The News
US President Joe Biden is reportedly set to block the sale of US Steel to Japan’s Nippon Steel, over concerns that the $14.9 billion acquisition posed a national security risk.
He is expected to make the announcement, first reported by The Washington Post, in the coming days.
The sale of US Steel had become one of the biggest political flashpoints ahead of the November election, as both Biden and Democratic presidential nominee Vice President Kamala Harris opposed the merger, the latter saying the company should remain “American owned and American operated” at a recent rally in Pittsburgh.
US Steel warned Wednesday that killing the deal put thousands of jobs “at risk,” and the company may be forced to close mills and leave Pittsburgh. Following news of the potential block, shares of US Steel plummeted by more than 17% Wednesday, reflecting market anxiety over the deal’s failure.
SIGNALS
Nippon Steel may need to win union to secure deal
The multibillion-dollar deal is seen as critical for modernizing US Steel’s aging mills, but it has met resistance from political leaders ahead of the election keen to court the union vote and show resolve in safeguarding the country’s economic independence from foreign influence. However, Nippon promised significant investments in US plants and no layoffs before 2026, and that the company’s board would be mostly composed of US citizens. If Nippon can convince the steelworkers union its promises are genuine, then opposition to the deal may evaporate, the Wall Street Journal noted. “The minute Nippon Steel and the steelworkers reach an agreement, all the opposition comes off the boil and goes away,” an analyst told the outlet.
Biden’s economic policy contradictions in spotlight
President Joe Biden’s opposition to the deal seems to contradict his previous push for more private sector investment, both foreign and domestic, to bolster American manufacturing, some critics, including some in the US government, have said. The move indicates a resistance to foreign investment, even from allies. The opposition exposes a core tension in Biden’s economic agenda — seeking to attract foreign investments while simultaneously ensuring US control over strategic industries.
US opposition could damage relations with Japan
The potential fallout from the failed takeover will have wider labor implications and likely damage relations with Japan, a key US ally in the Indo-Pacific. Foreign policy experts and even some within the Biden administration have ridiculed the White House’s assessment that the merger is a national security risk, the Financial Times wrote, given that Japan plays a critical role in countering China. Japan is also contending with its own political uncertainty as Prime Minister Fumio Kishida is stepping down soon, and some of his potential successors have suggested they would improve relations with Beijing, Nikkei reported.