President Joe Biden is expected to block U.S. Steel Corp.’s proposed $14.9 billion merger with Japan’s Nippon Steel Corp., citing national security concerns. The potential block comes despite promises of significant investments and a future expansion that would preserve U.S. jobs. The Biden administration’s stance reflects growing bipartisan opposition and a preference for U.S. Steel to remain under American control amid rising geopolitical and economic sensitivities.
The decision comes as Donald Trump, the Republican presidential nominee, reiterated his opposition to the merger during an October 16 interview at the Economic Club of Chicago. Trump declared he would block the deal if elected, citing national security risks and promising tariff increases aimed at U.S. allies and rivals.
The Committee on Foreign Investment in the United States (CFIUS) is currently reviewing the deal, focusing on its implications for national security. White House sources have suggested that President Biden is inclined to block the merger in line with the administration’s broader efforts to protect critical industries from foreign control, particularly those vital to national security.
Biden’s likely decision mirrors growing concerns from both sides of the political aisle. Vice President Kamala Harris has expressed her preference for U.S. Steel to remain under American ownership, though she has not explicitly stated she would block the merger. Meanwhile, Donald Trump has gone further, using the merger to bolster his economic platform, promising that foreign takeovers of key U.S. assets would face strict scrutiny under his leadership.
During his Chicago interview, Trump emphasized his plans for dramatic tariff increases and closer collaboration with the Federal Reserve, arguing that his policies would promote economic growth and strengthen domestic manufacturing. He notably referred to tariffs as "the most beautiful word in the dictionary" and pledged to implement them against China and U.S. allies like Mexico and Europe. "Our allies have taken advantage of us more so than our enemies," Trump stated, vowing to block deals like the U.S. Steel-Nippon Steel merger as a national security measure.
The merger has sparked sharp divisions among key stakeholders. U.S. Steel’s CEO David Burritt has vigorously defended the deal, highlighting Nippon Steel’s commitment to a $3 billion investment in plant improvements. Burritt stressed the potential for job preservation and increased competitiveness, positioning the merger as vital for U.S. Steel’s long-term success. "We want elected leaders to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails," Burritt declared at a recent rally in Pittsburgh.
Despite Burritt’s arguments, the United Steelworkers Union remains firmly opposed to the deal, criticizing the inclusion of a $70 million change-in-control bonus for Burritt. The union has called for U.S. Steel to remain under U.S. control and labeled the recent rally in favor of the deal a "pathetic attempt" to garner support. As political opposition intensifies, the deal's fate increasingly hangs in the balance.
While national security concerns dominate the conversation, the merger is also seen as a strategic move for advancing decarbonization within the steel industry. Both Nippon Steel and U.S. Steel have committed to reducing carbon emissions by 2050, and the deal could accelerate the adoption of low-carbon technologies, including electric arc furnaces and hydrogen-based steel production. These efforts are crucial to the steel industry’s role in the clean energy transition and the construction of renewable energy infrastructure.
However, critics argue that keeping U.S. Steel under American ownership is essential for maintaining control over a key industrial asset, especially given the sector’s importance to national security and domestic supply chains. Trump's stance, linking his economic policies to protecting industries like steel, underscores the deal’s geopolitical importance. He asserted during his interview that such mergers would disrupt American manufacturing and damage economic security, linking these concerns directly to his broader tariff strategy to bring jobs back to the U.S.
The decision on the merger is now in the hands of CFIUS, whose recommendation is not expected until after the November elections. Should the committee advise against the merger, Nippon Steel has indicated it may challenge the decision in court. The Japanese giant has already made moves to dissolve joint ventures with China Baowu Steel Group, distancing itself from Chinese influence and attempting to alleviate U.S. policymakers' concerns.
The stakes for Nippon Steel are high. Its long-term strategic plan involves increasing global steel production to 100 million metric tons annually while shifting from traditional blast furnaces to more sustainable technologies. This merger is a critical part of that strategy, as U.S. demand for steel remains strong and continues to grow under recent legislative initiatives such as the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.
The merger's fate could also have broader consequences for Japanese investment in the U.S. Foreign Direct Investment (FDI) from Japan, which overtook the U.K. as the largest source of FDI in the U.S. in 2019, could face increased uncertainty if Washington blocks the deal. Experts warn that the decision could signal a shift in U.S. openness to foreign investment, adding new risks for Japanese corporations looking to expand in the American market.
In the meantime, the steel industry and global markets will be watching closely as the Biden administration navigates its decision, weighing economic growth, geopolitical relations, and national security concerns in one of the most high-profile deals of the year.
Editor's Note: The original article was published on September 5, 2024, and has been updated to reflect the latest developments.
