Trump's Push for Government Equity Stakes Sparks Business Community Concerns

President Donald Trump stated on Monday his desire for more government investments in healthy US companies, a sentiment that has raised concerns within the business community. This follows the White House's announcement on Friday of a near-10% equity stake in chipmaker Intel, converting government grants into a shareholding.

Credit: THE WHITE HOUSE

President Trump reiterated his support for similar deals in other sectors, telling reporters, "I hope I'm going to have many more cases like it." This approach departs from the decades-old view of the US economy, where government corporate stakes were typically reserved for rare emergencies, such as the 2008 global financial crisis.

Critics view the Intel deal, along with other administration actions like pressure on the US Federal Reserve for lower interest rates and the use of emergency powers for tariffs, as a threat to the US business world's agility. Bill George, former Medtronic CEO and executive education fellow at Harvard Business School, commented on this significant shift. He noted, "We're moving from a pure capitalistic economy to a much more state-engaged economy... That's a huge change for America and over where we've been. I've never seen an era like this,"

Mr Trump posted on social media on Monday that he would help companies making similar "lucrative" deals with US states, but no specific details were provided. Columbia Business School professor Shivaram Rajgopal suggested the Intel deal could support the chipmaking industry, citing how other companies like Amazon have benefited from favourable policies. He questioned, "Why is taking a 10% equity stake in Intel any worse?"

However, Intel's regulatory filing on Monday highlighted potential risks, stating the government's investment could harm international sales, impede additional grants, or impose new regulations or restrictions in other countries. In a Commerce Department video posted on Monday, Intel CEO Lip-Bu Tan said, "I don't need the grant," adding, "but I really look forward to having the U.S. government be my shareholder."

Some Republicans have criticised the move, with Kentucky Senator Rand Paul calling the Intel stake "a terrible idea." Senator Paul questioned, "If socialism is government owning the means of production, wouldn’t the government owning part of Intel be a step toward socialism?" Analysts also wondered about the deal's impact on Intel's customers, who might be encouraged to buy Intel products. Bernstein analyst Stacy Rasgon asked in a note, "Is it conceivable that as part of something like this the administration might 'encourage' customers to use Intel’s capacity?"

Credit: THE WHITE HOUSE

The White House also intervened to complete the purchase of US Steel by Japan's Nippon Steel in June, taking what Mr Trump called a "golden share" that gives Washington a say over its operations. It also took a stake in rare earths company MP Materials and brokered a deal with chipmakers Nvidia and AMD to take 15% of revenue from sales to China of chips that had previously been prohibited. White House economic adviser Kevin Hassett indicated on Monday that the government could take additional stakes in other companies.

Douglas Chia, an independent consultant at Soundboard Governance, suggested companies beyond chips and defence could issue shares to the government. Mr Chia stated, "It's a step in the direction of turning publicly-held companies into state-controlled enterprises whenever the government feels like it, using 'national security' as the justification."

President Trump has shown involvement in various business matters, including applauding American Eagle's ad campaign for jeans and suggesting Goldman Sachs hire a new economist. Nell Minow, chair of Portland, Maine-based ValueEdge Advisors, remarked, "The president of the United States is telling Goldman Sachs they should fire an employee? That's crazy."

After his re-election in Nov. 2024, numerous CEOs met with Mr Trump, and these meetings have continued. Industry groups report their access to the administration comes from CEOs of large companies reaching out to the White House. Despite this access, they have sometimes been caught off guard, particularly concerning trade policies where Mr Trump has imposed heavy tariffs.

A retail industry lobby group source indicated that members are largely frustrated with Mr Trump's trade policy. CEO meetings have yielded notable moments, such as Apple CEO Tim Cook gifting Mr Trump a customised souvenir plaque with a 24-karat gold base mined from Utah earlier this month.

Apple, valued at more than USD 3 trillion, has aimed to shift production from China, targeted in Mr Trump's first-term trade war, to India. Mr Trump has also criticised this move. Apple announced approximately USD 600 billion in planned US investments, although the White House has suggested it could also build smartphones domestically, despite the United States lacking significant smartphone manufacturing capacity.

Harvard Business School's George questioned the long-term implications, saying, "I think companies are just starting to realise, how much control do you want to give up and how much ownership do you want to give up to the government?"

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• President Trump seeks more government equity stakes in US companies, following a near-10% acquisition in Intel.

• This strategy marks a significant departure from previous government non-intervention in the US economy, raising concerns among business leaders and critics.

• Intel's regulatory filing outlines potential risks to international sales and increased regulation due to government investment.

Source: REUTERS