Trump's Industrial Policy Gamble: When Government Becomes Shareholder

The U.S. government now owns 10% of Intel. For $5.7 billion in CHIPS Act funding, American taxpayers became shareholders in the semiconductor giant. But that's just the beginning. The Trump administration has also secured a 15% stake in rare-earth processor MP Materials for $400 million, a 5% stake in lithium developer Lithium Americas, and a "golden share" in U.S. Steel that gives Washington permanent veto power over headquarters relocation and offshore production.

Welcome to American capitalism, 2025 edition—where the government doesn't just regulate markets, it owns them.

The Hamilton Playbook Returns

This isn't entirely new territory for America. As UCL economist Mariana Mazzucato puts it, U.S. policymakers have long "talked like Thomas Jefferson while acting like Alexander Hamilton." The rhetoric celebrated free markets; the reality involved massive government investment in emerging industries.

The internet? Born from 1958 Defense Department research. Every technology in your smartphone—GPS, touchscreens, even Apple's Siri—originated in government labs. The pharmaceutical industry? Built on hundreds of billions in National Institutes of Health investments over decades.

Biden made this industrial policy explicit. The CHIPS and Science Act, Inflation Reduction Act, and Infrastructure Investment and Jobs Act generated over $200 billion in private investment and created more than 80,000 jobs. When the CHIPS Act passed in 2022, it convinced Taiwan Semiconductor Manufacturing Company (TSMC) to make a $40 billion investment in Arizona—the largest foreign direct investment in U.S. history.

Right Tool, Wrong Approach?

Mazzucato argues that taking equity stakes makes economic sense. When government socializes risk through public funding, the public should share in the rewards. Consider the Obama era's contrasting outcomes: solar company Solyndra received a $535 million loan guarantee and went bankrupt, while Tesla got $465 million, repaid it nine years early, and saw its stock price rise from $17 to $93. Had the government taken equity in Tesla's success, those returns would have covered Solyndra's losses several times over.

But Trump's approach differs fundamentally from this portfolio logic. Instead of organizing policy around explicit missions—clear public goals that define problems and outcomes—the administration treats industrial policy as "sector deals to be cut and announced." The government is using its unprecedented equity stakes "not to steer strategy or secure public value but to extract value retroactively."

Global Implications and Competitive Dynamics

This shift has profound implications for international competition. When governments become shareholders, market dynamics change fundamentally. It's no longer just company versus company, but government-backed enterprise versus private competitor.

For allies like South Korea, this creates both opportunities and challenges. Samsung and SK Hynix are already investing tens of billions in U.S. semiconductor facilities. How will competition change when they're facing government-backed American rivals? Similarly, Hyundai's U.S. electric vehicle ambitions must now account for potential government favoritism toward domestic manufacturers.

European policymakers are watching closely too. If American industrial policy succeeds in rebuilding manufacturing capacity and securing supply chains, pressure will mount for similar interventions across the Atlantic. The era of pure market competition may be ending.

The Mission Question

Mazzucato emphasizes that successful industrial policy requires more than just writing checks or taking stakes. It needs "clear missions to create public value" and "capable institutions with the expertise to design contracts, coordinate across departments, and learn from results."

The Apollo program succeeded because it had a clear mission—get to the moon by 1969—and organized 400,000 people, mostly in private sector, around that goal. The result wasn't just the moon landing, but GPS, touchscreens, baby formula, home insulation, and camera phones.

Today's challenge is whether Trump's transactional approach can deliver similar transformational outcomes. Taking equity stakes is smart policy, but only if coupled with strategic direction and enforceable conditions ensuring that supported firms "reinvest rather than extract, offer better wages and training rather than race to the bottom, and produce affordable goods and services rather than engage in monopoly pricing."