BANGKOK — President Joe Biden’s recent refusal to allow Nippon Steel’s attempt to acquire U.S. Steel, citing national security concerns, highlights ongoing tensions in trade and investment relations with a key ally in Asia. This incident is not an isolated occurrence, as trade disputes have plagued the relationship for decades. Secretary of State Antony Blinken made a diplomatic visit to Tokyo in an effort to ease these brewing tensions.
Eiji Hashimoto, CEO of Nippon Steel, has expressed firm commitment to their proposed $15 billion acquisition. In response to the U.S. government’s decision, Nippon Steel, along with U.S. Steel, has initiated a federal lawsuit challenging the rejection. The claim that this acquisition could endanger national security has struck a chord in Japan.
Many Japanese officials perceive the U.S. stance as a betrayal, recalling years of U.S. advocacy for reducing barriers to investment and trade collaboration. The situation is further complicated as Japanese firms brace themselves for potential tariff increases, especially with Donald Trump’s impending inauguration as President.
Prime Minister Shigeru Ishiba openly warned that blocking this deal could hinder Japanese investment in the United States. He expressed the necessity for clear explanations regarding the cited national security issues, stressing the importance for future discussions between the two nations.
During his farewell tour in Tokyo, Blinken reassured that the alliance with Japan has significantly strengthened over recent years. He highlighted that both countries are each other’s largest investors, which helps build a robust economic foundation moving forward. While discussing the Nippon Steel issue with Foreign Minister Takeshi Iwaya, Japan’s Foreign Ministry confirmed that the importance of U.S. investment by Japanese companies was reaffirmed.
In the lead-up to Blinken’s visit, Ishiba articulated the urgency of addressing these national security concerns, warning that they could greatly influence Japan’s future investments in the U.S. He acknowledged the legitimate worries expressed by Japanese industries regarding ongoing investments.
Japan’s Trade Minister, Yoji Muto, also voiced disappointment regarding the decision, which was front-page news in numerous Japanese publications highlighting Nippon Steel and U.S. Steel’s legal battle.
Historically, Japan has been the United States’ most significant ally in Asia. This close relationship was established following the U.S. occupation after Japan’s defeat in World War II. The U.S. maintains around 63,000 troops at various bases across Japan, which serves as a critical defense ally against regional threats from China, Russia, and North Korea. However, some critics have argued that the rejection of Nippon Steel’s acquisition indicates a shift in U.S. policy, treating Japan more like a competitor than a partner.
Editorial perspectives, such as one from The Japan Times, captured this sentiment, questioning when an ally becomes less than a partner, suggesting that Washington’s treatment of Japan parallels its approach to China. The editorial expressed that the concerns surrounding national security are puzzling, noting that trust between the nations has been considerably damaged and uncertain steps must be taken to restore it.
Both the Biden and Trump administrations have historically endorsed increasing tariffs on steel and aluminum imports from China, citing the need to protect American manufacturers from unfair practices and an influx of cheap goods. Previously, in 2018, Trump imposed a 25% tariff on Japanese steel on national security grounds. The Biden administration later reached an agreement in 2022 to allow a specific quota of steel imports without tariffs, with excess quantities facing the same 25% tariff.
Current trade tensions emerge from a backdrop of extensive negotiations that have pushed Japan to open its market to foreign goods, leading to profound transformations in its retail landscape and manufacturing sectors. This foreign pressure, referred to as “gai-atsu,” has driven Japanese automakers and manufacturers to establish operations in the U.S., significantly contributing to job creation. Both Nippon Steel and U.S. Steel argue that their agreement would help save American jobs, and business associations in both nations are expressing concern over the potential failure of the deal amid a broader trend away from openness in trade.
