One of the largest steel producers in the world, Japan’s Nippon Steel, is attempting to purchase the American-based US Steel, but is facing pushback from the US government due to concerns over the potential takeover’s effect on the economy. US Steel was once the preeminent steel conglomerate in the world, but is no longer in the top 10 of steel production companies anymore. As a result, the company has been looking to foreign lifelines, but regulators and politicians in the United States are expressing concern.
The deal, first announced last year, would see Nippon acquire US Steel for $14.9 billion, if approved by regulatory agencies. However, there have been concerns raised that the purchase would create not only the economic problems discussed but also open the United States to additional national security risks. Despite this, both companies are attempting to go full-steam ahead with inking the deal.
Why is the government concerned about the takeover?
The Biden administration as well as the Harris and Trump campaigns have all opposed the deal due to economic and security concerns. As the potential closure of the takeover looms, President Joe Biden is “preparing to announce that he will formally block” the takeover, said The Washington PostBiden’s blocking of the acquisition is a “stunning move to kill a deal featuring a corporation from Japan, a close US ally,” said the Post.
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Biden could not officially halt the deal until receiving a recommendation to do so from the Committee on Foreign Investment in the US (CFIUS). But it appears this recommendation is looming, as the committee believes that the deal “would create national security risks because it could hurt the supply of steel needed for critical transportation, construction and agriculture projects,” said ReutersCFIUS also “cited a global glut of cheap Chinese steel and said that under Nippon, a Japanese company, US Steel would be less likely to seek tariffs on foreign steel importers.”
The White House “previously described Japan’s proposed acquisition as a security risk, which many foreign policy experts and some administration officials in private have ridiculed,” said the Financial Times. Much of this ridicule is a result of Japan being the “most important US ally in the Indo-Pacific and has been working very closely with Washington on a range of efforts to counter China.” But concerns over the effects the deal would have Regarding China remain: China’s “persistent use of market-distorting government interventions has allowed the country to unfairly gain dominance in the global steel market, as it exports extensive surplus steel that artificially lowers international prices,” said Reuters.
What have other responses been?
Both Nippon Steel and US Steel have pushed back against claims that the deal would cause economic hardship or national security duresswith the latter claiming that blocking the deal would cost numerous jobs and could lead to US Steel abandoning its Pittsburgh headquarters. Without the deal, US Steel will “largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting numerous communities across the locations where its facilities exist and depriving the American steel industry of an opportunity to better compete on the global stage,” the company said in a statement.
But while the “political sands are shifting beneath US Steel’s proposed sale,” it is “perhaps too late for President Biden to change his mind about stopping the deal,” said Axios. And beyond any economic consequences, the “political reaction was predictable: Don’t let a foreign company buy an American icon, even if it’s no longer the country’s largest steelmaker.”
Despite the controversy, the American steel industry “will be on much stronger footing because of Nippon Steel’s investment in US Steel,” a spokesperson for Nippon Steel said to Fox BusinessBut questions over the deal remain, as “while the resilience of US domestic steel capacity is clearly in the national interest, it is unclear how ownership by a firm domiciled in a major treaty ally would fundamentally threaten this,” Sarah Bauerle Danzman, an international studies professor at Indiana University, said to CNBC.
