Trump’s “State Capitalism”: Washington’s Expanding Corporate Portfolio

President Donald Trump routinely warns Americans about the dangers of communism and socialism. But apparently, government ownership of private businesses is perfectly acceptable, provided his administration gets to choose which ones.

A new report from the libertarian Cato Institute documents Washington’s rapidly expanding ownership stakes in American corporations and warns that political power and corporate interests are becoming increasingly intertwined.

Cato’s Government Ownership Dashboard now tracks 35 federal equity arrangements involving private companies, up from 34 in an October 2 analysis.

The portfolio spans semiconductors, steel, mining, nuclear energy, quantum computing, and defense manufacturing. Some deals have closed; others remain proposals or conditional agreements.

Cato economist Scott Lincicome calls the trend “state corporatism,” warning that government participation in private enterprise threatens competition, innovation, and economic freedom.

The administration’s most prominent transaction involves semiconductor manufacturer Intel.

In August 2025, Trump secured a 9.9-percent stake in the company in exchange for $8.9 billion in federal funding. Much of that money came from previously approved CHIPS Act incentives. Washington also obtained a warrant to acquire additional shares under certain conditions.

The agreement followed Trump’s demand that Intel CEO Lip-Bu Tan resign over alleged conflicts involving China. After meeting with Trump, Tan retained his position, and the government became a major shareholder.

Another arrangement gave Washington extraordinary influence without conventional stock ownership.

In June 2025, Trump approved Japanese company Nippon Steel’s acquisition of U.S. Steel, but secured a special “golden share”. It allows the government to veto certain corporate decisions, including significant operational changes and facility closures.

Washington subsequently used that leverage to oppose U.S. Steel’s plans to suspend processing operations at its Granite City, Illinois, facility.

The government also entered the critical-minerals business.

In July 2025, the Pentagon committed $400 million to rare-earth producer MP Materials. Preferred shares and warrants could give Washington roughly 15 percent ownership.

Additional arrangements involved Lithium Americas, Trilogy Metals, USA Rare Earth, Vulcan Elements, and other mining and processing companies.

The Pentagon also committed $450 million to Elmet Group, a manufacturer of materials used in missiles, submarines, and other defense equipment. The September agreement included preferred stock, warrants, and corporate governance rights.

From Nuclear Reactors to Quantum Computing

Washington’s portfolio extends into advanced energy and emerging technologies.

In October 2025, the Commerce Department negotiated an arrangement involving nuclear manufacturer Westinghouse. It gives the federal government conditional participation in future financial gains and potential equity rights.

The administration also pursued investments in quantum computing companies, including D-Wave, Rigetti, PsiQuantum, Quantinuum, and Atom Computing.

Cato’s dashboard identifies nine quantum computing arrangements among the 35 announced deals.

Be Like China to Beat China?

Trump officials defend the investments as essential to national security, industrial competitiveness, and reducing dependence on China.

China dominates important rare-earth processing markets, while semiconductors and advanced computing have significant military applications. But does protecting strategic industries require government ownership?

In an August 2025 analysis, Cato’s Michael Chapman cited The Wall Street Journal’s chief economics commentator Greg Ip, who described Trump’s approach:

This isn’t socialism, in which the state owns the means of production. It is more like state capitalism, a hybrid between socialism and capitalism in which the state guides the decisions of nominally private enterprises.

Ip went further, accusing Trump of “imitating the Chinese Communist Party by extending political control ever deeper into the economy.”

Chapman also quoted economist Daniel J. Smith:

Lawmakers will soon argue that if chips and steel are too important to leave to free markets, food and medicine are as well.

When Trump and Sanders Agree

Criticism of Trump’s acquisitions also came from fellow Republicans.

Senator Rand Paul (R-Ky.) called the Intel deal a “terrible idea,” asking:

If socialism is government owning the means of production, wouldn’t the government owning part of Intel be a step toward socialism?

Senator Thom Tillis (R-N.C.) similarly warned that partial government ownership resembled a “semi-state owned enterprise, à la CCCP,” referring to the Soviet Union.

Yet democratic socialist Senator Bernie Sanders supported taxpayers receiving equity in subsidized corporations, arguing they “have a right to a reasonable return on that investment.”

Trump pledged further acquisitions:

I will make deals like that for our Country all day long… I want to try and get as much as I can.

Commerce Secretary Howard Lutnick also discussed federal stakes in defense contractors, including Lockheed Martin.

“They are basically an arm of the U.S. government,” he said of the company.

The debate reveals an unusual divide: Some Republicans condemn federal ownership as socialism, while Trump and Sanders find common ground in making taxpayers corporate shareholders.

Government Power, Private Interests

Government ownership creates conflicts beyond taxpayers’ financial exposure.

Washington regulates corporations, awards contracts, distributes subsidies, and approves mergers. Now it can also profit from selected companies. The Pentagon, for example, can become a defense manufacturer’s customer, financier, regulator, and shareholder simultaneously.

Private business interests surrounding the presidency raise further concerns.

Donald Trump Jr. and Eric Trump have invested in defense and technology businesses, including SpaceX and Anduril, through funds linked to them.

In October, Defense Secretary Pete Hegseth appointed SpaceX CEO Elon Musk and Anduril founder Palmer Luckey to advise the Pentagon’s new Project Meridian initiative on the future of warfare.

According to a July investigation by The Washington Post, companies backed by investment funds linked to Trump’s sons received at least $3.2 billion in direct federal business after the investments, plus $3.1 billion in future contract options.

Meanwhile, the Post reported last week that Trump himself purchased between $1 million and $5 million in SpaceX bonds shortly before announcing a new space policy.

These relationships raise questions about political influence and preferential treatment. Who ensures that public decisions remain independent of such financial interests?

Cato economists Tad DeHaven and Chad Smitson also questioned the Pentagon’s statutory authority to acquire corporate shares and criticized the limited disclosure of deal terms.

Political Connections as an Investment Strategy

Government intervention can also redirect private capital.

In a January analysis, Cato’s Lincicome argued that Washington’s investment helped lift Intel’s share price despite persistent operational problems, potentially redirecting tens of billions of dollars in private investment away from stronger competitors.

One semiconductor analyst attributed market enthusiasm to “vibes and tweets.”

Intel itself warned investors that federal ownership could create political and regulatory complications.

“The Trump administration now owns Intel’s success or failure,” former Commerce Department official James Secreto told The Associated Press.

That raises the prospect of further interventions to protect struggling investments.

Political access may become as valuable as commercial performance, rewarding companies for cultivating Washington rather than competing for customers.

“Socialism by Installments”

Such government intervention in business and markets is clearly unconstitutional. Apart from that basic truth, there are other dangers, as well.

History shows how difficult it can be to reverse supposedly temporary government interventions.

For instance, Fannie Mae and Freddie Mac, two federally chartered mortgage finance giants, entered government conservatorship during the September 2008 financial crisis. Both remain under federal control 18 years later.

Previous administrations have also intervened in private enterprise. George W. Bush and Barack Obama oversaw emergency corporate bailouts, while Joe Biden expanded industrial subsidies through the CHIPS Act and Inflation Reduction Act.

But Trump has made direct equity acquisitions and negotiated corporate control recurring instruments of industrial policy, without a comparable economy-wide crisis.

Cato’s Chapman invokes economist Ludwig von Mises, who warned that government interventions create distortions that invite further interventions. He described the progression as “socialism by installments.”

Federal powers also outlast presidential administrations. Republicans now justify corporate ownership through national security and competition with China. A future Democratic administration could invoke climate policy, healthcare, or other priorities.

The precedent would already exist.