After months of opposition, US President on Friday blocked the proposed buyout of the Steel Corporation, or US Steel, by Nippon Steel.
The second-largest US steelmaker had previously approved the $14.9-billion (€14.5-billion) takeover bid, saying it would help protect the ailing firm from intense competition from abroad, including .
Nippon Steel had hoped the acquisition would help hike its global steel output by nearly a third, to 85 million tons.
However, the merger became a significant issue for Democrats and Republicans in November’s , as Pennsylvania, where US Steel is headquartered, was a critical swing state.
In an attempt to protect American jobs, the United Steelworkers union fiercely opposed the transaction.
Why Biden has blocked the deal
Biden has cited national security concerns and risks to key supply chains as his main reasons for vetoing the purchase.
“This acquisition would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains,” Biden said in a statement. “That is why I am taking action to block this deal.”
The president previously said that critical industries, like the steel sector, must remain under the control of domestic players.
In December, the Committee on Foreign Investment in the United States (CFIUS) — which reviews mergers and acquisitions of US firms by foreign entities — failed to reach a consensus on whether to approve the deal and referred the decision to Biden, who leaves office on January 20.
The panel, led by Treasury Secretary Janet Yellen, warned the buyout could lead to a cut in US steel output, which would cause supply shortages, affecting the transport and energy sectors the most.
CFIUS warned the deal could scupper Washington’s attempt to quash the dumping of cheap steel from China, where heavy industries receive massive subsidies from the Beijing government.
According to US newspaper The Washington Post, the committee was also concerned Nippon Steel could shift production to its sites in Brazil, Mexico and India after gaining control of US Steel.
Senior White House advisers had reportedly tried to persuade Biden to proceed with the purchase, as it would represent a sizable investment in an ailing US company. They also thought a veto could hurt ties with Japan, one of Washington’s closest allies in the .
Both Biden and former President implemented protectionist policies in recent years to safeguard the US steel sector against a global oversupply, which has driven down prices. The measures included 25% tariffs on imported steel, while China was singled out for unfair trade practices.
Biden’s veto is unlikely to be overturned by President-elect Trump, who campaigned on reviving US heavy industry, and last month wrote on his Truth Social social messaging platform that he was “totally against the once great and powerful US Steel being bought by a foreign company.”
Trump has promised to use a mix of more and tax incentives to protect the US steel sector.
What have Japan, Nippon Steel said about veto?
In a last-ditch attempt to get the deal approved, Nippon Steel proposed giving Washington a say in any potential production cuts at US Steel, Reuters news agency reported earlier this week, citing a source familiar with the deal.
In December, Nippon Steel defended the merger, promising “significant” investments in US Steel’s facilities and employees to “ensure a vibrant future for American steelmaking.” The firm said it remained “confident that the acquisition will protect and grow US Steel, creating the best steelmaker with world-leading capabilities for the benefit of American workers and customers.”
Nippon Steel has pledged over $2.7 billion in capital investment for US Steel’s facilities in Pennsylvania and Gary, Indiana, and offered to move its US headquarters to Pittsburgh, where US Steel is based. It has also promised to honor existing agreements with unions.
In November, Japanese Prime Minister Shigeru Ishiba urged Biden to approve the merger to avoid weakening ties between the two countries.
Both Nippon Steel and US Steel have insisted the deal poses no national security concerns and vowed to pursue legal action, claiming US officials failed to follow proper procedures while reviewing the acquisition.
What could be the impact of Biden’s decision?
While it may preserve the independence of US Steel, Biden’s veto could leave the steelmaker struggling to secure the capital and technology needed to modernize.
It would leave the firm unable to compete against larger, better-funded global steelmakers like ArcelorMittal or Chinese rivals.
US Steel could now face difficulties finding a buyer for the entire company. A cash and stock deal in August 2023 by rival Cleveland-Cliffs was worth around half of the amount of the Nippon Steel bid. At the time, US Steel rejected the union-backed deal, and a few months later approved the Nippon Steel merger plan.
By blocking the acquisition, Biden is also signaling to other international investors that they may face political and regulatory hurdles when bidding for US firms deemed critical for national security.
The decision is also likely to widen China’s grip on the global steel sector and could even prompt the European Union to seek foreign investments from the likes of Nippon Steel for its .
Edited by: Uwe Hessler
The post Why both Biden and Trump oppose Japan’s takeover of US Steel appeared first on Deutsche Welle.
