The proposed acquisition of U.S. Steel by Nippon Steel of Japan has been met with a great deal of controversy, causing the decision to fall into the hands of President Joe Biden, who is opposed to the deal. The nearly $15 billion deal has raised concerns around national security risks, leaving many skeptical about the implications of a Japanese company buying an American-owned steelmaker.
The Controversial Deal
The Committee on Foreign Investment in the United States (CFIUS) recently submitted their report on the merger to President Biden. The President now has 15 days to reach a decision. This comes after Biden formally stated his opposition to the deal in March. Notably, some federal agencies represented on the panel have expressed skepticism about the potential national security risks that could arise from allowing a foreign company to acquire a major American steelmaker.
As the deadline for a decision on the deal was reached, the options were to approve the bid, recommend that Biden block it, or to extend the review process. Both President Biden and President-elect Donald Trump have vowed to block the acquisition due to concerns about foreign ownership of a flagship American company.
Potential Economic Risks
While the national security risks are a major concern, there are also potential economic risks associated with blocking the deal. One such risk is the loss of Nippon Steel’s potential investments in U.S. mills and upgrades that could help preserve steel production within the United States.
Under the terms of the proposed $14.9 billion all-cash deal, U.S. Steel would retain its name and headquarters in Pittsburgh, where it was founded in 1901. The company would ultimately become a subsidiary of Nippon Steel, and the merged entity would rank among the top three steelmakers in the world, according to the World Steel Association’s 2023 figures.
Preserving American Steel Production
President Biden, supported by the United Steelworkers, has argued that it is crucial for U.S. Steel to remain an American company that is domestically owned and operated. Similarly, Trump has also expressed his opposition to the acquisition and pledged to block the deal. His proposal for reviving U.S. Steel includes a series of tax incentives and tariffs.
The steelworkers union has expressed concerns about whether Nippon Steel would maintain jobs at unionized plants, honor collectively bargained benefits, and safeguard American steel production from cheap foreign imports.
As the decision now rests with President Biden, the future of U.S. Steel hangs in the balance. The potential implications of this deal extend beyond just the companies involved, affecting national security, the economy, and the American steel industry as a whole.
