“Whether Americans realize it or not, the Trump administration is trying to engineer a radical reconstruction of capitalism in the United States. The new model looks more like China’s, which allows private-sector development but emphasizes government ownership and control.
Various academics and politicians — many of whom have never run a business — are arguing that this is a wise model.
It is not.
We know from a century of evidence and a lifetime of practice that healthy economies grow from innovation that produces wealth. America’s economic system, built on three pillars — innovation, a big market and a stable rule of law — has been one of its greatest strengths and unique advantages.
Do we need to do a better job of distributing the gains from America’s economic success? Clearly. Is state-controlled industry and planning the way to do that? Absolutely not.
America’s economy has been struggling to deliver broadly felt progress for some time, a failure especially evident in the shrinking middle class and its declining opportunities. We hear this echoed in populist calls from both left and right. But the way to restore faith in American capitalism is not to discard it in favor of a Chinese-style approach. That model is showing signs of failure in China after an initial burst of success.
President Trump is dangerously close to copying its mistakes.
Take three of Mr. Trump’s most recent moves. First, in June his administration pushed a “golden share” arrangement in the merger of Nippon Steel and U.S. Steel, ensuring the government a veto right over key decisions — a tool straight out of Beijing’s playbook. Second, last month the administration took a 10 percent stake in Intel, effectively making Washington a shareholder in one of America’s most important technology companies, using money Congress had already allocated. And third, Mr. Trump has turned tariffs into a tool for political favoritism, granting exemptions to preferred companies in exchange for loyalty and concessions. Together, these steps blur the line between private enterprise and state ownership, substituting political calculation for competitive discipline and market-driven innovation.
To be sure, there are times when state intervention in markets is appropriate. Government helps build infrastructure and funds science that supports the creation of new technologies (sometimes entire industries). The internet and the Interstate System of highways are two classic examples, among countless others. And in national emergencies, such as the 2008 financial crisis and the Covid-19 pandemic, the government has a vital role to play in stabilizing the economy and mobilizing a national response to protect public welfare.
But government intervention damages the economy when it singles out individual companies instead of offering a broader program to support an industry, engage in general R&D or build infrastructure. Programs that apply transparent rules fairly preserve competition, while political favoritism distorts it. When the government — or an individual official — handpicks winners and losers, it undermines markets and rewards inside access.
That is exactly what’s happening now. Commerce Secretary Howard Lutnick has suggested that in addition to Intel and Nippon Steel, Washington could buy into military contractors such as Lockheed Martin, Boeing and Palantir. The White House has pushed chip makers like Nvidia and AMD to give a share of revenue from sales in China to the U.S. government, providing it a stake without formal ownership. It is not clear how these equity stakes will be held or managed (for instance, who will decide when to sell them). These moves are fundamentally changing the relationship between the private sector and the state.
While libertarians and traditional conservatives in the MAGA coalition have objected to the administration’s infringement on economic liberty, some on the left, such as Senator Bernie Sanders, have applauded its steps toward state ownership, arguing that Americans deserve a share of the profits from companies that receive federal money.
There are certainly cases in which this can make sense. After the Great Recession, banks should have compensated the United States for bailing them out. And when Tesla received $465 million in loans during a precarious moment in its existence, a stake in the company would have been an appropriate return. Tesla paid the loan back early and with interest, but the public never received compensation proportionate to the risk it took on. The government must design such arrangements systematically and transparently from the start and apply them evenly across industries. The federal initiative that funded Tesla (as well as other automakers), for example, and the CHIPS Act that funded Intel and other chip makers should have included taxpayer compensation mechanisms that applied to all participating companies.
Instead, the Trump administration is handing out or imposing deals arbitrarily and retroactively. The danger is evident: The government is not stepping in to solve a true crisis, protect taxpayers or advance the nation’s strategic priorities; it is perverting markets in favor of politically connected companies and hampering innovation. In other words: crony capitalism.
Authoritarian regimes don’t stop with large companies. State control inevitably reaches start-ups and small businesses, hollowing out the heart of the economy. Consider China. In 2018 more than 51,000 venture-backed start-ups formed. By 2023, that number had collapsed, reportedly to just 1,202. (The Chinese government disputes these numbers.) Innovation was replaced by access, creativity by compliance.
This is how authoritarian economies function. Success depends less on building products that meet people’s needs and more on cultivating connections with the state. In China knowing the right officials is often a prerequisite for even starting a business. That same pay-to-play culture is metastasizing in the United States today.
And perhaps most dangerous, the Chinese model relies not just on favoritism but also on fear — fear of crossing the government or simply of being overlooked by party elites. In 2023, reports began surfacing of disappeared Chinese founders and executives. The risk of unwanted attention from President Xi Jinping is destroying the incentive to take risks.
We see this fear taking hold in the United States, with company officials across industries genuflecting to Mr. Trump or simply trying to stay out of his line of fire.
The American model is capable of renewal. We need a system that adapts by encouraging innovation, empowering entrepreneurs and ensuring that risk and reward are fairly shared across society. America thrives when markets are large, rules are stable and opportunities are open to those willing to take risks, not just those with the best political connections. In practice, this means the government should create hands-off policy, while companies should take more responsibility for their employees and communities. And the two should work together to open more paths for people to build ownership — whether through their labor as workers, their capital as investors or their initiative as entrepreneurs.
Mr. Trump is exploiting popular discontent with the U.S. economy, but state capitalism corrodes even the strongest systems, as China’s stagnation shows. We abandon the American model at our peril.
Mr. Levine and Ms. MacBride are the authors of “Capital Evolution: The New American Economy” and “The New Builders: Face to Face with the True Future of Business.”” [1]
The authors are writing: “Trump Is Copying China. That’s a Terrible Idea.”
Robots are here and looking at us. We need to adapt our model, spread the wealth, making the possibility to survive the transition for everybody as a community. You, people, don’t know, what you are talking about.
With AI boosting capital returns for high earners and firms that adopt the technology, policymakers need to address rising wealth inequality. Comprehensive social safety nets and strategic tax policies could help make the transition more inclusive.
1. Trump Is Copying China. That’s a Terrible Idea.: Guest Essay. Levine, Seth; MacBride, Elizabeth. New York Times (Online) New York Times Company. Sep 12, 2025.
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