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Why Biden Wants to Block the Nippon-U.S. Steel Deal
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IN BRIEF


WHY BIDEN WANTS TO BLOCK THE NIPPON-U.S. STEEL DEAL

By Noah Berman

Last updated September 6, 2024 11:45 am (EST)

Email Print

U.S. President Joe Biden is reportedly planning to block the Japanese takeover
of U.S. Steel, raising questions about the administration’s economic and foreign
policy priorities.  

President Joe Biden is reportedly poised to block Nippon Steel’s acquisition of
U.S. Steel, a century-old icon of American industry. Experts say his halting of
the deal risks undercutting his administration’s “friendshoring” efforts to
strengthen U.S. alliances and supply chains. 

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The forthcoming decision centers around the Japanese company’s agreement to buy
the Pittsburgh-based steelmaker for $14.1 billion, announced in late 2023. For a
variety of reasons, U.S. lawmakers, federal regulators, and the United
Steelworkers Union (USW) began to scrutinize the deal almost immediately,
delaying its closing.

WHAT’S THE OPPOSITION?

More on:

United States

Japan

Foreign Investment

Economics

The deal has faced resistance from the politically influential steelworkers
union, as well as Biden, Vice President Kamala Harris, former President Donald
Trump, and a bevy of other lawmakers. 

USW President David McCall, whose union represents half of U.S. Steel employees,
opposed the deal over concerns that Nippon would enact significant layoffs for
union workers. In a factsheet released in December, U.S. Steel said Nippon “has
the financial wherewithal and desire to honor all existing agreements with the
USW,” and in September, the company warned that scrapping the deal would
threaten thousands of union jobs and the company’s future in Pittsburgh. 

Analysts say that union members’ votes will play a pivotal role in battleground
states during the 2024 election. Trump narrowly won Pennsylvania in 2016, and
Biden won the state similarly in 2020. Both Trump and Democratic nominee Harris
have voiced opposition to the deal. In September 2024, Harris said that U.S.
Steel “should remain American-owned.” Trump has said he would halt the deal
“instantaneously,” citing the need to protect the U.S. steel industry. 

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U.S. President Joe Biden speaks at the United Steelworkers Union headquarters,
in Pittsburgh in April 2024. Elizabeth Frantz/Reuters


Meanwhile, a bipartisan group of lawmakers has raised concerns that Nippon
Steel’s operations in China make the acquisition a threat to U.S. national
security. Led by senators from steel-producing states in the Midwest, these
lawmakers point to Nippon’s partnerships with Baoshan Iron & Steel, a
state-owned firm linked to the Chinese Communist Party. (Nippon exited its
partnership arrangement with Baoshan in August 2024.) Senator Sherrod Brown
(D-OH), who is running in a tight reelection race, was among the first lawmakers
to publicly oppose the deal. 

Nippon says that these accusations are based on “significant inaccuracies and
misrepresentations,” and argues that the acquisition would strengthen U.S.
national security by forming a stronger competitor against Chinese firms. In
June 2024, U.S. Steel CEO David Burritt said the deal would “strengthen the
alliance for us to be able to take on China.”

More on:

United States

Japan

Foreign Investment

Economics

WHAT ARE THE MERITS OF THE DEAL?

Shortly after the deal was announced, independent analysts said it could
revitalize U.S. Steel, once the world’s largest steel producer—and corporation.
Nippon had pledged to invest some $2.7 billion in U.S. Steel facilities in
Indiana and Pennsylvania. U.S. Steel began to decline along with the broader
American steel industry in the 1970s as foreign firms, including Nippon, began
to produce the material at a far lower cost. Between 1970 and 1987, American
steel production declined 35 percent, while global steel production grew 21
percent. 

The combined firm would be the third-largest steel-producing company in the
world, giving it more control over the crucial input in industries that
Washington is seeking to bolster, such as electric vehicle manufacturing.
(Nippon is currently fourth; U.S. Steel is twenty-fourth.) 

The deal could result in lower prices for U.S. buyers, and serve as an example
of friendshoring, a strategy touted by the administration that involves building
supply chains with allies. Nippon executives have argued that the deal would
create a firm more equipped to compete with Chinese companies, which dominate
steel production.



WHAT ROLE IS CFIUS PLAYING?

The deal is reportedly in the final stages of review by the Committee on Foreign
Investment in the United States (CFIUS), an executive-branch, interagency panel
that scrutinizes proposed transactions involving U.S. and foreign businesses to
see whether they raise national security concerns. 

CFIUS reviews can take months. They culminate in a recommendation to the
president, who has sole authority in preventing transactions and can reverse a
deal if there is “credible evidence” of a national security threat. Between the
creation of CFIUS in 1975 and 2018, presidents blocked foreign-investment
transactions just five times. However, in many other cases, companies have
agreed to scrap or alter merger plans after CFIUS alerted them that it would
likely recommend a block. (This includes Nippon, which in 1983 abandoned plans
to buy the metals unit of another Pittsburgh-based company, Allegheny
International, over concerns about potential CFIUS intervention.)

Dig Deeper
When Does Foreign Investment Become a Security Risk?


Skeptics of the threat posed by the deal, including CFR Senior Fellow Edward
Alden, argue that the acquisition of a U.S. firm by a close ally does not raise
obvious security risks. “Under the committee’s statutory analytical framework,
Nippon Steel’s acquisition of U.S. Steel poses no national-security risk to the
U.S.,” writes Thomas P. Feddo, a lawyer who ran the CFIUS process under Trump.
Other observers point out that the lawmakers leading the anti-deal charge
benefit from union support and face tough reelection contests.

HOW IS THE CHALLENGE AT ODDS WITH BIDEN’S OTHER STATED GOALS?

Biden has sought to elevate economic relationships with U.S. allies,
particularly fellow Group of Seven (G7) member Japan and other countries in East
Asia. Critics argue that his opposition to a merger with a Japanese firm raises
questions about Washington’s commitment to allies and its openness to foreign
investment.  “If Washington won’t allow this transaction—involving a buyer from
a G7 country—then what foreign buyer would it see as a permissible owner?” asks
Sarah Bauerle Danzman, a senior fellow at the Atlantic Council. 

Some experts note that blocking the transaction would represent a major
departure from CFIUS’s typical remit, which has historically focused more
narrowly on national security. 




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