The Biden and Trump administrations have both spoken at length about “strategic competition” with China, but the Trump administration’s latest move takes industrial policy to a new level. The White House confirmed it is seeking an equity stake in Lithium Americas, a Canadian mining company developing the massive Thacker Pass lithium project in Nevada. Lithium Americas’ stock soared 95% on the news, highlighting how powerful government action can be in shaping market fortunes.
So I have to ask is this a boost for critical minerals or a blow to free markets? While the proposed deal is framed as a prudent way to protect taxpayer interests and secure a domestic supply of lithium a key ingredient in electric vehicle (EV) batteries. I'm wresting with the thought of how direct government ownership square with the principles of a free market economy?
On the surface, the government’s logic is straightforward. Lithium Americas and its partner General Motors are renegotiating a $2.2 billion Department of Energy loan. Because the project failed to meet the original disbursement conditions, the company requested more favorable terms. In exchange for extending repayment, the administration wants a small equity stake to create a cash buffer for taxpayers.
Yet, the market reaction tells its own story. Shares of Lithium Americas more than doubled in a single day which is a sign that investors view government backing as a guarantee of success. This is not mere sentiment because companies with government stakes often enjoy easier access to capital, higher valuations, and lower perceived risk. Competing miners without federal support now face a tilted playing field. A government that buys stocks even in the name of security risks signaling that success depends less on innovation and efficiency than on political favor.
I think we are in dangerous waters with this precedent that's being set. I also think some Trump insiders made a killing on this deal, but don't get me started on the insider trading going on in our government...