Is Trump Bringing an End to US Free Market Capitalism?

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2:22Bloomberg Audio Studios. Podcasts, radio, news. In the case of Intel was interesting, but I hope I'm going to have many more cases like it. You know, you do have stupid people say, oh, that's a shame. It's not a shame. It's called business.

2:49Stephanie Flanders:I'm Stephanie Flanders, Head of Government and Economics at Bloomberg, and this is Trumponomics, the podcast that looks at the economic world of Donald Trump, how he's already shaped the global economy, and what on earth is going to happen next. This week, we're sparing a thought for the boardrooms of corporate America, and how Trumponomics is working out for them. Donald Trump has involved himself more directly in American businesses on a wider range of issues than any president in living memory. He weighs in on social media, in the courts, and especially in the Oval Office. So is it just Trump being Trump?

3:26Stephanie Flanders:Or will history also say this was the point where the US embraced the kind of state-run capitalism previously associated with Moscow or Beijing? Just a few examples to introduce the thought. In late August, you'll remember the president sealed the deal that gave the US government a nearly 10 % stake in Intel Core. President Trump celebrating that he got it for zero. What this means for future... Shortly after calling on social media for the CEO of that semiconductor company to resign. The president's banned American chipmakers from exporting chips to China, only to change his mind a few months later after the CEO of the chip giant NVIDIA paid the president a visit and agreed to pay the government a 15 % tax on those chip sales.

4:1115 % of the revenues that they make from those sales into the China market of the H20

4:15Stephanie Flanders:when it comes to NVIDIA or AMD's equivalent once they start shipping those. Something we don't yet know is even constitutional. America's commander-in-chief has also weighed in on everything from changed restaurant logos and clothing commercials, causing stocks to jump or sink on the basis of late-night Truth Social posts. American Eagle shares are up 24 % right now, and this is after President Donald Trump came out in support of the controversial ad with Sidney Sweeney in it. And just this week, for example, he weighed in on a longstanding feature of US corporate life, saying, apropos of nothing in particular, that companies should have to report on a six-month basis their earnings, not quarterly.

4:58Stephanie Flanders:So how are CEOs handling all of this? What is the Trump playbook for them? And where are all of those interventions taking corporate America, American capitalism? Well, we're going to get into that right now with Shelley Banjo, Bloomberg's Managing Editor for Global Business in the Americas, who spends at least part of her time talking to chief executives who come through our doors in New York. Shelley, great to have you. Thanks for having me. And from San Francisco, Ian King, a reporter who covers semiconductors, hardware and telecoms for us at Bloomberg. Thanks, Ian. Hello there.

5:38Stephanie Flanders:Shelley, I noticed that one of our esteemed colleagues, Wes Kosova, wrote this week a brilliant CEO guide to getting what you want out of Trump. I mean, if someone was trying to devise MBA courses now on handling this second term of President Donald Trump, you know, seven months in, what do you think will be in that kind of class? I think the first thing is do not come empty handed. You know, Wes's wonderful story, as you point out, talks about this trophy that Tim Cook has prepared for him. We had the Coca-Cola CEO come in with a personalized bottle for Trump. And we can sort of mock this or laugh.

6:17But the indication is I am here to kiss the ring. And I want to start that from the outset the way you would go and visit royalty.

6:25Stephanie Flanders:We've been talking about this over the last few days. It's not just these sort of, you know, public times where you go to the White House and you lobby. It's also just the sort of never quite knowing what's going to happen next. Right, exactly. Because you can understand what Trump might be after on, you know, sort of the policies that he's into. But as a CEO, you're sort of living in fear that you're going to be the subject of a truth social post. And that is something that businesses and CEOs are terrified of because it's very hard to plan for. You can't really come up with a business case of what to do when this happens.

7:05The one CEO we had in last week told us that they actually did do a simulation with a board of what happens when you are the subject of a true social post. So it's a conversation they're having at the board level.

7:17Stephanie Flanders:And it's funny because I know people who do do some of these trainings, and obviously our social media is not a new thing. And I've heard sort of government relations and others talk about how does one handle it if there's a Twitter storm over something, you know, airlines deal with it all the time when you've got, you know, some prominent person stuck in a long line or their plane gets delayed. But I suspect, you know, there's a whole different set of rules if you're dealing with the commander-in-chief. Absolutely. And it moves markets. We saw with the Cracker Barrel example that they spent a lot of time putting out a new logo.

7:51Didn't look all that controversial at the time. Cracker Barrel, the famous U.S. restaurant chain, faces intense backlash after it tried to swap its own logo for a sleek new design. And all of a sudden it sort of stirred up a storm saying, why are you erasing our history? And so there was a huge backlash. and all of a sudden, you know, Trump is weighing in, the stock price is going down, and the CEO has to make a decision. Am I going to stand up for this? Am I going to, you know, fall back? And in the end, they caved. They said, you know, we're going to go back to how it was. We're sorry. And if you think about that exercise, you're sitting there just developing a brand logo, you don't necessarily think, okay, well, what is the president going to think about this brand logo?

8:40Stephanie Flanders:They talk about audience of one, yeah. And now you do. And so we had the Alaska Airlines CEO in a couple of days ago, and I asked him about this because they also changed their logo recently. And he said, it's not an excuse to say, like, we didn't think about it anymore. Like, we live in this world where you have to think about that. You have to think what's going to happen if, you know, the social media folks, if the president, if whoever is going to come out against you, what is your plan? And the anxiety that he said he was feeling as he was changing his logo. So, Ian, we do know that the president likes doing big deals and talking to big companies who will then make promises with lots of zeros attached when it comes to investment and other things.

9:23Stephanie Flanders:Obviously, the big tech giants, the likes of Google and Apple, you know, there's been a lot of that in that area, but also in the area that you cover. We're obviously thinking more and more these days about AI and the semiconductor chips that go into AI. How has the world changed just for the companies in the beat that you cover in the last seven months? I mean, it had already changed. We inherited an environment from the Biden administration where there was a unique level of government interest. And whether that government was in Washington or Beijing, the industry had become a tool of geopolitics.

9:58What's changed under the current president is the predictability. And on the one hand, the CEOs of the companies that I cover believe they've cracked the code. They believe that sort of flattery gets you everywhere. They have a certain pattern in terms of behavior that they exhibit now. They will go to the White House. They will come out of the security gate. They'll look into a TV camera and they'll say the following words, which is, we are so lucky to have this president who is uniquely interested in our industry. And then they will quote some large dollar number, which, frankly, quite often isn't really related to anything concrete.

10:35And that pattern appears to help them in their relationships and allow them to open doors to other things. But on the flip side of that, as Shelley said, there's an element of unpredictability that has been introduced in terms of we are one social media posting away from a massive intervention in the fate of our company and our company's earnings and our company's profits. And I think that is definitely taking its toll.

11:01Stephanie Flanders:I mean, we obviously saw the kind of embarrassing example of that. The off-mic moment was when Mark Zuckerberg, head of Meta, was kind of caught after one of these sessions in the White House where he'd announced a big number for what Meta was going to invest. And then he was heard to be saying to the president, I wasn't sure what number to use. I hope that was all right. Sorry, I wasn't ready to do it. I have a friend now. He said, I wasn't sure what number you wanted to do it. Which sort of goes to this choreography that people are engaging with and not necessarily a great attention to what the actual number is, at least from a business standpoint.

11:38Stephanie Flanders:But I guess the most extreme example, Ian, for those who haven't followed every turn, was where we ended up, where we started and where we ended up with the chief exec of Intel, Lit Bu Tan. So just talk us through what happened to him, because there was a sudden true social post about him saying he must be conflicted and must resign. And then the president said there is no other solution to this problem. But then it turned out that there was. Yeah, this was an alarming moment, I think, in corporate history. This gentleman was brought in to rescue Intel. He is of, you know, he's originally Malaysian.

12:13He's an American citizen. Now he's of Chinese background. And there was a political sort of campaign to try to undermine him because of his investment links to China, links that we don't even know exist anymore, but that certainly historically was the case. And what happened was the president saw that and seized upon it and immediately jumped to the conclusion that Lip Bhutan, the CEO of Intel, a publicly traded company, was in fact conflicted and should step down. That was a call he made. A week later, Lip Bhutan is in the White House. Everything is great. and this Chips Act money that had been assigned to Intel under the Biden administration is suddenly switched into a shareholding stake for the US government in Intel.

12:57So, I mean, how do you follow that? How do you plan for that? How do you run a company with that kind of set of possibilities in the air? The answer is you don't, you just react. And that's not a way to run a company.

13:11Stephanie Flanders:There's been some Republicans and certainly some sort of pro-market conservative commentators who've raised both eyebrows at that deal. But I think it's very striking how little opposition there's been to it or sort of concerns about it. And I guess one has to, just for completeness, I mean, NVIDIA is the other big deal that the president has made, which financially is probably even more significant for the company. We're talking about much bigger numbers. but also could be quite significant strategically for the US. Again, it's geopolitics influencing the US policy. The underlying desire is to prevent China from getting access to advanced semiconductors because we believe in the US that is against national security interests.

14:02But somehow that's become negotiable. Somehow that has become the subject of a real estate deal. and if NVIDIA and AMD, which is a smaller company doing roughly the same thing, are allowed to send a certain type of chip to China now, a reduced capability chip, then they can do that. But with the proviso that they give the US government effectively a kickback, 15 % of that. And there's a whole, as you alluded to, fuss or concern about whether this is even legal. We spoke with the CFO of NVIDIA. So this is the world's largest publicly traded corporation. We asked her about how are you going to pay this 15 %?

14:40And she said, I'm not. There's no rules. There's nothing. Effectively, what she said was, this is illegal. If I do this, I'm breaching my fiduciary duty. Can't do it until they give me a set of rules to do it. Those rules have not emerged. So right now, it's not going to happen.

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17:13Stephanie Flanders:Shelley, I do want to get back to you because something that strikes me when you think about the kind of training that anyone who gets to the top of a company will have had either implicitly or explicitly. I was sort of thinking about it as before we started this. The implicit messaging has always been you want to do everything you can to ingratiate yourself with the government, whatever country you are, but without it being evident and without necessarily calling attention or raising any question marks. Whereas it seems this is the opposite in this administration, whatever you do to ingratiate yourself has to be completely open and ideally, you know, in the Oval Office with cameras rolling.

17:53Stephanie Flanders:That is quite a shift. And I just wonder, you know, Are there even sort of legal worries in these boardrooms about needing to really very publicly engage in sort of quid pro quos with the federal government? Yeah, I mean, the most striking example of that has obviously been Elon Musk and Tesla and sort of how close you get to the president where you're literally in the White House making and helping and forming these decisions. And we saw the impact on Tesla. People stopped buying Tesla cars. You can sort of negotiate how much of that had to do with his association with Trump, how much it had to do with other things.

18:36But, you know, even we had the board chair of Tesla into Bloomberg this or this last week. And, you know, even she said as part of the negotiations with Musk for his pay package, like we would like to see him focus on Tesla. And so, you know, it does sort of raise the question of, you know, how much is it you're just doing your job as CEO includes now managing the emotions and the whims of the U.S. president and how close is too close and how far is too far. I mean, you haven't really seen a consumer backlash quite like at Tesla at other companies. And so I think some Americans, consumers and probably consumers around the world are sort of inured to it a little bit.

19:20They understand that this is part of the job. I think it's also a question of are people really going to do what they say that they're going to do? Because I think a hallmark of the Trump presidency is we're throwing a lot of big numbers at you, a lot of big stuff, a lot of big threats. You don't know which ones are going to come true. This week, you had the TikTok deal come back into focus. I remember when I was living in Hong Kong in 2018, 2019, 2020, you know, the first Trump presidency, we were talking about this. And so, you know, fast forward to 2025, we're still talking about the same thing that Trump was talking about.

19:55We're still talking about tariffs. Like, there's some things that just haven't happened yet. So how do you know as a CEO which ones to take seriously and which ones you don't? And I think the answer has become, as Ian sort of alluded to, like you have to take them all seriously. But I don't know, you know, how much do consumers really get impacted by that?

20:13Stephanie Flanders:You know, a part of the story of American capitalism was always sort of slightly economical with the truth. You know, there has always been an enormous amount of subsidies and lobbying. When I worked in the U.S. Treasury, you know, having been brought up in the U.K., I'm half American. And I was sometimes surprised by the sort of assumption that businesses, the sort of the closeness of the lobbying and the closeness of the business relationships was certainly something that was different from the UK and seemed to be part of the American tradition that you'd have businesses weighing in very directly on, you know, deals that were being done and other things.

20:49Stephanie Flanders:and there was no question of any wrongdoing. It was just like the way things happened. So, I mean, given that, is it surprising that you haven't had more businesses sort of say, hang on a minute, what kind of capitalism is this? For sure. And we are seeing that right now build up, all these companies build up their presences in Washington. They're hiring the firms that are aligned with Trump and people who had come out of the Trump 1.0 administration who have now started up their own lobbying firms. And they're coming out and saying that outright. We're not hiding. This is what it means to be a good CEO in this moment in 2025.

21:24And so are companies getting closer with the U.S. government or the administration's goals? Probably. I'm not sure if any of the consumers or investors seem to care at this moment. So far, we haven't seen some sort of big outcry or anything like that.

21:40Stephanie Flanders:I guess so far we've mainly seen stock prices go up rather than down, which makes a difference. Exactly. Ian, if we just think about the potential long-term implications of this, and I've seen that there's been a debate around this, some saying that America is embracing, for better or worse, more of a kind of Chinese-style state-run capitalism. Other people, I saw Michael Strain, the director of economic policy studies at the American Enterprise Institute said, you know, this is Trump being Trump. This is opportunism and a sort of thrill about having deals being done from Donald Trump. It's not a big ideological shift.

22:15Stephanie Flanders:I mean, even those two examples that you and I just talked about, taking a strategic share in an industry, a US company that makes something chips that we know is going to be sort of central to the future of the global economy. It doesn't seem, of all the things that Donald Trump's doing, that didn't seem to me like the craziest thing. And it certainly is no different from some countries, you know, that aren't China, like France, for example. Yeah, I mean, when you unpack that, there are a number of elements which I think talk to your point here. The first point is that he inherited an apparatus called the CHIPS Act from the Biden administration.