Global Cities Seize the 90-Day Tech Opportunity

Xiuli Chen

— 11 min read

In the midst of a 90-day pause in the US–China tariff war, city leaders worldwide have a unique window to bolster their leadership in artificial intelligence (AI) and emerging technologies. Rather than wait on uncertain trade negotiations, proactive cities are moving to develop forward-thinking policies that attract talent, nurture startups, and future-proof their economies. This brief examines how a short trade truce can become a springboard for long-term tech competitiveness – highlighting examples from the U.S., China, South Korea, the Middle East, and beyond.

The 90-Day Truce: An Opening for Innovation Policy

The current trade war “pause” is about much more than tariffs on steel or soybeans. At its core, the U.S.–China trade conflict is a battle over who will lead global innovation in the 21st century. As Wharton’s Geoffrey Garrett noted during the first skirmishes, “Think less steel… and more electric vehicles, self-driving cars, and artificial intelligence.”However, In other words, technology and AI supremacy are the real prizes, and trade tensions have only heightened the urgency for nations – and cities – to out-innovate their rivals.

A 90-day tariff truce offers only a brief respite for businesses. However, those three months are enough time for policy-makers to launch bold initiatives. Industrial transformation may take years, yet drafting smart regulations or incentive packages can happen on a fast track. Perhaps we will look back on this moment and thank the pause for giving governments a chance to refocus on innovation, as one analyst quipped. The challenge is clear: cities that act swiftly on innovation policy now will be better positioned once global trade frictions resume.

Why focus on cities? Modernizing an innovation ecosystem “is the work of many hands – federal, state, and local”. Cities and regional governments often move faster and tailor solutions better than national bureaucracies. Local leaders can rally stakeholders, pilot new ideas, and create innovation-friendly environments virtually overnight compared to national efforts. Regional innovation policies become a crucial buffer during global disruptions. During global disruptions, local innovation policies become an essential regional buffer, helping regions adapt and thrive despite external shocks. As trade frictions rise, many areas deploy “proactive local policies… to diversify markets, strengthen logistics, and enhance long-term economic resilience.”

Case Study: Texas Fast-Tracks SpaceX with Policy Ingenuity

One vivid example of agile policy is Texas’s success in attracting SpaceX (Elon Musk’s Space Exploration Technologies) to build a major facility. In the early 2010s, Musk was scouting locations for the world’s first commercial rocket launchpad. Texas officials seized the moment: they offered about $20 million in incentives and even changed state laws to accommodate SpaceX’s needs. This included permitting the closure of a public beach during rocket launches and legal protections against noise complaints – unusual policy tweaks that signaled Texas’s commitment.

The result? Musk chose a remote site near Brownsville, Texas over competitors in Florida or elsewhere. By 2014 the deal was set, and today SpaceX’s “Starbase” in South Texas is a reality. The impact on the local economy has been transformative: about 600 direct jobs from SpaceX, injecting opportunity into one of the nation’s poorest regions. Local leaders aspired to make Brownsville “as well known for space travel as Houston” is for NASA – a vision now coming true. This case proves that targeted local policies (even enacted within months) can lure world-class projects, rebrand a city’s image, and kick-start an ecosystem of suppliers and startups around an anchor tech investment.

Key lesson: In a period of uncertainty, Texas didn’t wait – it acted. By rapidly assembling incentives and adjusting regulations, a state essentially out-competed others to capture a high-tech venture. Other cities can similarly use nimble policy moves to attract AI labs, robotics factories, or R&D centers looking for a new home during the trade war cooldown.

Global Snapshots: Cities Investing in AI & Emerging Tech

Around the world, forward-looking cities are already deploying innovative policies to bolster AI and emerging tech. From East Asia to the Middle East to North America, local authorities are “pulling out all the stops” to support new industries. Below, we highlight several hubs and their strategies:

Shenzhen’s futuristic Qianhai district, a major free-trade and tech zone, reflects the city’s rapid rise as an innovation hub. Once a small fishing town, Shenzhen became a special economic zone and is now showering AI firms with subsidies to stay ahead.

Shenzhen showers AI companies, workers with cash to boost local industry

Municipal government issues a slew of new policies including tens of millions of dollars in subsidies to promote AI development

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China: Local Governments Double Down on AI

In China, the central government’s drive for AI supremacy by 2030 has spurred city-level tech initiatives on an unprecedented scale. Shenzhen – often dubbed China’s Silicon Valley – is a prime example. The municipal government recently unveiled a ¥4.5 billion (≈$630 million) package of financial incentives to boost AI and robotics. This policy bundle includes subsidies for businesses to access supercomputing power and purchase training data, research grants up to ¥10–30 million for breakthrough projects, and rewards for adopting AI in traditional industries. In effect, Shenzhen is using public funds to accelerate AI adoption across its economy, ensuring local firms can compete with (or complement) the tech giants in Beijing and Hangzhou. Other Chinese cities are not far behind: Shanghai has created an AI “pilot zone,” Hangzhou offers cloud computing credits to startups, and even inland cities are setting up AI parks to catch the wave. The message is clear – Chinese cities see AI as key to their economic future and are racing to create the most fertile environment for it.

Why now? With export markets in flux, Chinese regional leaders want to reduce reliance on low-value manufacturing and instead climb the value chain. By investing heavily in AI and next-gen tech now, cities aim to future-proof growth regardless of tariff battles. It’s a long-term play that can be kick-started with short-term policy support.

South Korea: Regulatory Innovation and Talent Hubs

South Korea recognizes that cutting red tape is just as vital as funding when it comes to innovation. In July 2019 – right in the thick of global trade tensions – Korea rolled out “regulation-free zones” in seven cities/provinces to foster emerging industries. “There is no innovation if locked in a regulation,” declared the SMEs Minister at the launch. Busan, for example, was designated a blockchain sandbox, lifting 11 regulations that previously hindered blockchain applications in finance, logistics, and data privacy. Similarly, Sejong City was named a pilot zone for autonomous vehicles – allowing self-driving buses to operate and partnering with telecom companies to build a 5G-enabled testbed. By temporarily waiving restrictive laws, these cities attracted crypto startups and AV researchers who had been stymied elsewhere.

South Korea is also investing in human capital and innovation infrastructure at the city level. Seoul, the capital, recently announced seven key strategies to become a “Global AI Innovation Hub,” including training 10,000 AI specialists per year and creating a ₩500 billion (≈$400M) fund to spark private investment. The city is expanding its AI research district in Yangjae tenfold, effectively building a mini “AI City” with work-live-play amenities for tech talent. By focusing on talent, Seoul aims to address its gaps in AI research and commercialization – areas where Korea still trails global leaders. These moves, launched within a short span, show how a metro can respond to global uncertainty (like export slowdowns or chip supply worries) by doubling down on domestic innovation capacity.

Middle East: From Oil Capitals to AI Capitals

In the Middle East, several cities are leveraging wealth and strategic policy to become the next tech oasis. The United Arab Emirates (UAE) in particular has been proactive. Dubai appointed the world’s first Minister of AI in 2017, signaling a top-down commitment to tech. Abu Dhabi followed by launching “Hub71,” a global tech ecosystem in 2019, to diversify its economy beyond oil. What sets Hub71 apart is its generous support for young companies: it offers equity-free incentives like 100% subsidized housing, office space, and health insurance for startups’ employees in their first years. This makes relocating to Abu Dhabi extremely attractive for founders. In just two years, Hub71 grew its community from 35 to over 100 startups from 21 countries – including ventures from as far as Israel and South Korea (new partners as of 2020). By rapidly opening its doors and wallet to global entrepreneurs, Abu Dhabi has signaled that it will use policy and resources to grab a share of the AI and fintech startup pie.

Dubai, meanwhile, has turned itself into a living laboratory for tech. It launched the Dubai Future Accelerators program to pair startups with city challenges, opened autonomous vehicle trials (from drone taxis to self-driving pods), and established free zones like Dubai Internet City which offer tax breaks and foreign ownership rights to tech firms. Such policies can be rolled out in a matter of months, and they’ve helped Dubai attract regional headquarters of tech multinationals and a swarm of startups, despite the Middle East’s geopolitical uncertainties.

Beyond the Gulf, Israel’s “Startup Nation” experience provides a playbook for how targeted policies can ignite an innovation ecosystem. In the 1990s – during a period of global economic flux – Israel’s government launched the Yozma program, a public venture fund that matched foreign VCs and offered tax breaks to encourage investment in local startups. The impact was dramatic: annual venture capital investments in Israel leapt from $58 million in 1991 to $3.3 billion by 2000 (a nearly 60-fold increase). The number of new tech companies exploded, and by the end of the decade Israel was second only to the U.S. in venture capital as a share of GDP. Tel Aviv blossomed into a top global startup hub, all fueled by a policy conceived and implemented within a few years. This underscores that even a small country’s city-based tech clusters can thrive amidst global turmoil if local policies set the right conditions.

Other Innovation Hubs: Canada and Europe

North America and Europe haven’t sat idle either. The Canadian federal government and Quebec’s provincial government have made significant investments to support Montreal’s AI ecosystem, which have had a transformative impact on the city’s position in the global AI landscape.

Federal and Provincial Investments

Retaining AI Luminary Yoshua Bengio

These investments played a crucial role in retaining Yoshua Bengio, a leading figure in the AI field, in the academic sphere. Bengio is the head of Mila and has been instrumental in making Montreal a global hub for AI research. His presence has attracted major corporate R&D investments, with companies like Google and Microsoft opening AI research offices in Montreal.

Impact on Montreal’s AI Ecosystem

In summary, the coordinated efforts of the Canadian federal and Quebec provincial governments have significantly bolstered Montreal’s AI ecosystem, retaining top talent like Yoshua Bengio and attracting major corporate investments. This strategic approach has rapidly elevated Montreal’s status as a global AI hub.

European cities, too, are leveraging policy levers. London set up Tech City UK and a special visa scheme to draw tech talent after Brexit. Paris created innovation campuses (Station F being a prime example) and used targeted tax incentives to lure AI researchers. Helsinki and Amsterdam have experimented with AI transparency charters and open data platforms to invite startups to build solutions locally. While Europe’s regulations are often seen as strict, several cities are adopting “sandbox” approaches (particularly for fintech and AI governance) to allow experimentation in the short run while longer-term EU-wide rules evolve. These city initiatives ensure that local ecosystems in Europe can continue to innovate and partner internationally even if global trade winds shift – or if big players like the US and China turn inward.

Policy Innovation in Practice: City Approaches at a Glance

To better understand how cities turn policy into action, consider the varied approaches in the following examples:

City Approaches at a Glance.pdf
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As the table shows, cities can use different policy tools – from tax and funding incentives to regulatory relief and talent programs – but all share a proactive posture. Crucially, these actions were initiated or implemented within a short timeframe, underscoring what can be done in “90 days” or similar brief windows of opportunity.

Quick Policy Wins Cities Can Achieve in 90 Days

Drawing from these cases, here are some actionable steps cities can take immediately during a trade-war ceasefire to boost their tech ecosystems:

  • Jumpstart Investment and Incentives: Launch or expand funds, grants, or tax breaks to attract AI and tech firms. For example, Shenzhen’s recent ¥4.5B subsidy plan and Montreal’s government-backed research funds poured capital into local innovation. Even a modest city tech fund or tax holiday can signal that you’re open for innovation and invite startups to set up shop.
  • Cut Red Tape (Regulatory Sandboxes): Identify one emerging sector and suspend hindering regulations for pilot projects. South Korea did this with blockchain in Busan, lifting data and finance rules to let projects trial new services. A city could, for instance, allow autonomous delivery robots in a district or fast-track drone testing permits. These sandboxes can be launched via executive orders or temporary ordinances within weeks, creating a safe space for innovation.
  • Cultivate Talent and Partnerships: Use the 90-day period to announce scholarships, training programs, or tech incubators in partnership with universities and companies. Seoul’s plan to train 10,000 AI professionals annually shows the scale of ambition, but even a smaller city can fund coding bootcamps or AI courses at a local college. Similarly, brokering a quick agreement between a city, a major university, and a corporation to form an “AI Lab” or startup incubator can lay the groundwork for a talent pipeline. Investing in people ensures long-term competitiveness.
  • Attract Key Projects or Players: Identify one marquee tech investment to target during the lull – and move heaven and earth to win it. This could be an R&D center, a manufacturing facility for high-tech components, or a regional HQ of a growing startup. Texas did this with SpaceX; Abu Dhabi did it by luring startups with generous support. Cities should be ready to offer expedited approvals, customized incentives, public visibility, and executive-level attention to clinch such deals quickly. Landing even one high-profile project can anchor an entire ecosystem (as seen in Pittsburgh, where Carnegie Mellon’s robotics labs helped attract Uber’s and Aurora’s self-driving operations).
  • Leverage Local Strengths for Resilience: Lastly, double down on what your city already does well – and frame it as part of the future. Trade disruptions often force companies to seek new supply chains and markets. If your region has strength in, say, healthcare, automotive, or agriculture, promote policies for “AI + [Your Industry]”. For instance, a city known for finance could create a fintech innovation zone, or a manufacturing town could open a robotics training center. By innovating in domains you have an edge in, you both protect those sectors from external shocks and potentially capture businesses looking to relocate to a stable, innovative environment. Research shows cities that emphasize high-value, innovation-intensive industries tend to be more resilient in trade crises. Local innovation buffers global volatility.

Conclusion: Local Leadership in a Time of Global Uncertainty

When global trade politics become a roller coaster, it’s the cities with steady, visionary innovation policies that will emerge as winners. A 90-day pause in tariffs is not merely a time-out – it’s a call to action for city and regional leaders. By crafting smart policies in real time, cities can strengthen their innovation ecosystems in ways that pay dividends for decades.

Local innovation is not just a “nice to have” in a trade war; it’s a must-have for economic security. The United States’ own economic advantage has long come from its ability to “out-innovate at the technological frontier” with broad participation across regions. The same is true globally: whether it’s Shenzhen in China or Dubai in the Middle East, those who invest in innovation during the tough times will leap ahead when better times return.

Policymakers, tech investors, and academics should thus view this trade truce as a strategic planning period. It’s the moment to propose that AI research park, to pass that startup-friendly law, or to launch that international talent exchange. Cities that act boldly now – establishing themselves as havens for AI and emerging technologies – will not only weather the current trade storm but chart the course of the next technological era. In a world of uncertainty, innovation-driven cities provide the certainty of progress. And in the long run, that is a far more decisive factor in prosperity than any tariff.

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