Executive Summary

• The Trump Administration’s taking of a 9.9-percent financial stake in Intel is the latest intervention that inserts the federal government squarely in the middle of firm-level decision-making.
• Using novel regulatory interventions and taking direct financial stakes in firms is a move toward state-directed capitalism, allowing the government greater power to pick winners and losers and influence business decisions typically left to private enterprise.
• As Congress remains an onlooker, the executive branch could be laying the groundwork for a new economic model that supplants market competition with a state-managed system, likely leading to an inefficient allocation of resources and providing an uneven benefit to a small group of firms.

Introduction

The Trump Administration has used novel regulatory interventions – even going as far as taking a direct financial stake in an individual firm – to insert the federal government squarely in the middle of firm-level decision-making.

The steady push toward state-directed capitalism allows the federal government more power to pick winners and losers. This newfound influence will empower the federal government to more forcefully tip the scales of business decisions typically left to private enterprise.

As Congress looks on, the executive branch could be laying the groundwork for a new economic model that supplants market competition with a state-managed system. This structure would likely lead to the government using private firms as political pawns that results in an inefficient allocation of resources and a permanently slower rate of economic growth. Moreover, such government intervention would likely provide a lopsided benefit to a small number of firms that trade independence for government protections.

Trump’s Tactics

President Trump has leveraged a variety of tactics that put the federal government in the position to steer the decisions of individual firms. His transactional approach to policymaking – a desire to “make a deal” – is one such method, in which the government seeks a share in the economic benefits of policy decisions. This approach to governance has likely changed the calculus among private businesses, which must now consider how the administration perceives particular business decisions rather than strictly focusing on creating value for customers and shareholders.

Nippon Steel/U.S. Steel

In December 2023, Japan-based Nippon Steel announced it would acquire U.S. Steel. The deal drew opposition from the Biden Administration, then-presidential candidate Trump, and the United Steelworkers union. In January 2025, following a review by the Committee on Foreign Investment in the United States (CFIUS) that failed to reach a consensus, President Biden issued an executive order blocking the acquisition, citing national security concerns. Nippon and U.S. Steel sued the administration, alleging political interference in the CFIUS review process.

After taking office, President Trump reversed the position he held as a candidate, and expressed support for the acquisition, calling for another CFIUS review. On June 13, 2025, President Trump issued an executive order paving the way for Nippon to acquire U.S. Steel. The order was not, however, a simple approval. The administration was able to extract concessions from Nippon Steel in exchange for permitting the acquisition, including a pledge of $11 billion in capital investment by 2028. The administration also received a “golden share” as part of the deal, which gave President Trump unprecedented authority over typical business operations.

The golden share, as outlined in an amended corporate charter filed with the Securities and Exchange Commission, gives President Trump – and later, the Departments of Treasury and Commerce – the ability to appoint an independent director to the company’s board of directors. The golden share also ensures that key management roles (CEO, CFO, General Counsel, Senior VP with responsibility for production, manufacturing, and raw materials supply) are held by U.S. citizens, and gives the government veto power over the closure or idling of existing U.S. manufacturing facilities. So-called golden shares are not typical in the United States, but have been used in China and several European countries.

The constraints of the U.S. Steel golden share are already affecting business operations. It was recently reported that U.S. Steel will “quit sending steel slabs to be processed at Granite City Works,” meaning “employees will stop production come November and keep the mill ready to start up again.” According to the report, it “remains unclear what exactly U.S. Steel and Nippon have planned for Granite City Works Long Term.” Yet because of the golden share agreement with the Trump Administration, Nippon and U.S. Steel “cannot further idle, close or sell” without approval, meaning that Nippon and U.S. Steel will be unable to pivot quickly in response to market conditions, leaving the firm with capital sitting idle and putting it at a competitive disadvantage.

Using the CFIUS review specifically, and merger reviews generally, to extract concessions from merging firms could decrease any competitive benefits from the transaction. Moreover, this novel approach could set the stage for similar golden-share type agreements between future administrations and merging parties.

MP Materials

In July 2025, the Department of Defense (DoD) entered a public-private partnership with MP Materials to “accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency.” The DoD purchased $400 million of various forms of company stock and warrants that will position the agency to become the company’s largest shareholder. MP Materials plans to use this investment to construct the company’s second domestic manufacturing facility that will serve “both defense and commercial customers.”

The agreement also included a 10-year commitment by the DoD to establish a price floor of $110 per kilogram for neodymium-praseodymium (NdPr), “reducing vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside.”

A direct government stake in MP Materials and a commitment by the DoD to purchase its products at a minimum price substitutes market discipline for government bloat. In other words, ensuring MP Materials will have a customer for a minimum of 10 years removes the incentive for the firm to operate efficiently and provide a product private customers demand.

Nvidia/AMD

The Trump Administration struck a deal with Nvidia and Advanced Micro Devices (AMD) that gave the semiconductor companies the export licenses necessary to sell chips in China in exchange for paying the U.S. government 15 percent of the revenue from those sales. Speaking on the deal, Trump said, “‘if I’m going to do that, I want you [AMD and Nvidia] to pay us as a country something, because I’m giving you a release.’”

The arrangement marked a reversal of the administration’s own policy that banned the sale of certain chips to China due to national security concerns. The American Action Forum’s (AAF) Jeffrey Westling previously summarized the deal. AAF Trade Policy Analyst Jacob Jensen explained that the 15-percent revenue tax is akin to an export tariff, is constitutionally dubious, and may violate other federal statutes, including the Export Control Reform Act, which allows the federal government to issue export licenses to companies but explicitly states that “no fee may be charged in connection with the submission, processing, or consideration of any application for a license.”

As Westling explained, “if the Trump Administration continues to leverage U.S. national security for its own benefit, policymakers could inadvertently ignore legitimate national security risks under the assumption that the claimed risks are again just leverage for the administration.” Put another way, the president’s decision to allow exports to China on the condition that companies forfeit a share of the profits does not alleviate any legitimate national security concerns.

The administration’s actions could cause multinational corporations looking to export goods and services abroad to reconsider producing inside the United States. Instead, these firms could open new production facilities closer to their final customers to avoid potential government interference in business decisions.

It is also possible that foreign importers, specifically in countries where the government has significant influence over business decisions and imports, could become wary of purchasing from these companies, as it would provide a direct financial benefit to a foreign government. This would have a negative impact on the international competitiveness of U.S. firms.

Intel

In November 2024, the U.S. Department of Commerce under the Biden Administration announced it had awarded Intel with $7.9 billion in direct funding under the CHIPS and Science Act to advance semiconductor projects. On top of that, Intel secured a $3 billion contract with the Pentagon to produce advanced semiconductors and intelligence applications under the Secure Enclave program, which is designed to expand the manufacturing of leading-edge semiconductors for the U.S. government.

The Trump Administration, however, announced that the U.S. government would convert the remaining $8.9 billion of unspent funds – $5.7 billion in CHIPS grants, awarded but not yet paid, and $3.2 billion awarded as part of the Secure Enclave program – into a direct equity stake in the firm. The government agreed to purchase 433.3 million primary shares of Intel common stock, equivalent to a 9.9 percent stake in the company.  While the government’s investment is passive, meaning it will have “no board representation or other governance or information rights,” it is an unusual step for the U.S. government to take such a stake in a private company.

The federal government’s financial stake in Intel presents a similar problem to that of Nvidia and AMD, in which foreign importers would rather purchase from other firms to avoid providing the U.S. government with a direct financial benefit.

National Champions

Through these novel regulatory approaches and direct financial stakes, the U.S. government has effectively nationalized these firms and made them national champions. It can now use these firms to fulfill political goals that may not be aligned with market demands. Moreover, it is now in the federal government’s interest to ensure these firms do not fail, meaning state support will likely be offered to help them compete globally. It is possible that the federal government will negotiate on behalf of these national champions with foreign governments, steer state contracts directly to these firms, or put in place a regulatory regime to their benefit. Such actions will displace market competition.

As Former Assistant Attorney General for Antitrust Bill Baer explained, “protecting companies from competition can lead to inefficiencies, complacency, and stagnancy,” adding that “ultimately, these firms may struggle to remain competitive in the global marketplace.” Deborah Platt Majoras, former Federal Trade Commission chair, warned that “providing subsidies to or trade barriers for a domestic champion, and prohibiting foreign ownership, a country can certainly preserve the domestic firm far longer than it might survive in the market.” In other words, state support artificially prolonged the lifespan of these firms that would have otherwise been unlikely to compete in the marketplace.

As the Trump Administration has taken steps to promote national champions, Assistant Attorney General (AAG) Gail Slater, speaking about the global race for artificial intelligence, offered that “America has competitors, like China, that think they can win this race with centralized control and the promotion of national champion monopolists,” and that “their foreign ideology trusts managers more than markets.” She added these “national champions are too often national chokepoints.” Similarly, Principal AAG Roger Alford explained how the Department of Justice “reject[s] arguments that we should excuse harm to competition in order to protect a national champion firm on the theory that this will somehow benefit national security,” noting further that “[w]e don’t accept the premise that shielding our businesses from competition somehow make us stronger.”

These sentiments from current and former antitrust enforcers should give the Trump Administration pause before anointing national-champion firms.

Despite the opposition from competition enforcers, firms – typically large and politically connected – must now consider the Trump Administration’s drive to promote national champions when making business decisions. Firms could find it more advantageous to leverage their political connections and be crowned a national champion rather than compete on the merits.

Government-promoted national champions also make it more difficult for other firms to compete effectively. Government policymaking, rather than applying across-the-board rules for industry, would likely cater to the needs of individual firms and put competitors at a disadvantage. Additionally, firms now must consider actions that could conflict with the political position of the federal government for fear of retribution. This government-created incentive would likely lead to a misallocation of resources that results in higher prices, fewer choices, and inferior quality goods for consumers.

Government-directed Investment

President Trump’s tariff negotiations have included commitments from foreign governments to invest in the United States.

Recently, Secretary of Commerce Howard Lutnick indicated that Japan pledged to investment up to $550 billion in U.S. infrastructure projects, including a liquified natural gas pipeline in Alaska. The Japanese government published a memorandum of understanding (MOU), which described the establishment of an investment committee – chaired by the U.S. Secretary of Commerce and other representatives from both countries – that would recommend projects to the president of the United States for approval. Per the MOU, the United States and Japan would split equally the revenues from the projects until the principal cost is repaid, after which the United States will receive 90 percent of the profits.

Such terms of agreement leave unprecedented discretion in the hands of the president. In turn, the president could approve investments that are politically motivated rather than those that are the most economically viable.

State-directed Capitalism

Competitive markets foster innovation, lower prices, and more choices for consumers. Yet the current climate demands firms consider how each business decision will be received by the Trump Administration. Given the president’s transactional approach to governing, firms – rather than allocating capital that achieves the highest returns – could divert these resources to lobby for novel policy interventions and government protections to ensure their survival.

The calculus among private firms will likely change from a focus on returns on investment, more efficient production, and lowering costs to ensuring business decisions properly align with the thinking of politicians. But what is in vogue today will likely fall out of favor tomorrow. Such a decision-making process is not suited for developing long-term business strategies.

Conclusions

The steady push toward state-directed capitalism will give the U.S. government greater power to pick winners and losers. Taking direct financial stakes in individual firms and employing novel policy interventions gives the government a tighter grip over business decisions typically left to private enterprise.

As Congress sits on the sidelines, the executive branch could be laying the groundwork for a new economic model that supplants market competition with a state-managed system. Such a shift would likely lead to an inefficient allocation of resources, a permanently slower rate of economic growth, and provide a lopsided benefit to a small contingent of firms with access to the executive branch.