In this chapter we will explore the changing connection between smart manufacturing industrial policy and trade restrictions within the framework of a world where artificial intelligence (AI) has quickly changed in many ways. With Industry 4.0 technologies turning the production system into an extremely interconnected and data-driven ecosystem governments in every corner of the planet are increasingly taking action in form of strategic industrial policy and regulatory frameworks. The chapter continues by contending that although AI-based manufacturing can lead to greater efficiency flexible and innovation it also increases the intensity of geopolitical competition in such key areas as semiconductors and high-tech computer-related industries. Trade limits such as tariffs export controls and data localization measures are transforming global value chains that is resulting in regionalization and technological fragmentation.