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The manufacturer prices would be higher, thus triggering price gouging laws.

Price gouging is based on a reasonable price and is subjective. If the present situation results in inflated prices due to lack of materials or needing to run at a higher capacity, that's still reasonable. California, for example, has this written into their penal code, limiting it to a 10% increase in price of the total cost of manufacturing, which includes the increased cost of production, transportation or storage.

If those companies decided that they were going to stop selling their current stock of masks completely until they sold for a higher price, that would be price gouging.

Would you take on the cost and risk of additional machines and employees for an ephemeral market and small margins?

But you wouldn't be taking on that cost and risk. That's the whole point of subsidizing manufacturing. To alleviate said cost and risk in desperate times.

You know, like a global pandemic. That's a pretty desperate time, IMO.

For the public good? Absolutely. Even more so if the government subsidized part of it to help ensure those goods were available to their citizens.

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