The Trump administration makes straight bets in companies, which rarely seen in the US at the time of war or outside the economic crisis, pushing a Republican party forward, which traditionally makes free-market capitalism champions to embrace state intervention in industries importantly seen for national security.
Japan’s Nippon Steel agreed to give President Donald Trump “Golden Share” as a condition for the controversial merger of two companies in American Steel. Trump now ends personally Comprehensive veto power On major commercial decisions made by the nation The third largest steel producer.
“You know who has the Golden Share? I do,” Trump said at a summit on Artificial Intelligence and Energy in Pittsburgh on 15 July.
The President’s golden share in US Steel is similar to the nationalization of a company, but without any profit the company usually receives, such as direct investment by the government, Sarah Baurel Dengeman, an expert in foreign investment and an expert in national security in the Atlantic Council, a think tank focused on international affairs.
But the Trump administration demonstrated earlier this month that it is ready to buy directly in publicly traded corporations. Defense department agreed to buy $ 400 million equity share In rare-earth mine MP contentMaking the Pentagon the company’s largest shareholder.
This level of support by the federal government for a mining company is unprecedented, Graclin Baskaran said, “Experts of Critical Minerals at Center for Strategic and International Studies.”
“This is the biggest public-private cooperation that the mining industry has ever done in the United States.” “Historically, the DOD has never had equity in the mining company or mining project.”
Trump’s unique hold on the Republican party gives him the ability to intervene in companies on a scale that would be politically difficult for a democratic president, Dengeman said.
“Democrats may have been accused of being a communist and many other Republican probably would not feel comfortable in this particular direction due to their greater commitment to market principles in this particular direction,” Dengeman said. He said that Trump is expanding the boundary of what is possible in the US in terms of state intervention in markets.
The White House did not immediately respond to the remarks request.
There is a possibility of more state investment
More intervention can occur on the horizon as the Trump administration develops a policy to support American companies in strategic industries against state -backed competition from China.
Internal secretary dag bargam Said in April The US government may “need to invest an equity in each of these companies that are taking important minerals in China.” Pentagon’s investment in MP content is a model for future public-private participation, CEO James Litinsky said.
Litinsky told CNBC, “This is a new way to accelerate free markets, which we want to receive the supply chain,” Litinsky told CNBC. The CEO said that the US government is helping the mining industry fight “Chinese comparals”.
Meanwhile, golden shares in US Steel are a potential model for foreign direct investment “transactions that actually affect our national security, but where it is going to be great for our economic growth,” Sen Dave McCormic, A-Pa., Said in an May 1 interview with CNBC.
Dawn Bilson, an analyst of Gordon Haskate, wrote to the clients earlier this month, “After taking a stake in American Steel and MP, now we are surprised where the administration will find its next investment,”.
Trump proposed in January that America needs Take 50% stake Tiktok as part of a joint venture in the social media app. Chinese bidens will be required to divide Tiktok under the recently passed law. Restricted in america Trump extended the time limit of compliance with bidence until 17 September.
Example of past
There is a long history of intervention in industries in the US, especially where national defense is concerned, Mark Wilson said, a historian at the University of North Carolina, Charlotte, who study the military complex.
But previous intervention was often temporary and generally occurred during war, economic crisis or in an important industry, a major player took the form of a bailout to prevent insolvency from being insolvency.
The US government bought a majority stake in General Motors to prevent the vehicle manufacturer in view of the 2008 financial crisis, eventually Sell your shares In harm to taxpayer. In 1970s, defense legendary lockheed and automaker Christler received Government Relief package,
During the First World War, President Woodrow Wilson Nationalization of railroadsBut he returned him to personal ownership after the struggle. The Roosevelt administration made extensive intervention during the Great Depression and World War II, by establishing Tenasi Valley Authority To make big investment in the country’s manufacturing capacity.
China on a large scale
Wilson of UNC said that the US is not fighting an economic crisis or war today, but the withdrawal of great power competition with Russia and China and disruption of the supply chain of Kovid -19 epidemic has given rise to more nationalist economic policies.
Dengeman said the US rapidly believed that China’s economic model dumps “on global markets”, which makes it difficult for other markets to compete, “Denzman said.
Baskern said that the threat from the dominance of China’s rare-earth supply chain became clear in April when Beijing imposed an export ban against the US. Within weeks, the vehicle manufacturers warned that they would have to stop production due to a rare-earth deficiency, forcing the US to return to the conversation table with Beijing.
Wilson said, “The historic moment we are in appears to be a re -evaluation of the previous generation perceptions, the efficacy of the markets and free trade to solve all our problems in national security.”
The question is whether the state’s intervention can solve free market failure to remove national security concerns in industries such as rare earth, Dengeman said.
“When you try to address one of these market failures with such government intervention, you can make a waterfall of new market failures,” he said. “You are more distorting the market.”
