In a decisive move reflecting concerns over national security and economic sovereignty, U.S. President Joe Biden has chosen to block the $14.9 billion acquisition of U.S. Steel by Japan’s Nippon Steel Corporation (5401), The WaPo reported Friday. This decision, expected to be officially announced on Friday, comes after the U.S. Committee on Foreign Investment in the United States (CFIUS) referred the deal to Biden without reaching a consensus, highlighting potential risks to national security.
The primary concern articulated by CFIUS was the possibility that Nippon Steel might reduce U.S. Steel’s production capacity, thereby jeopardizing supply chains vital for national defense and key industries. This scenario could lead to shortages and delays, impacting sectors critical to America’s security framework. In response to these worries, Nippon Steel proposed giving the U.S. government veto power over any decision to decrease steel production, alongside previous commitments to maintain U.S. Steel’s Pittsburgh headquarters and ensure American representation on its board.
Despite these concessions, Biden’s administration stood firm on the importance of U.S. Steel remaining under domestic ownership. The President’s stance was clear from March when he publicly declared the necessity for U.S. Steel to be “domestically owned and operated,” underscoring a broader policy of safeguarding American industrial assets against foreign control. This sentiment was echoed by President-elect Donald Trump, who vehemently opposed the acquisition, emphasizing his commitment to keeping U.S. Steel American on Truth Social.
The transaction had garnered significant shareholder support, with U.S. Steel’s investors voting in favor in April, recognizing the strategic and financial merits of merging with Nippon Steel. However, this support did not alter the political and security considerations at play. U.S. Steel’s CEO, David B. Burritt, had expressed optimism about the deal, citing the strong backing from shareholders as validation of its benefits.
This decision by Biden not only reflects a broader trend of skepticism towards foreign investment in key domestic industries but also signals a protective stance on national security assets. It places economic nationalism and the safeguarding of domestic industries at the forefront of U.S. policy, potentially setting a precedent for future international deals involving American companies in strategic sectors. The move has immediate implications for Nippon Steel, whose shares saw a 1.8% increase post-announcement, reflecting perhaps a mixed market reaction to the news.
As the U.S. navigates its relationship with global partners like Japan, this block on the merger could strain economic ties but also reaffirms the country’s commitment to maintaining control over industries deemed essential to its economic and security interests. The decision marks a significant moment in U.S. trade and foreign investment policy, highlighting the delicate balance between fostering global business relationships and protecting national interests.
h/t CNBC
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