Trump’s loan freeze chaos is bad for business

New York CNN —
The US government has many ways to funnel financial support to businesses, both large and small, helping them to do research and development, expand operations, hire and pay staff, and compete in the global market place. Just about all of those means of financial support were up in the air as of Tuesday evening.
The Trump administration attempted to place an indefinite freeze on federal grants and loan programs Monday night, a move that left many questions for businesses that have come to depend on government support for their plans and activities.
Then late Tuesday a federal judge blocked the move from taking place for “open awards” already granted through at least Monday, creating even more uncertainty.
And if there’s one thing that businesses hate, it is uncertainty. But it’s the best they have for a least a little while.
The move by the Trump administration sowed chaos and mass confusion across non-profits, local governments, universities, and recipients of other federal money. But businesses spread across every state depend on government grants and loan programs too, using literally tens of billions of federal dollars to employ perhaps millions of workers.
Whether that spigot is in danger of being turned off by the Trump administration’s freeze on federal grants and loan programs, and if so, for how long, was difficult to sort out Tuesday, even before the judge’s ruling. But there is clearly lots at stake.
The federal Office of Management and Budget issued a two-page memo late Monday saying it was instituting a “Temporary pause of agency grant, loan, and other financial assistance programs.” The memo seemed to make clear it wants to continue and perhaps even increase help for businesses, as long as the Trump administration likes what they intend to do with the money.
“Financial assistance should be dedicated to advancing administration priorities… unleashing American energy and manufacturing,” the statement said.
Clean energy efforts in the crosshairs
But some assistance to businesses is clearly on the administration’s crosshairs. The memo specifically said “The use of Federal resources to advance… green new deal social engineering policies is a waste of taxpayer dollars that does not improve the day-to-day lives of those we serve.”
There is no such thing as a “green new deal.” The effort to pass that in 2019 during the first Trump administration failed. But clean energy projects got a major financial lift in 2022 when Congress passed the Inflation Reduction Act, which despite the name, focused greatly on support for energy and the environment. It included loans to help companies build electric vehicle plants and battery factories that are expected to create thousands of jobs, often in “red” states that President Donald Trump has won. The status of those previously announced loans is not clear, even before the court decision Tuesday evening.
The DOE reports that as of the end of the latest fiscal year in September it had funded $46.9 billion worth of “innovative clean energy projects and advanced technology vehicle manufacturing facilities across the United States.”
For example, BlueOval SK, a joint venture between Ford and Korean battery maker SK, received a $9.6 billion loan that is being to be used to build three EV battery plants – two in Kentucky one in Tennessee. Each plant is expected to employ 2,500 workers. One of the Kentucky plants and the Tennessee plants are due to start production later this year.
But a spokesperson for BlueOval SK did not answer questions about whether the “pause” announced Monday puts this or any other federal financial support at risk.
StarPlus Energy, a joint venture between Samsung SDI and automaker Stellantis, which builds cars under the Jeep, Ram, Dodge and Chrysler brands, also has a $7.5 billion loan that closed in December to build two lithium-ion battery cell and module manufacturing plants in Kokomo, Indiana. It also said it couldn’t answer questions from CNN on the status of its loan.
But federal financial support is crucial for American automakers trying to compete with Chinese car companies, who have received massive support from their own government to ramp up the country’s domestic electric vehicle industry, a letter to Congress from a trade group that represents automakers receiving loans said last year.
“Nations around the world are moving aggressively to lead the development and deployment of these emerging automotive technologies,” said the letter from the Alliance for Automotive Innovation, the industry trade group, which told CNN that it maintains the letter’s position. “The US must do everything it can to protect its competitiveness in a global marketplace, ensure a level playing field against unfair trade, technology, and subsidy practices.”
The group pointed out that the Chinese auto industry now produces about 10 million EVs and plug-in hybrids year, roughly equivalent to all the passenger cars made at American car factories.
Loans to businesses large and small
It’s not just the Department of Energy that has supported American clean energy efforts. The Small Business Administration, the Commerce Department’s Economic Development Agency and the Export-Import Bank, a federal agency that funds or backs loans used by American exporters to fund purchases by their foreign clients, all talk about clean energy loans in their year-end reports for last year.
None of those agencies responded to requests for comments from CNN Tuesday ahead of the court decision about how those or other financial support for the businesses they serve could be affected by the freeze on grants and loans.
The SBA provided $56 billion to small businesses and disaster-impacted communities in fiscal year 2024 which ended in September, making more than 100,000 business loans in that time. In addition to an increased emphasis on clean energy loans last year, it also highlighted loan programs targeting women-owned and minority-owned businesses. It’s not clear whether those programs are also at risk since the OMB statement also identified DEI programs, or diversity, equity, and inclusion programs, as something it wants to root out during this current freeze.
Much federal funding goes to industries with much broader political support. For example, the 2022 bi-partisan CHIPS Act approved $39 billion for manufacturing incentives to support building or expanding 16 US semiconductor factories, plus an additional $11B for research and development assistance.
The programs that provide loans or grants to American businesses send most of that help to a wide variety of businesses in a range of industries representing core components from the American economy – from construction, hospitality and tourism, agriculture, traditional energy companies, health care and manufacturers large and small.
Asked at Tuesday’s White House press conference how organizations that rely on federal funding should make payroll, Trump Press Secretary Karoline Leavitt said that Russ Vought, the acting head of the OMB, had said that if a government agency makes a case for a grant or a loan being “necessary,” he would review the policy in that case to see if “it is in-line with the President’s agenda.”
Democrats on Capitol Hill were quick to object to the cut-off, saying that the money for those programs were appropriated by Congress and that the administration does not have the unilateral power to cut it off, no matter how he feels about programs.
The Trump administration has positioned itself as pro-business so it’s not clear how long it will choke off all the grant and loan programs flowing to corporate America long-term. Programs that are supposed to help develop clean energy, or which give preferences to minority groups, are likely most at risk. But even some of them could end up being restored, especially if the money is being used to build factories and creating jobs in red states.
But as of Tuesday, there is far more uncertainty than answers about what lays ahead for businesses that have made strategic decisions based upon the expectation of continued help.
CNN’s Rebekah Riess contributed to this report.