EDITORIAL | In Biden's Rejection of US Steel Acquisition, Only China Wins

How important is an ally to the United States? A recent decision by the US president raised strong doubts on that score. President Joe Biden announced on January 3 that he was blocking Nippon Steel's planned acquisition of US Steel, a major American steelmaker. It was a thoroughly regrettable decision.

Nippon Steel had promised it would not close US Steel facilities and would protect jobs even after the acquisition. The company also announced plans to invest $2.7 billion USD in modernizing US Steel's facilities. Both sides expected that once the acquisition was completed, US Steel's competitiveness would be enhanced through access to Nippon Steel's cutting-edge technology.

The deal would have also provided a means to compete with Chinese companies. Currently, Chinese steel mills account for more than half of the world's crude steel production. Biden claimed, however, that the Nippon Steel acquisition "poses risks to national security and critical supply chains."

Nippon Steel's plan would also contribute to stable steel production in the United States. After all, steel is the foundation of America's economy and military.

The only party that benefits from Biden's decision is China.

No Precedent for Biden's Decision

Up to now, most cases in which US presidents have blocked foreign acquisition of American businesses have involved Chinese companies. Such a decision is unprecedented for a company from a US ally such as Japan.

With China in mind, the governments of Japan and the United States have promoted economic and security cooperation in a wide range of areas, including semiconductors. Biden's decision that collaboration in the steel industry is not allowed is inconsistent with this trend.

Observers Don't Buy Biden's Argument

Naturally, this decision has failed to convince observers. It ignores both Japan's relationship as an ally and the wishes of the local Pennsylvania government, which supports the acquisition.

Nippon Steel vowed it would "pursue various measures to defend its legal rights." Together with US Steel, it filed a lawsuit on January 6 against the US government challenging the decision.

There had been consistent opposition to the proposed acquisition of US Steel by the United Steelworkers (USW) union. Furthermore, as the US presidential election approached, the Democratic and Republican candidates both expressed opposition to the buyout as they sought to attract union members' votes.

To avoid political repercussions, Nippon Steel withdrew its initial acquisition plan. It then resubmitted its application to the Committee on Foreign Investment in the United States (CFIUS) in September 2024. Next, CFIUS reviewed the deal to determine whether the acquisition raised security concerns. However, they were unable to reach a conclusive decision. Therefore, the CFIUS members left the final decision up to Biden.

Lacking a Rationale, Harmful to an Alliance

There is now concern that aborting a Japanese company's acquisition plan without any rational basis will have an impact on the bilateral relationship of trust between Japan and the US.

Donald Trump will be inaugurated as the next US president on January 20. The governments of Japan and the United States must again work hard together to strengthen our alliance relationship.