Nippon Steel logo, Tokyo (©Reuters/Kyodo)
On December 2, President-elect Donald Trump reiterated that he would block Nippon Steel's proposed acquisition of US Steel. His stance runs counter to Prime Minister Shigeru Ishiba's November 20 letter to President Joe Biden, asking him to approve the transaction.
Trump's opposition to the deal, which he first declared almost a year ago. It also goes against the interests of the United States, the US-Japan alliance, and our collective posture in competing with China. Biden should recognize the benefits of the deal and allow it to be completed before leaving office.
Since the proposal's announcement, opponents of the deal have invoked "national security" concerns as a reason to block the transaction. But with US Steel based in Pennsylvania, the real reason for the opposition was political: candidates assumed that supporting the deal would cost them votes in a critical swing state.
With the election over, it's time to move beyond politics, recognize the important benefits that will accrue to both Japan and the United States as a result of the deal, and allow it to go through.
A Deal that Makes America Stronger
President Biden should acknowledge that this deal will actually bolster American national security by revitalizing the domestic American steel industry and strengthening the critical US-Japan alliance and economic partnership in the face of growing competition from China.
A strong steel industry serves as a strategic asset, underpinning the defense industry and infrastructure projects essential to the national security of both countries. President Truman's statement that "Steel is as vital to national security as soldiers and guns" remains true to this day.
It is a sentiment echoed by Prime Minister Ishiba in his letter to President Biden. Joint efforts between Nippon Steel and US Steel will also create synergies that will allow the two nations to strengthen collaboration in industries like semiconductors and aerospace which are crucial to future competitiveness and national security.
Bolster's US Bipartisan Policy Aims
The investment in US Steel would also be a powerful demonstration of the vital importance of US-Japan relations. As two of the world's largest economies, with common values and enduring political, military, and diplomatic ties, the US and Japan have shared interests in addressing global challenges like China's economic and military rise. And with the US elections behind us, Biden should acknowledge that this deal closely aligns with key themes of his administration's foreign policy: maintaining a free and open Indo-Pacific and cooperating with allies to counter China.
The legacy of his first presidency's policies should also inform Trump's views of this proposal. In his 2017 National Security Strategy, President Trump identified China as a challenge to "American power, influence, and interests, attempting to erode American security and prosperity."
His administration then prioritized policies to enhance engagement with Japan and other allies and partners across the Indo-Pacific. The Biden administration largely adopted those policies in launching its Indo-Pacific Strategy, which placed special emphasis on enhancing the US-Japan alliance as the cornerstone of American security in the region.
Countering China, Growing US Steel
China's expanding influence and increasingly competitive steel industry present significant challenges to both nations. By fostering deeper economic interdependence, Nippon Steel's acquisition of US Steel would enhance cooperation between two longstanding allies, ensuring they are well-positioned to counter such challenges.
The ability to rely on allied nations for critical materials also reduces dependence on adversaries for supply chains. That fortifies resilience during geopolitical crises.
China's restriction of rare earth exports to Japan in 2010 during a territorial dispute — which led to disruptions and price spikes in essential Japanese industries — underscored the risks of reliance on hostile powers. China's just-announced ban on the export of critical rare minerals to the US further underscores that danger.
By contrast, Nippon Steel's proposed acquisition of US Steel embodies the principle of "friendshoring" — strengthening trade and supply networks with trusted allies to mitigate geopolitical risks.
Nippon Steel's reputation for responsible corporate governance, close compliance with local laws, and emphasis on community engagement should assuage any concerns about foreign ownership.
Local economies continue to benefit from the jobs Nippon Steel will sustain and the new ones it will create as it invests in US Steel's future by bringing cutting-edge technology to the company. Indeed, rather than where the buyer is based, it is more important that any buyer of US Steel can maximize American jobs and growth.
CFIUS Forthcoming Decision
Currently, the Committee on Foreign Investment in the United States (CFIUS) is reviewing the proposed deal over alleged national security concerns. A final recommendation is expected within weeks.
If CFIUS remains objective in its assessment, it will almost certainly conclude that this deal should go through. As soon as it does, President Biden should embrace the proposed partnership to ensure a free and collaborative environment between our two nations' industries while enhancing the overall US-Japan relationship.
As someone who has worked on US-Japan trade, economic, security, and diplomatic ties for more than three decades, I believe doing otherwise would undercut one of the most important alliances in the world at a time when a close bilateral relationship is more important than ever.
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Author: Daniel Bob
