The U.S. government isn’t quite seizing the means of production. However, it is certainly extorting the control of those means from firms engaged in ordinary business operations.

The White House recently announced a soft-core nationalization of U.S. Steel, the terminus of that company’s attempt to sell itself to a Japanese steelmaker, Nippon Steel. The regulatory difficulties that afflicted the deal were wholly manufactured, the product of faux economic populism masquerading as security-related anxieties. Under the Biden administration, the acquisition was to be scuttled under the pretense that a non-American company would impair national defense. After first aligning himself with his predecessor’s obstructionism, President Donald Trump deigned to allow it to go forward.

Surely, this should be cause for free marketeers to rejoice! Or perhaps not. The tribute paid to escape regulatory ire is a so-called “noneconomic” Golden Share in U.S. Steel to be held by the White House in perpetuity. This will provide regulators a veto over the firm’s decision-making. How exactly this control relates to national security remains unclear. The marionette strings the Trump administration has attached to U.S. Steel’s management are, instead, tethered to the interests of labor unions and the sort of stultifying central planning that conservatives once deemed verboten on both principled and prudential grounds.

Crowing on X, Secretary of Commerce Howard Lutnick listed the actions that the Golden Share will “prevent … from occurring without the consent of the President of the United States or his designee.” These include, inter alia, the relocation of U.S. Steel’s headquarters from Philadelphia, the closure or idling of plants, the purchase of manufacturing inputs from international sources, and certain salary changes.

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Make no mistake: these veto powers will hamstring U.S. Steel. Markets are not static. To remain competitive, businesses require flexibility. If the materials U.S. Steel requires to operate can be had more cheaply from non-American suppliers, the state should not prevent it. Higher input costs mean higher prices for American businesses that consume steel products, sapping U.S. Steel’s competitive vigor and rendering the larger American manufacturing sector poorer.

Likewise, if a plant becomes unprofitable to operate, it should be shuttered and its work transferred elsewhere. Much of the purported “hollowing out” of the Rust Belt has resulted from salutary technological developments — which have benefited America’s manufacturing sector greatly — and the escape of American manufacturing from ill-governed jurisdictions. Indeed, many factories fleeing the Rust Belt have found refuge, not in China or Mexico, but in Tennessee or North Carolina, places more friendly to business and investment. Attempts to disallow such changes weaken the very manufacturers whose interests the Trump administration claims to champion.

More ridiculously, given that the government’s statutory authorities pertain only to national security, Lutnick also reports that the Golden Share will hang a regulatory veto over any future attempt to rename U.S. Steel. This condition illuminates the true source of objections to the acquisition — none of which relate to national security in the slightest.

U.S. Steel gained fame in its early years as a quintessential American firm. Today, however, it has faded into relative insignificance. The world’s largest corporation in 1901, it dropped from the S&P 500 in 2014. It was ranked, in August 2023, below 900 in terms of market capitalization. Its output, which is unlikely to shrink, could vanish without imperiling the Department of Defense (DoD)’s demand for steel, which amounts to just 1% to 3% of the industry’s output.

Moreover, the steel products most vital to the DoD come not from U.S. Steel plants but from those of its competitor, Cleveland-Cliffs. “The rest of the steel industry [besides these Cleveland-Cliffs plants] … has not only been mostly worthless to national security — it has arguably become detrimental to it,” former deputy undersecretary of defense for industrial policy William C. Greenwalt argues.

The U.S. Steel saga has more to do with branding than national security. Had it been named, say, “Pennsylvania Steel,” regulators would never have balked at its acquisition by Nippon (particularly given the deal’s myriad economic benefits). Despite Lutnick praising the Trump administration’s settlement as “The Art of the Deal,” it should be recognized that the quasi-nationalization of industry is to be avoided, not touted as a victory. If economics and history convey any lesson, it is that state-run or -controlled enterprises rarely succeed. Irrespective of whether Nippon Steel ought to be permitted to acquire an American company, the federal government’s acquisition of a stake in U.S. Steel ought to be eschewed.

In the end, the Golden Share is iron pyrite.

David B. McGarry is the research director of the Taxpayers Protection Alliance.