WASHINGTON — President Joe Biden has officially halted a nearly $15 billion deal involving Nippon Steel of Japan seeking to acquire U.S. Steel, a key player in Pittsburgh’s steel industry. This decision underscores his earlier commitment made during his presidential campaign to protect the iconic American steel company from foreign ownership.
The proposal had sparked significant political discussions, particularly in the heart of America’s industrial regions, and its rejection has provoked threats of legal action from Nippon Steel. Biden emphasized the need for dominant U.S. firms to continue to represent national interests in his statement released on Friday.
In response to the president’s decision, Nippon Steel and U.S. Steel condemned the move, claiming it violates due process and suggesting the decision was politically motivated. They pointed out that Biden did not provide significant evidence illustrating that the merger posed a national security threat, hinting at the possibility of litigation to safeguard their legal rights.
Biden’s announcement follows a review by the Committee on Foreign Investment in the United States (CFIUS), which failed to reach a consensus on any potential national security concerns regarding the deal. The committee is tasked with evaluating foreign investments and comprises several key Cabinet members, including Treasury Secretary Janet Yellen. According to an anonymous source familiar with the situation, some federal agencies involved expressed doubts about whether the acquisition could indeed pose a threat to national security.
Just weeks before Biden’s anticipated departure from office, this decision could potentially strain U.S.-Japan relations, especially given Japan’s status as a crucial ally and its significant holdings of U.S. debt. In their joint statement, the two steel companies expressed their concern over the rejection of the deal, labeling it “shocking — and deeply troubling,” and claiming it sends a negative message to foreign investors.
During his campaign, Biden voiced opposition to the acquisition, particularly due to the potential implications for workers, labor contracts, and corporate transparency, and he was supported by the United Steelworkers union. He articulated the importance of maintaining strong American steel companies that support local workers, recognizing U.S. Steel’s long-standing history in the steel industry.
In addition, former President Donald Trump opposed this acquisition publicly, stating intentions to use tax incentives and tariffs to support U.S. Steel’s future. Steelworkers President David McCall expressed gratitude for Biden’s decision to block the sale, calling it favorable for both union members and national security.
The Steelworkers have raised concerns regarding Nippon Steel’s reliability as a trustworthy business partner in the U.S. market, labeling it a “serial trade cheater” that has previously undermined the domestic industry. McCall warned that allowing Nippon Steel to acquire U.S. Steel would risk further destabilizing the American trade system and compromise the nation’s ability to fulfill its critical infrastructure demands.
While U.S. Steel demonstrated financial robustness with a reported $1.8 billion in profit, it has indicated that without the infusion of Nippon Steel’s capital, it may transition to non-union electric arc furnaces, which could result in a relocation of its headquarters away from Pittsburgh.
Nippon Steel argued that it aimed to bolster American steel’s competitiveness against the Chinese market and promised considerable investment in U.S. facilities, including modernization efforts for aging production sites in states like Pennsylvania and Indiana. It also guaranteed to defend U.S. Steel in trade matters and commit to avoiding competition with local blast furnaces.
The announcement of the proposed acquisition in December 2023 included plans for a $14.9 billion cash and debt purchase while committing to maintaining the U.S. Steel brand and its Pittsburgh base. However, the deal raised alarms concerning union labor, supply chain stability, and national security implications against a backdrop of increased political support for revamping the American manufacturing landscape, alongside the previously established protective tariffs that have benefitted domestic steel production.
Through a comprehensive public relations strategy, Nippon Steel attempted to garner support for the merger, which included offering significant bonuses to U.S. Steel employees. Various conservative entities and business groups voiced their endorsement for the deal, which began to gain traction among some union members and local mayors aligned with the interests near Nippon Steel’s facilities.
Recognized as the fourth largest steel maker globally in 2023, according to World Steel Association data, Nippon Steel contrasts with U.S. Steel, which holds the 24th position.
