- President Donald Trump is personally wielding a golden share over U.S. Steel.
- The Pentagon bought a $400 million equity stake in rare-earth miner MP Materials.
- These stakes could serve as models for more intervention by the Trump administration in industry.
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The Trump administration has made direct investments in businesses on a scale that is uncommon in the United States outside of times of war or economic catastrophe. This has pushed the Republican Party, which has historically supported free-market capitalism, to support government intervention in sectors of the economy that are thought to be crucial for national security.
Nippon Steel of Japan consented to grant President Donald Trump a “golden share” in U.S. Steel in exchange for the contentious merger of the two businesses. Trump now has a broad veto authority over important economic choices made by the third-largest steel producer in the country.
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“Who owns the golden share, do you know? At a symposium on energy and artificial intelligence in Pittsburgh on July 15, Trump declared, “I do.”
According to Sarah Bauerle Danzman, a national security and foreign investment expert at the Atlantic Council, a think tank that focuses on international affairs, the president’s golden share in U.S. Steel is comparable to nationalizing a business but without any of the advantages that a company typically enjoys, such as direct government investment.
However, earlier this month, the Trump administration showed that it is also open to directly investing in publicly traded companies. The Pentagon became the largest shareholder in rare-earth miner MP Materials after the Department of Defense decided to buy a $400 million equity investment in the company.
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According to Gracelin Baskaran, a critical minerals specialist at the Center for Strategic and International Studies, this degree of federal backing for a mining business is unheard of.
“This is the biggest public-private cooperation that the mining industry has ever had here in the United States,” Baskaran stated. “Historically, DOD has never done equity in a mining company or a mining project.”
According to Danzman, Trump’s special influence within the Republican Party allows him to politically interfere with businesses on a scale that would be challenging for a Democratic president.
“The Democrat would have been accused of being a communist and a lot of other Republicans probably would not have felt comfortable moving in this particular direction because of their greater commitment to market principles,” Danzman stated. According to her, Trump is broadening the scope of what the US government can do when it comes to market intervention.
A request for comment was not immediately answered by the White House.
As the Trump administration formulates a strategy to defend American businesses in key industries from Chinese state-sponsored competition, more measures may be in the works.
The U.S. government may need to make a “equity investment in each of these companies that’s taking on China in critical minerals,” according to a statement made by Interior Secretary Doug Burgum in April. According to CEO James Litinsky, the Pentagon’s investment in MP Materials serves as a template for upcoming public-private collaborations.
“It’s a new way forward to accelerate free markets, to get the supply chain on shore that we want,” Litinsky stated to CNBC. In response to “Chinese mercantilism,” the CEO stated that the mining business is receiving assistance from the U.S. government.
Sen. Dave McCormick, R-Pa., stated in a May interview with CNBC that the golden share in U.S. Steel is a possible model for foreign direct investment “transactions that really affect our national security but where it’s going to be great for our economic growth.”
Earlier this month, Gordon Haskett analyst Don Bilson wrote to clients, “We’re now left to wonder where this administration will find its next investment, having taken a stake in US Steel and MP.”
In January, Trump suggested a joint venture in which the United States would own 50% of the social media app TikTok. A recently passed law mandates that China’s ByteDance divest TikTok or face the platform’s prohibition in the United States.Trump gave ByteDance until September 17 to comply.
According to Mark Wilson, a historian who specializes in the military-industrial complex at the University of North Carolina, Charlotte, the United States has a lengthy history of interfering with industries, especially those related to national defense.
However, previous interventions were frequently short-lived and usually occurred during economic crises, wars, or as bailouts to keep a significant player in a vital industry from going bankrupt.
In order to keep General Motors from going bankrupt after the 2008 financial crisis, the U.S. government purchased the majority of the company’s stock, which it then sold off at a loss to taxpayers. Government bailouts were given to the defense behemoth Lockheed and the automobile Chrysler in the 1970s.
President Woodrow Wilson nationalized the railroads during World War I but put them back in private hands following the war. From creating the Tennessee Valley Authority to making significant investments in the country’s manufacturing capacity, the Roosevelt administration implemented extensive interventions throughout the Great Depression and World War II.
Wilson of UNC noted that although the United States is not currently engaged in a war or economic catastrophe, the resurgence of great power rivalry with China and Russia as well as the interruptions to the supply chain caused by the Covid-19 outbreak have resulted in more patriotic economic policies.
China’s economic model is built on overcapacity in manufacturing, which dumps goods “onto global markets in ways that make it hard for other markets to compete,” according to Danzman, a fact that the U.S. has come to appreciate more and more.
According to Baskaran, Beijing’s export restrictions on the United States in April made clear the threat presented by China’s hegemony over the rare-earth supply chain. The U.S. was forced to return to the negotiation table with Beijing after automakers threatened to stop production owing to a rare-earth shortage within weeks, she claimed.
“The historical moment we’re in does seem to be one where there is this reassessment of assumptions of the previous generation about the efficacy of markets and free trade to solve all our problems in national security,” Wilson stated.
According to Danzman, the issue is whether government action can resolve the free market’s inability to meet national security issues in sectors like rare earths.
“When you step in to try to address one of these market failures with this kind of government intervention, you can have a cascade of new market failures,” she stated. “You’re distorting the market more.”
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