In a decisive move, President Joe Biden has halted the substantial acquisition of US Steel by Nippon Steel.
According to the New York Post, President Joe Biden barred the $14.9 billion purchase, pointing to concerns for national security, amidst political climate tensions.
This decision arrived shortly before the end of President Biden's term, underscoring the national debate over foreign ownership of critical U.S. industries. The proposed deal had been under scrutiny by the Committee on Foreign Investment in the United States (CFIUS), which last month failed to reach a consensus, ultimately leaving the judgment in the hands of Biden.
Following the announcement, shares in US Steel took a significant downturn, dropping by over 6%, continuing its 36% decline over the last year. As repercussions linger, Nippon Steel has signaled its intent to contest the decision legally.
White House spokesperson John Kirby emphasized that the rejection aims to ensure the U.S. steel industry remains under American control. "This isn’t about Japan. This is about US steelmaking and keeping one of the largest steel producers in the United States an American-owned company."
Nippon Steel was prepared to maintain US Steel's headquarters in Pittsburgh and respect existing union agreements, attempting to mitigate the government’s concerns. Despite these assurances, widespread objections from union leaders and political figures have marred the proposed deal since its inception in December 2023.
The United Steelworkers Union has expressed apprehension that the merger could lead to a disregard for contractual agreements and pensions. Such worries gained more traction as political climates tensed with the upcoming presidential election, where the deal faced growing scrutiny and critique, including from Vice President Kamala Harris.
In response to the potential block, US Steel had warned that not completing the merger could force the company to close mills and possibly relocate its headquarters from Pennsylvania. These threats outlined the grave implications of the failed deal for the local economy and workforce.
President Joe Biden defended his decision fiercely, highlighting the importance of maintaining a domestically owned steel industry for national security and economic prosperity.
The President stated, "It is my solemn responsibility as President to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad, and it is a fulfillment of that responsibility to block foreign ownership of this vital American company."
The blocked deal not only imposes an immediate financial penalty on Nippon Steel but also casts a long shadow over future international investments in the U.S. Nippon Steel and US Steel have termed the blockade a "clear violation of due process," accusing it of being a politically motivated move.
They vowed to "take all appropriate action" to assert their rights and challenge the decision.
The failed transaction would result in a $565 million penalty for Nippon Steel, adding financial insult to strategic injury. Nippon Steel had projected that the acquisition would boost its global output, signifying a significant setback in its expansion plans.
This move by President Biden, just weeks before his term concludes, reflects a stringent stance on national security and economic protectionism, setting a profound precedent for how foreign acquisitions may be treated in the politically charged atmosphere of transitioning administrations. The implications of this decision will likely resonate across political, economic, and trade discussions worldwide.
