Industrial Policy, Trump Style

President Donald Trump has famously challenged traditional free-market conservative dogma in the name of America First. He’s taken a ‘golden share’ in U.S. Steel that grants him control over the company’s decisions; he’s pressured Intel to convert federal grants received through the 2022 CHIPS Act into a 10 percent equity stake for the U.S. government; and he even removed a national security ban on chip sales to China by Nvidia and AMD in exchange for 15 percent of the revenue.

Commentators from The Wall Street Journal to The Atlantic have decried Trump’s economic nationalism as “state capitalism with American characteristics,” comparing Trump’s state interventionism with Xi Jinping’s China.

While China and the U.S. may increasingly share authoritarian traits—the centralization of executive authority and the suppression of free speech are just a couple—they fundamentally differ in their economic strategies. In China, state-managed capitalism advances industrial innovation through top-down strategic policies; in the U.S., a state-directed cronyism leverages executive power to satisfy the whims—and, perhaps, fill the pockets of favored actors.

China’s state-managed capitalism—rooted in decades of industrial policy—has fostered world-leading growth in advanced technologies, energy infrastructure, and manufacturing capacity. Trump’s interventions, by contrast, lack any strategic vision. His administration has turned industrial policy into a personal patronage system—using tariffs, subsidies, and regulatory power not to build national capacity, but to reward allies and punish enemies.

Trump has deployed federal power more than any recent president, but instead of using it for practical purposes, he has turned it into a tool for repression and self-promotion. Unlike China, Trump’s “state capitalism” blunders forward according to the president’s impulses, not the nation’s priorities. A closer comparison would be authoritarian cronyism: unconstitutional, self-enriching, and strategically confused. (For an explanation of how a future administration could refocus Trump’s industrial policies to achieve strategic goals, constitutionally, see Joel Dodge’s recent piece in the Washington Monthly: “Trump’s Industrial Policy: What’s Right and Wrong.”)

Trump’s Cronyism

Zooming in on the realities of Trump’s economic policies reveals their irrationality.

After initially banning the export of AI chips to China for national security reasons, Trump reversed his decision when Nvidia’s CEO personally appealed for leniency. Trump agreed to resume chip exports to China only in exchange for 15 percent of the revenue. 

The move is not only baldly unconstitutional—Article I of the U.S. Constitution states that “No Tax or Duty shall be laid on Articles exported from any State”—it’s self-defeating. The White House’s chip policy places tariffs on imports and fees on exports, making it both expensive to compete internationally and sell at home, all while undermining the U.S. tech industry’s advantage over Chinese competitors.

Trump’s equity stake in Intel follows the same I-need-a-taste playbook. Biden’s 2022 CHIPS Act allocated billions to boost U.S. semiconductor manufacturing, but by 2025, $8.9 billion of those funds had not yet been distributed to Intel. Trump used the unspent funds as leverage, pressuring Intel to give up equity in exchange for money Congress had already approved. 

To be fair, Senator Bernie Sanders, the Vermont Independent, who introduced an amendment to the CHIPS Act in 2022 that would have taken equity in return for government funding, approved, arguing that “the taxpayers of America have a right to a reasonable return” on federal investment. However, it’s unclear how the Trump administration will collect or distribute such returns. With Russ Vought at the Office of Management and Budget, bypassing Congress to direct appropriated funds as the White House pleases, there’s no reason to believe any returns will ever redound to the American taxpayer. This isn’t a socialist scheme to redistribute American wealth, or even the opening salvo to a sovereign wealth fund—it’s just another step in the consolidation of power in Trump’s person.

To what end? Political theater. Trump’s ‘golden share’ in U.S. Steel, which gives the government control over major company decisions, has led to absurd results: a steel mill in Illinois is shutting down production but keeping its workers on the payroll to keep the facility idle. Instead of offering severance pay or job training to help workers move on, the White House simply wants to avoid bad headlines showing American steel mills—MAGA’s cultural icon of America First—laying off blue-collar workers. Meanwhile, for those working outside Trump’s Rust Belt nostalgia photo ops, more than 42,000 manufacturing jobs have been lost since he announced his ‘Liberation Day’ tariffs. 

Trump’s theatrics are already generating massive blowback. Recently, the Department of Homeland Security led its largest-ever immigration raid at Hyundai’s battery plant in Georgia, arresting hundreds of skilled South Korean workers brought in to get the facility up and running quickly. Footage of shackled South Korean businessmen and engineers, which ICE proudly posted online, sparked outrage across the political spectrum in South Korea and now threatens billions in foreign investment. Trump seemed to grasp the misstep, acknowledging that “we have to learn from others how to make [sic].” It may already be too late. One South Korean worker, describing the squalid conditions in ICE detention, said upon his return to South Korea, “I will never visit the United States again.”

From extorting blue-chip companies to arresting foreign engineers, it’s clear that Trump has no strategic priorities. There is no ‘Made in America 2035’ vision. He can hardly commit to a firm policy for more than a few days, let alone years. His heavy-handed transactionalism distorts market decisions as businesses scramble to divine the president’s caprices—and curry his favor. Until industrial strategy becomes a hit on Fox & Friends, the president will unlikely ever think about it.

Actually Successful Industrial Policy

Meanwhile, on the other side of the world, China has become the paradigm of industrial development.

Through decades of interventionist industrial policies, China’s state-managed capitalism has pursued long-term growth and prosperity—and delivered, lifting 800 million people out of poverty over the past 40 years. Since Deng Xiaoping’s reforms in the 1970s, the nation has embraced market mechanisms with a “negotiated receptivity,” borrowing what works from abroad, discarding what doesn’t, and constantly adapting policy to Chinese realities rather than importing Western dogmas wholesale. In contrast to Trump’s phony populism, China has shown what it means to treat economic development as a national project.

Rather than be led down the developmental dead-end of the neoliberal Washington Consensus, China drew lessons from the experiences of Soviet-style public enterprise and East Asian state-led sectoral development. It has cultivated domestic champions, moved steadily up the value-added chain, and invested heavily in technological innovation. China has allowed the state to co-evolve with markets by building experimental, adaptable institutions.

This long-term strategy has already transformed the global economy. The first “China Shock” witnessed the country’s transformation into the world’s factory, displacing long-established American industries like furniture and textiles. The second China Shock is poised to be far more consequential, threatening to overtake the U.S. lead in advanced hi-tech sectors from aviation to robotics to batteries.

This extraordinary leap began in 2015 with the launch of Made in China 2025 (MIC25), an industrial strategy explicitly designed to catapult China from a low-cost assembler of goods to a global leader in advanced technology. Targeting ten priority sectors, including aerospace, biopharma, and clean energy, MIC25 aimed to achieve self-sufficiency in the core components of advanced manufacturing. This included tax incentives and subsidies into private and state R&D, technology transfers traded for market access, joint ventures, foreign acquisitions, licensing high-tech equipment, and even outright cyber and industrial espionage.

The strategy has been largely successful. China has dramatically reduced its dependency on imports and foreign firms by localizing high-tech production and research in exchange for market access. It has also become globally competitive in high-tech sectors like EVs and drones and risen to technological leadership through world-class research and patents.

While the U.S. and European Union have accused China of ‘unfairly’ subsidizing industry, the Head of Research at the China Institute at the University of Alberta, Anton Malkin, argues that MIC25 follows America’s historical playbook for achieving economic dominance: “a system of government-funded research initiatives underlined by strategic and defense priorities that are meant to feed into eventual commercial adaptation by the private sector.”

China’s industrial strategy represents a new Fordist model of production. By vertically integrating supply chains from raw materials to final assembly, Chinese firms hedge against geopolitical and environmental risks while gaining unprecedented control over production. China took the West’s playbook to beat them at their own game.

Authoritarianism Without Chinese Characteristics

This is what the current state-managed capitalism really looks like. China doesn’t just punish companies with tariffs to encourage manufacturing—a so-called ‘strategy’ that is clearly failing—it uses targeted government intervention to develop entire industries, bring in foreign technology, and steadily move up the value chain. Nothing better illustrates the success of China’s approach than the fact that the U.S. and EU are now seeking joint ventures and technology transfers from China—the very tools that built China’s economy. 

If the Trump administration and Xi Jinping’s CCP share anything in common, it’s their authoritarian impulse. The CCP stifles dissent, enforces traditional hierarchies, suppresses labor, restricts movement, and arbitrarily detains minority populations in reeducation camps. The Trump administration attacks First Amendment rights, promotes a return to patriarchy, crushes unions and collective bargaining, and rounds up immigrants and even lawful residents into mass detention centers.

China has successfully combined political repression with a coherent economic plan—much to the dismay of many. In contrast, Trump’s America uses political repression to mask the absence of any real economic vision. Trump’s so-called “state capitalism” is not a serious industrial policy. It resembles China’s authoritarianism but lacks its strategic coherence and economic dynamism.