Does the Trump Administration want to change American capitalism? Washington’s recent moves, like buying a 10% stake in semiconductor manufacturer Intel, indicate a change of direction. Washington has been a supporter of free-market capitalism for decades. The government seems to support a different direction today – namely, state-directed capitalism.
This reversal is striking to me as a professor of Questrom School of Business, who studies economic systems. The Ravi K. Mehrotra Institute supports my research, as it aims to better understand the interaction between business, markets, and society. According to my previous research, which found, for instance, that U.S. media coverage of capitalism in the 1940s was much more negative than now, capitalism is not in retreat, but rather is evolving.
What direction does the Trump Administration push it in?
Capitalisms and their types
The term capitalism is used in a variety of ways. Capitalism is defined as the ownership of private property, such as farms, factories and offices.
Profit is the driving force behind capitalism. Adam Smith is credited with some of the first descriptions of profit as the driving force behind capitalism. In 1776 he said, “It’s not the generosity of butchers, brewers, or bakers that will provide us with our food, but their concern for their own interests.”
Capitalism is characterized by the profit-making and the control of the production means. There are several types of capitalism, but I will focus on the three most significant.
When the government is hands off in the economy, it’s called free-market capitalism. After the Civil War, America is an excellent example of free market capitalism. In the late 1800s the federal government had few regulations for businesses.
State-guided capitalism occurs when the government selects which industries or businesses to support. Favored industries receive money, and are subject to fewer regulations. China is a prime example of state guided capitalism. The state supports industries like shipbuilding, AI, and steel.
When a small group of people control the economy and own key industries, it is called oligarchic capitalism. This type of capitalism is prevalent in Russia.
Each type of capitalism is unique and has strengths as well as weaknesses. Free-market capitalism, for example, provides incentives that encourage the growth of the economy. However, the absence of regulations often causes businesses to run roughshod on consumers. U.S. history describes the late 1800s in the United States as an era of the robber barons.
State-guided capitalists can boost output in favored industries. If the government chooses the wrong industry, it can waste a lot of money to prop up failing firms.
The oligarchic capitalist system can quickly invest and move resources to new areas, but profits are only shared by a small elite.
Recent Changes
The U.S. appears to operate under a model of hybrid capitalism that combines free-market principles and elements of state capitalism.
The Trump administration has recently decided to purchase a 10% share in Intel. In 2022, Congress approved the CHIPS and Science Act worth billions of dollars to support U.S. chipmakers. Intel will receive US$11.1 Billion in grant funding from this program, as well as other government funds. This public funding has been converted by the current administration into 10% of Intel’s shares.
Intel is not the only company that has invested in other companies. Recently, government became a shareholder of other companies that it deemed strategically important. This trend is likely to continue. It could even lead to the creation of “sovereign funds”. In July 2025 the Department of Defense purchased $400 million of MP Materials’ convertible preferred stock. MP Materials, the U.S.’s only rare-earth mineral mine with an integrated production capability, is owned by the Department of Defense. The Department of Defense will be the company’s largest shareholder, according to MP Materials.
A share of the revenue is required by the government from major computer chip makers. As a requirement for export licences, Nvidia or AMD must remit 15% from the revenue of certain chip sales in China.
The US Change is Important
CHIPS and Science Act, which was passed in 2009, has already invested billions of dollars into U.S. Semiconductor manufacturing through grants and tax credits as well as R&D assistance. MP Materials and Intel may serve as models for future strategic interventions. The U.S. spends billions of dollars each year and investments in American companies and industries represent a tiny percentage.
The CHIPS and Science Act, which was signed into law in 2022 by the Biden Administration, relied heavily on the traditional industrial policies such as tax credits, grants and milestone funding. The Trump administration, on the other hand, has turned these grants into equity agreements, stating that the government must get a return for its investment.
The shift to direct ownership from an approach based on incentives is one of the most interesting experiments in American capitalism today. What happens when this strategy is expanded? Governments could get more involved with energy, AI and biotech, as well as any other area where there are signs that markets have a tendency to lag or where supply chains may be geopolitically unstable.
The U.S. does not reject capitalism, but rather recalibrates its limits. Washington’s intervention will be evident in the next few years.
