Protectionism is not exclusive to Donald Trump. The current president of the United States, Joe Biden, has vetoed the purchase of the steel company US Steel by the Japanese company Nippon Steel, citing national security reasons. This brings to an end an operation worth around $14 billion, launched at the end of 2023 and which has been met with resistance from politicians and unions for just over a year despite the Japanese group’s promises of multimillion-dollar investments. The presidential veto, long anticipated but coming just over two weeks before Biden leaves office, could cloud the relationship between the United States and Japan, one of its main Asian allies.
“As I have said many times, steel production – and steel workers – are the backbone of our nation,” Biden said in the statement released by the White House explaining his decision. “A strong, domestically owned and managed steel industry represents an essential priority for national security and is essential for resilient supply chains. That’s because steel powers our country: our infrastructure, our auto industry and our defense industrial base. Without domestic steel production and domestic steel workers, our nation is less strong and less secure,” he added.
US Steel is an iconic company founded in 1901 by JP Morgan and Andrew Carnegie. It is headquartered in Pittsburgh, the industrial capital of Pennsylvania, a very politically important state. The operation soon found rejection not only from Biden, but also from the two main candidates for the elections on November 5, Democrat Kamala Harris, and the president-elect, Donald Trump, who were trying to court the unionized voters of said State. but Biden has beaten him to it.
The decision comes after examination of the operation by the Committee on Foreign Investment in the United States (CFIUS), dependent on the Treasury Department and chaired by Treasury Secretary Janet Yellen. This committee had the power to approve, block or modify the agreement for reasons of national security, or refer it to the president for a decision, which is what it finally did in the absence of agreement within it.
In its final assessment of the deal, the committee warned that after purchasing US Steel, Nippon Steel could reduce domestic steel production, posing “risks to the national security of the United States.” Among the sectors most affected in this case, the committee pointed out transportation and energy. “US Steel’s possible reduction in production could cause supply shortages and delays that could affect industries critical to national security,” it argued.
Nippon Steel had made efforts to make commitments to try to overcome political and union resistance to the purchase. The in case you close the operation. The Japanese group also guaranteed employment and made a commitment to prioritize US Steel production to meet the demand of the US steel market and promised multi-million dollar investments. Nippon Steel desperately offered to have the operation approved with a condition that explicitly prohibited reducing production, but none of its efforts were successful.
The president’s veto is an extraordinary decision in a country that has been characterized by its openness to foreign investment, particularly from friendly and allied countries, such as Japan. It is a warning about the difficulty of carrying out operations in strategic sectors, especially if they affect politically relevant States. The Biden administration has embraced a policy of economic nationalism that Trump promises to accentuate with massive tariffs.
Nippon Steel announced a friendly takeover bid at a price of $55 per share, 70% above Thursday’s price. This difference made it clear that the market did not believe that the operation would go ahead. The share price is well below even when it was valued at around $14 billion. Biden when for the first time he clearly expressed his rejection of the purchase by Nippon Steel. “US Steel has been an iconic American company for more than a century, and it is vital that it remains domestically owned and operated,”
The veto means leaving US Steel without the investments that the buyer had promised and plunges the company’s future into uncertainty. In expressing his opposition to the operation, Trump promised to revitalize the ailing US steel sector “through a series of tax incentives and tariffs.”
Nippon Steel can challenge the decision, but that would mean entering into a long legal battle with an uncertain outcome.
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