Increased Involvement of U.S. Government in Private Businesses
The U.S. government has taken a significant step in increasing its involvement in business under President Donald Trump's administration. This shift has been evident in recent investments, such as the acquisition of a "golden share" in Intel and US Steel.
Last week, the U.S. government acquired a 10% stake in Intel in exchange for releasing subsidies worth $8.9 billion for the expansion of U.S. production. The move comes after Trump originally demanded a 20% stake, but settled for 15%. Trump has expressed his intention to demand counter-performance from more companies for measures by the U.S. government.
The "golden share" in Intel grants the U.S. government certain powers, such as the approval of job relocations, plant closures, or large takeovers within the country. Interestingly, the Commerce Department, which holds the stake, must follow Intel's suggestions in shareholder votes.
Trump has also mentioned the Intel deal as an example he would like to replicate. In a similar move, the Pentagon has entered MP Materials, a company operating a rare earths mine in the U.S. The aim is to build a second plant for the production of magnets in the U.S. with Pentagon support. This indicates a growing interest in domestic production of strategic resources, such as rare earths, for national security purposes.
However, this increased involvement in businesses could potentially lead to additional restrictions or rules for companies. Intel, for instance, has warned about the U.S. government's stake in the company potentially impacting its sales outside the U.S., especially if the company faces additional restrictions or rules in other countries due to its status as a U.S. government-owned entity.
Moreover, the U.S. government's stake in Intel includes shares with voting rights, which could expose the company to additional restrictions or rules in other countries. The U.S. government must hold the shares for at least one year.
It's important to note that Intel and AMD currently pay 15% of their semiconductor sales to the U.S. government due to export license conditions. The U.S. government's increased involvement in businesses could potentially lead to further nationalizations, spurred by President Trump's interest in additional government investments in U.S. firms. Critics view this as a departure from the traditional free market model.
The U.S. government's entry into US Steel, requiring the approval of the American president for job relocations, plant closures, or large takeovers within the country, could have implications for business operations. The U.S. government has been considering taking a stake in Intel, aiming for about a 10% share, to stabilise the company and ensure domestic chip production. There are speculations about further nationalizations, but the future remains to be seen.
Trump has stated that company representatives often have to pay for his assistance. This, coupled with the potential for increased government involvement in business, raises questions about the balance between government intervention and free market principles in the U.S. economy.
