'bitterly Ironic': Trump Is Wrecking His Ai Agenda With Anthropic Spat, Lobbyists And Ex-officials Say

The Trump administration’s push to punish the artificial intelligence startup Anthropic is undercutting the United States’ plan to boost American technology and dominate its spread worldwide, according to industry advocates and a former top Trump adviser on AI.

Fears of further escalation in the fight between the Pentagon and Anthropic over limits on military use of AI have already sparked major uncertainty for tech companies working with the government, roughly a dozen industry representatives, investors and former government officials told POLITICO.

They said the sector would suffer even greater damage if the administration designated Anthropic as a risk to the military supply chain — an action the Defense Department formally took Thursday. Anthropic has said it would fight any such designation in court.

Concerns over the impact of such an unprecedented action against a U.S. company reached a new pitch this week, as four top tech lobbying groups urged President Donald Trump to reconsider his administration’s supply-chain threat.

But Trump showed no signs of easing up, telling POLITICO in an interview earlier Thursday that Anthropic would face setbacks as a result of its dispute with the Pentagon. “Anthropic is in trouble because I fired them like dogs, because they shouldn't have done that,” Trump said.

Trump had said last week that he was barring Anthropic from any work with the federal government, causing the departments of State, Treasury and Health and Human Services to direct employees to stop using the company’s products.

But it is the supply-chain risk label — historically reserved for foreign companies with ties to U.S. adversaries like China — that threatens to upend the American tech sector and gut the president’s plan to dominate the global AI landscape. Defense Secretary Pete Hegseth first made that threat last week, after Anthropic insisted on restricting the military’s use of its Claude AI model to conduct mass surveillance of Americans or choose targets to kill.

Bloomberg first reported Thursday that the Pentagon had made the action official. It’s not yet clear how widespread the designation is, and if it applies to companies that work with other parts of the government besides the military.

The designation will prompt many, if not most, companies that work with the military to cut ties with Anthropic. The lobbyists behind Wednesday’s industry letter warned that would slow innovation, close off foreign markets and potentially cede ground to China by making it harder for U.S. AI firms to compete.

They said even talking about labeling an American company a supply-chain risk had sent a “ripple of uncertainty” across the industry.

Chris Mohr, president of the Software and Information Industry Association and one of the letter’s organizers, told POLITICO that the chilling effect on industry “will be immediate” — and would persist even if the White House never again tries to harm a leading American AI firm over a contract dispute.

“Do we know that the government would do it again? I have no idea,” Mohr said in an interview. “But if you were running one of these companies, you would look at that and start to make judgments accordingly.”

One top tech industry representative in Washington, granted anonymity to discuss sensitive talks, said it will be difficult to do business when a social media post from the president can abruptly force companies to tear out crucial inputs.

“That environment — where you need to disassemble highly complex, interdependent products like Lego bricks on the fly — is just going to make U.S. vendors less competitive,” the representative said.

Reuters reported that major contractors such as Lockheed Martin are already starting to remove Claude from their networks. And Franklin Turner, a government contract lawyer at law firm McCarter and English, told POLITICO many of his clients are also working to remove Anthropic from their systems. He said those efforts will harm their bottom lines — and that the due diligence needed to ensure future partners don’t provoke the government could prove even more costly.

“There's an untold but very real administrative cost to this that affects far more companies than just the one singled out here,” said Turner.

Dean Ball, a former Trump administration AI adviser who left the White House in July, said the Anthropic spat is dramatically weakening the president’s prior plan to empower the U.S. artificial intelligence industry.

Ball was the lead author behind the White House’s AI Action Plan. Released last summer to great fanfare, it advanced a pro-innovation, export-focused agenda and warned against new regulations on the fast-moving AI industry. The government should not create "bureaucratic red tape” for AI companies, but “create the conditions where private sector-led innovation can flourish,” the plan says.

“It's sort of bitterly ironic,” said Ball, who accused his former employers of engaging in the most heavy-handed attack on the private sector in generations by targeting Anthropic.

Much of Trump’s pro-innovation AI agenda was undergirded by claims that the country needed a course correction from stifling regulation under former President Joe Biden.

Amos Hochstein, a former senior adviser to Biden on energy and infrastructure, disagreed with that characterization — but also said the entire argument has now been flipped on its head.

“Here I am, the Democrat, saying that I think it's inappropriate for the U.S. government to overstep its role in regulating and controlling the U.S. economy, or controlling companies. And the Republicans are saying, ‘No, we do want to control the economy,’” Hochstein said.

“It's like a weird reversal of roles,” said Hochstein. “Draconian rules are never good for anyone, whether they're done by Democrats or Republicans.”

The Trump administration has argued that the Pentagon must be allowed to use Anthropic’s AI tools however it legally sees fit, and won’t accept Anthropic’s red lines on the use of Claude to surveil American citizens or empower autonomous weapons. A White House spokesperson pointed POLITICO on Wednesday to a line in the AI Action Plan that stressed the importance of the Pentagon adopting “secure and reliable” AI models.

“The American people alone determine the destiny of our armed forces, not unelected tech executives,” the White House said in a written statement. “At the same time, the Administration remains committed to advancing American AI innovation and AI exports around the world.”

But Ball warned this week that if the White House moved forward with labeling Anthropic a supply-chain risk, it could significantly chill investment in U.S. AI firms. And he said the administration has already irreparably harmed its effort to embed American AI in countries around the world.

“I think the damage there is more fatal, and already done,” said Ball. “The skepticism abroad of using U.S. technology and creating a dependency on U.S. AI was already so large.”

Since Trump’s reelection, the European Union has escalated efforts to grant preference to domestic companies and wean itself off of American technology. Samir Jain, a former national security official in the Obama administration, said that sentiment is likely to spread as Trump demonstrates a desire to control companies like Anthropic.

“Particularly when you're talking about countries in Africa or countries in Asia, I think China is going to be looking like an increased alternative [for cutting-edge AI],” said Jain. He called the threats against Anthropic “another dimension through which American policy is becoming incoherent on AI.”

Some investors scoff at the notion that Washington can meaningfully harm the U.S. AI sector, or even slow investment in the transformational technology.

“What are you going to do, not invest in AI because you're worried about the daily whims of Donald Trump?” said Ross Gerber, co-founder of investment firm Gerber Kawasaki. He said Trump would be gone in a few years and stressed the importance of thinking “long term.”

But Bilal Zuberi, founder and managing partner of venture capital firm Red Glass Ventures, said Trump’s attempt to harm Anthropic could cause investors to think twice before entering the technology sector. “Absolutely it can chill investments,” he said.

Zuberi added that tech founders could also decide it’s “too dangerous” to partner with the government, potentially depriving Washington of the best tech solutions. “If that was to happen, we would all be disadvantaged by that,” he said.

Late on Wednesday, The Financial Times reported that Anthropic and the Pentagon were attempting to hash out a last-ditch deal that could save the company from being designated a supply-chain risk. Zuberi said many investors seemed to expect the dispute would be “sorted out” — and warned they may be in for a rude awakening.

“This is a dangerous precedent,” said Zuberi. “People are hoping that this is an aberration of people — whether it's [Anthropic CEO] Dario [Amodei] fumbling it and provoking individuals in the DOD, or whether there are certain people in the DOD who have less control on their emotions, rather than being professionals.”

“But hopefully this goes away,” said Zuberi. “If not, we are in pretty difficult territory.”

Dasha Burns contributed to this report.