Mr Trump, the US Steel Deal is About Economic Security

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United States President Donald Trump has indicated his intention to approve a "partnership" between Nippon Steel and major American steelmaker US Steel. In 2023, US Steel and its shareholders accepted Nippon Steel's offer to buy the company. Nevertheless, both President Joe Biden and his successor disapproved of the deal as it then stood.

This time, the detailed framework for acquisition is still unclear, and uncertainty surrounding the proposed Nippon Steel-US Steel deal remains. Still, the fact that Trump has signaled he is no longer averse to the deal in some form has certainly increased the chances of the acquisition going ahead.

To maximize the effectiveness of the acquisition, Nippon Steel needs to make the company a wholly owned subsidiary. This is a point that Nippon Steel needs to explain adequately to President Trump.

Trump posted his comments on his Truth Social, his own social media outlet. He said that the partnership between the two companies "will create at least 70,000 jobs, and add $14 Billion dollars to the U.S. Economy."

*US President Donald Trump at the White House on May 23. (©Reuters)*

Trump has also called for a revival of domestic manufacturing and seeks to encourage production to return to US shores. The acquisition plan dovetails nicely with these policies.

Challenging China's Dominance

In the global steel industry, Chinese manufacturers today account for more than half of the world's crude steel production. Expanding scale is essential for other steelmakers hoping to compete with these Chinese manufacturers. Since Japan and the United States are allies, cooperation between their steelmakers would be greatly significant for economic security.

For the United States, steel is a vital industry that serves as the foundation of the economy and military. For that reason, the US side has been concerned that a foreign acquisition of US Steel could pose security risks.

Nippon Steel has sought to allay these concerns by pledging that it will protect jobs and not close US Steel's steel mills after the acquisition. It has also been reported that, if approved, the Japanese company will invest $14 billion in US Steel. If the acquisition goes ahead, it will strengthen US Steel's competitiveness. For example, as part of Nippon Steel, the US company could share its cutting-edge technologies, such as electromagnetic steel sheets for electric vehicles.

*US Steel factory in Pennsylvania, United States (©AP via Kyodo).*

Tariffs are Unnecessary Distractions

We commend Nippon Steel for its negotiating stance. It has persistently emphasized its commitment to contributing to the development of the US steel industry.

However, it is important to note that Trump has also posted, "My tariff policy will make steel American-made once again, and forever." Nippon Steel’s acquisition plan was announced in December 2023 and therefore is not the result of the Trump administration's high tariff policy.

The Japanese government needs to assert this point in negotiations with the US administration as it seeks the elimination of a set of tariff measures. Japan must make a persuasive case that high tariffs are unnecessary to attract investment from Japanese companies to the US.