President Biden blocked the $14 billion takeover of US Steel by Japan’s Nippon Steel in an announcement Friday based on the grounds that the sale poses a threat to national security.
The decision was an unusual exercise of executive power, especially for a president who is only weeks away from leaving office. It’s also a departure from America’s long-established tradition of open investment, which could have ramifications for the US economy. Although the politics of this move were clear, Mr. Biden emphasized that he is doing it to protect the security of the country.
“It is my primary responsibility as president to ensure that, now and in the future, America has a strong domestically owned and operated steel industry that can continue to power our national energy sources at home and abroad,” said Mr. Biden’s statement on Friday morning. “And it is in fulfillment of that responsibility to block foreign ownership of this important American company.”
The initiative of Mr. Biden’s decision to stop these transactions could make foreign investors rethink the wisdom of acquiring American firms in critical industries based in politically important states. It could also strain relations with Japan, a close ally of the United States and a major source of American foreign investment.
The president’s decision to block the deal came after a federal transaction review committee chose not to make a formal recommendation on whether to approve the deal, according to letters sent to the companies and the White House last month.
The Committee on Foreign Investment in the United States, made up of agencies including the Department of Treasury and Justice, expressed doubts about this agreement to the companies it wrote last month. CFIUS (pronounced SIFF-ee-yuhs) expressed concern that the transaction could pose a national security threat to the United States by potentially leading to a decline in American steel production. Officials have suggested that some of Nippon’s future global business considerations could go beyond its pledge to invest in US Steel.
The lack of official recommendation paved the way for Mr. Biden, prevented an unexpected change of heart, ending the transaction that entered the political trap of the election year.
“As a committee of national security and trade experts across the executive branch has determined, this acquisition will place one of America’s largest steel producers under foreign control and create a threat to our national security and our critical supply chains,” said Mr. Biden, pointing to the concerns raised by the committee.
His decision may face challenges in court. Nippon has indicated that it is prepared to take legal action if the deal is blocked.
Nippon sent a letter to CFIUS last month accusing the White House of “impermissible influence” in the process. Nippon said the concerns raised by CFIUS are “full of factual inaccuracies and omissions, misleading and incomplete statements, speculations and opinions that are baseless and patently unreasonable.”
US Steel also continued to push for a deal. After CFIUS failed to make formal recommendations, the company issued a statement saying the deal is “the best way, so far, to ensure that US Steel, including its employees, communities and customers, will thrive in the future.”
CBS News and the Washington Post previously reported that a decision could come as early as Friday.
The politics of Mr. Biden was clear: US Steel is based in the key state of Pennsylvania, and its powerful union strongly opposes the takeover, partly out of concern that Nippon will not honor its commitments to invest in the plants and maintain the plants. employee pension. The public debate over divestment has emerged as a key issue ahead of the 2024 presidential election, and Mr. Biden, Vice President Kamala Harris and President-elect Donald J. Trump have all said publicly that US Steel should remain American.
Before the election, the Biden administration gave the companies three more months to try to address concerns about the deal. By December, however, it was clear that the deal was doomed when CFIUS told Nippon that government agencies were divided on whether to proceed, and after Mr. Trump has announced that he will stop us when he takes office.
“As President, I will prevent this deal from happening,” said Mr. Trump on social media. “Buyer Beware!!!”
Despite his opposition to the steel agreement, Mr. Trump last month accepted a $100 billion investment in the United States promised by SoftBank, a Japanese technology company, that will focus on technology and artificial intelligence over the next four years.
Nippon’s request faced political opposition from the time it was announced in December 2023. Democratic senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, as well as Senator JD Vance, an Ohio Republican who is now the vice president-elect, urged Mr. . Biden to review proposed sales to protect steel production and lost jobs. Both Mr. Brown and Mr. Casey lost his seat to Republican opponents in November.
Just before last Christmas, the Biden administration appeared to disagree with the concerns expressed by lawmakers, when Lael Brainard, director of the National Economic Council, issued a statement saying that this reform “seems to be worthy of further consideration in terms of its potential impact on national security and the reliability of the supply chain.”
While US Steel shareholders approved the deal in April, the chances of it happening are shrinking as the presidential election nears.
US Steel, founded in 1901, has struggled for years amid fluctuating global steel markets and rapidly evolving technology, which the company often took for granted. The company, whose steel has been used to build the nation’s most famous bridges and buildings – such as the Willis Tower in Chicago and the United Nations building in New York – employed 340,000 workers at its peak in the 1940s but now has about 20,000 people. total workforce, about 4,000 in Pennsylvania.
The post-pandemic boom in the steel market, driven by a combination of shortages and demand fueled by federal infrastructure investment, has been showing signs of cooling amid concerns of a global recession. In 2023, US Steel’s rival, Ohio-based Cleveland-Cliffs, made an unsolicited offer to buy its rival. That started a bidding war that Nippon won.
As the world’s fourth-largest steelmaker, Nippon saw an opportunity to grow further and gain access to the American market through the purchase of US Steel. With large corporate investments in infrastructure and climate technology in the works, the United States is viewed as a growth market where demand for steel will increase in the coming years.
But the United Steelworkers union quickly came out against the deal. The union says it has been blindsided by company management and said there is little chance that Nippon will honor union contracts and protect workers’ pensions. Nippon said it would honor existing contractual obligations.
At the beginning of last year, Mr. Trump said US Steel needs to stay in American hands. Mr. Trump, who imposed heavy tariffs on steel imports from allied countries such as Mexico, Canada and Europe during his first term, said that preventing a Japanese company from buying US Steel is a matter of preserving America’s industrial heritage.
Mr. Biden, under political pressure, expressed that view in April, insisting that US Steel remains American-owned and operated. On Labor Day weekend, Ms. Harris, who succeeded Mr Biden as the Democratic nominee, repeated that message.
However, not everyone opposed the deal. Many US Steel employees came out in support, saying the company was in dire need of investment. Last month, three members of the Congressional Black Caucus sent a letter to the White House making the case that the deal was critical to America’s manufacturing future.
And Mike Pompeo, who was the secretary of state of Mr. Trump, in his first term and an adviser to Nippon, wrote in the Wall Street Journal that the deal would allow the United States to challenge China’s global steel dominance.
The company’s fate remains uncertain, and efforts to maintain its American roots could end up hurting workers in Pennsylvania in the long run. Shares in US Steel stumbled as prospects for a deal appeared to falter, falling to their lowest level in months during premarket trading on Friday.
Nippon has committed to keeping the company’s headquarters in Pittsburgh and investing in developing mills in the state. US Steel officials have warned that without Nippon, it may have to lay off workers, move its headquarters and plant the mills it has been building in the South. The company has received other takeover offers, and it is still possible that one could be revived.
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