Trump's Pay-to-Play Economy: A New Kind of Corporatism?

US President Donald Trump is taking a transactional approach to economic management, shaking down American companies and threatening institutions that underpin well-functioning markets. He has demanded payments from chipmakers Nvidia and AMD for export licenses, and has called for Intel's CEO to step down and for Goldman Sachs to fire its chief economist. Economists warn that this pay-to-play economy will lead to slower growth, less innovation, and lower living standards over time.

US President Donald Trump is taking a transactional approach to economic management, shaking down American companies and threatening institutions that underpin well-functioning markets. This week, chipmakers Nvidia Corp. and Advanced Micro Devices Inc. agreed to pay the U.S. Treasury 15% of the profits earned from selling certain advanced semiconductors in China in return for export licenses [1].

Trump has also demanded a "golden share" from Nippon Steel Corp. as a condition for approving its takeover of U.S. Steel Corp., and is in talks to take a direct stake in Intel Corp. INTC-Q. Additionally, he has called for Intel's CEO to step down and for Goldman Sachs to fire its chief economist [1].

Economists warn that this pay-to-play economy will lead to slower growth, less innovation, and lower living standards over time. "The President does seem to favour a pay-to-play economy," said Ryan Bourne, an economist at the Cato Institute. "It's a kind of maximalist corporatism more familiar in emerging-market economies or state-centric systems like China" [1].

Trump's attempts to exert more control over institutions, such as the Federal Reserve and the Bureau of Labor Statistics, have also raised concerns. He has threatened to fire Federal Reserve chair Jerome Powell and sacked the head of the BLS following an unflattering jobs report [1].

While Trump's approach to the economy is currently ascendant in Washington, it does not necessarily run deep within the rest of the Republican Party. "If you put all 53 Republican senators in a room and you ask them in an anonymous poll: ‘How many of you think that Nvidia should be shaken down to hand over 15% of their Chinese sales revenue?’ You get 52 of them who would say this is all crazy," said Michael Strain, director of economic policy studies at the American Enterprise Institute [1].

References:
[1] https://www.theglobeandmail.com/business/article-donald-trump-economy-pay-to-play-private-sector/
[2] https://www.mk.co.kr/en/world/11392528