President Donald Trump is a generational political talent who has recognized underserved constituencies, mastered modern media, and perfected political branding. His takeover of the Republican Party has been matched only by his resilience to a determined decadelong effort to oust him from participation in politics. His business record is more mixed, littered with success and failure. This, in addition to the principle of the matter, makes his recent turn toward state capitalism worrisome.
In June, Trump announced a deal between Nippon Steel, U.S. Steel, and the U.S. government that included Nippon purchasing all U.S. Steel shares in exchange for $14.2 billion, a promise to invest $11 billion in U.S. Steel operations by 2028, and a “golden share” for the federal government giving the president the final say over major decisions, including plant closures, capital expenditures, and even employee salaries.
In July, the Trump administration inked a deal with MP Materials, a Las Vegas-based company operating the nation’s only rare earths mine in California, for the Department of Defense to become the company’s largest shareholder. MP Materials is expected to boost production of rare earth minerals that are used in fighter aircraft, drones, night vision goggles, and other weapons systems.
In August, the Trump administration cut a deal with Nvidia, allowing the chipmaker to sell China chips used for artificial intelligence. Trump had blocked such sales due to a well-founded concern that U.S. national security would suffer if advanced technology were allowed into the hands of our chief foreign adversary. However, the president has now allowed the sale of the chips on the condition that Nvidia give 15% of revenues from chip sales to China to the federal government. It has not been explained how these revenues will be spent or how the fees mitigate the national security risk of the sales.
There is more. Trump struck a separate trade deal with Japan in July that included the creation of a $550 billion investment fund, with the money coming from Japanese companies but directed by the White House to “key industries such as energy, semiconductors, critical minerals, pharmaceuticals, and shipbuilding.” The deal included no oversight of these funds or restrictions on how they could be spent. Trump or any future president could give the money to whomever he wanted. It should be noted, however, that nothing in the deal forces Japanese compliance, and most observers believe the payments will never be made.
There are other impending deals that would involve the federal government more in corporate strategy. Before a July meeting with Chinese officials, Trump said, “We pretty much have a deal” with China to sell TikTok to a new U.S.-based firm, majority-owned and operated by U.S. investors. Who would control this company, and who would be these investors? That would be up to Trump.
Finally, there are reports that Trump is seeking a 10% stake in the chipmaker Intel, funded by the CHIPS and Science Act, which was created by former President Joe Biden. Trump would use the power of the federal government to press U.S. tech companies to buy Intel chips or use its new foundry.
None of these deals alone amounts to socialism. The administration is not taking over day-to-day operations. But it looks a lot like the state capitalism in Russia, Brazil, and France, none of which have enjoyed strong economic growth lately. Neither is the track record of government direct investment strong in the United States, as shown by Foxconn’s failed Wisconsin factory and Buffalo’s struggling solar plant.
TRUMP MUST CRACK DOWN ON AMNESTY LITE FOR ILLEGAL IMMIGRANTS
Even if one trusts Trump’s business acumen, he won’t be president forever. Should Americans expect Vice President JD Vance to know how best to allocate capital? Or Gov. Gavin Newsom (D-CA)? Or Rep. Alexandria Ocasio-Cortez (D-NY)? Who trusts them to guide these new government investments wisely?
However much some Republicans want to give Trump the control he desires, they would be wise to realize that once given to the public sector, control over the economy is rarely given back to the people.