and prices for consumers. Consider the DeepSeek example. In January 2025, Chinese technology company DeepSeek announced that it had produced an artificial intelligence model that matched the performance of existing models at a fraction of the cost. That announcement roiled global markets. Concerned that DeepSeek’s accomplishment would lessen demand for premium AI chips, investors bailed on Nvidia stock, wiping out $600 billion in market valuation in a single day and dragging down much of the U.S. tech sector with it.

But then an important thing happened: Valuations started to recover. Nvidia stock bounced back 9% the day after the announcement. Within the next month, the overall tech sector recovered most of the value lost on the day of the announcement, and the U.S. stock market as a whole set a new high in February.

Why did Nvidia and the tech sector recover? Well, first, there was some speculation that DeepSeek might have exaggerated its cost savings. But more broadly, investors came to the conclusion that, over the long term, this innovation from an upstart Chinese competitor would be good for artificial intelligence development, good for the global tech sector, and possibly even good for Nvidia. By lowering costs and increasing access to AI, the DeepSeek advance could increase demand for the technology, propelling the industry and markets to greater heights.

That’s the power of innovation at a global level.

The Spirit of Innovation

Generally, software and services are not subject to tariffs. However, I am concerned that uncertainty about global trade and economic direction could make companies pull back from innovation. As the global economy slows, companies will have less free cash to invest in R&D, and more reason to hold onto their capital instead of investing it. Over a longer term, if fragmented markets reduce global demand, the potential returns on new-product development could decline, making companies less enthusiastic about investing in innovation on a more secular basis.

Overall, I am confident that the spirit of innovation will prevail. Companies and individuals will continue pushing the frontiers of technology as they always have, regardless of global trade policy—and artificial intelligence is already accelerating the pace of discovery. But policymakers do have influence. They must encourage innovation, protect IP and ensure the “Tariff Age” does not stifle human advancement via muted technical innovation. Decisions about how best to address important national security and economic concerns will have an impact on how much companies spend on R&D and how hard or easy it is for companies to collaborate and compete in emerging technologies. So, when political leaders sit down at the negotiating table, let’s hope they keep innovation in mind.

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