Trump’s ‘Golden Share’ breaches government’s proper role 

On June 13, President Trump issued an executive order declaring that the proposed acquisition of U.S. Steel by Japan’s Nippon Steel presents a national security threat to the United States, and that the transaction should be prohibited unless the two companies assent to a national security agreement. The next day, US Secretary of Commerce Howard Lutnick wrote that “President Trump has secured a perpetual Golden Share as part of Nippon Steel’s acquisition of U.S. Steel.” Lutnick also said that, unless the president gives consent, U.S. Steel cannot relocate its headquarters from Pittsburgh, Pennsylvania, redomicile outside the US, change its name, or transfer jobs or production outside the US. 

According to Investopedia, a Golden Share is a “type of share that gives its shareholder veto power over changes to the company’s charter.” Furthermore, an entity with a Golden Share “holds special voting rights, giving its holder the ability to block another shareholder from taking more than a ratio of ordinary shares.” Trump’s Golden Share in U.S. Steel is not a simple background role; the agreement gives Trump immense power over U.S. Steel decisions, including choices over employee salaries, sourcing, acquisitions, closing or idling plants, and likely much more. Trump will also be given authority to “name one of the corporate board’s independent three directors and veto power over the other two choices.”  

The presence of a Golden Share is not technically nationalization, as there will still be private shareholders, but it effectively turns U.S. Steel into a state-owned enterprise, at least as far as capital allocation and investment decisions are concerned. The European Union does not generally allow such shares as they are incompatible with EU law on freedom of capital. This decision therefore puts the US to the left of the EU on this aspect of economic policy. 

The Golden Share is the culmination of months of turmoil. During his presidency, Joe Biden blocked Nippon Steel from buying a struggling U.S. Steel for $14 billion, also citing national security concerns. Now, though it seems like the dust has settled, Trump’s protectionist restrictions on U.S. Steel not only create significant distortions that interfere with American businesses but also set a dangerous precedent for direct government involvement in private business decisions. 

Nippon Steel and U.S. Steel are two for-profit companies, whose goal is to generate profits by providing valuable materials to their customers. Any restrictions placed on the companies, whether over their ability to merge or over day-to-day operation decisions, stifle their ability to optimize business and deliver the best product possible. For example, one of the national security agreement’s restrictions on U.S. Steel is that it cannot transfer production or jobs outside the US unless given consent by the president. If an opportunity to relocate to a foreign country to optimize production presents itself to U.S. Steel, then Trump could arbitrarily prevent such a move. Given Trump’s propensity for protectionist policies, it is likely that he would veto a relocation, potentially resulting in less efficient operations or higher prices for consumers. 

Even worse is Trump’s (and Biden’s) invocation of “national security concerns” as justification for the involvement of their respective administrations in the merger. Nippon Steel’s native Japan has been one of America’s closest allies for decades and it is extremely unlikely that the two countries would come into conflict anytime soon. Additionally, according to Cato’s Scott Lincicome, even in the case of a crisis, “the U.S. military needs a tiny amount of domestic steel output and gets none (emphasis in original) of it from U.S. Steel.” It is time for public officials to stop throwing around the term “national security” as if it justifies any actions they take. 

Aside from the negative practical consequences of Trump’s Golden Share, the quasi-nationalization of U.S. Steel sets a dangerous precedent for future government involvement in private business. It also represents a long, drawn-out shift in the Republican Party away from supporting free enterprise and towards economic collectivization and statism. To protect American business interests, and the fundamental rights and freedoms of Americans, this shift must be reversed. Let Trump’s Golden Share in U.S. Steel be a warning flag that America’s economic policy is heading in a dangerous direction.