Trump administration invests $10 bn in private firms for national security

The Trump administration is snapping up ownership shares of private companies it deems essential to national security. It is an unusual new strategy that has already committed more than $10 billion in taxpayer funds and shows little sign of slowing.

 

The government’s growing portfolio of corporate ownership involves minority stakes, or the option to take them in the future, in at least nine companies involved in steel, minerals, nuclear energy and semiconductors, a New York Times analysis found.

 

The effort appears mostly driven by national security concerns, particularly a desire for the government to prop up strategic industries and lessen America’s reliance on foreign countries like China for key resources. 

 

The unusual government intervention into the private market is fuelling some concerns, including the opacity of the process, the potential for favouritism, corruption and market distortions, along with the possible loss of taxpayer funds should the investments fail. Kush Desai, a White House spokesman, defended the administration’s approach.

 

“The administration’s targeted equity stakes ensure that taxpayers get a good bargain and that the ball meaningfully moves forward to encourage further investment by the private sector.” The shift has been brought about by China’s dominance of strategic industries, and accelerated by its move to clamp down on exports of minerals needed to make planes, semiconductors, robots and cars this year as part of a trade clash with Washington. The Energy Department has leveraged loan programs created in the Biden administration to take equity in mineral companies. The Commerce Department has also used its control of a Biden-era semiconductor fund and investments from foreign countries to begin building a portfolio.

 

The administration’s first significant investment took place in June when it acquired a “golden share” in US Steel in exchange for allowing Japan’s Nippon Steel to buy the iconic firm.  In July, the Defense Department agreed to take a $400 million stake in MP Materials, a mining company that has struggled to turn profits amid tough price pressures from China.

 

A month later, the Commerce Department became the largest shareholder of Intel, the beleaguered US chip giant.  Not all companies have welcomed government investment. Some firms been reluctant to meet with Trump officials out of fear the government would pressure them to hand over parts of their company, according to industry executives. 

 

Officials and analysts have also questioned how much due diligence the Trump administration is performing. While the Biden administration took many months to evaluate targets for grants and loans, and was often criticised for moving slowly, the Trump administration appears to have arranged several of its equity stakes in a matter of weeks. But some analysts have praised the Trump administration’s sense of urgency, saying that the Biden administration had done little to change it.

 

In early November, the government announced its  equity deal, with Vulcan Elements, a North Carolina-based start-up making rare earth magnets. John Maslin, the chief executive of Vulcan Elements, said the company had received no political favouritism, and that the partnership would help reduce a dependency on China that could prevent the US from making key goods like cars, phones and robots.