After over a year in the making, the takeover of U.S. Steel by Japan’s Nippon Steel was thwarted by former President Joe Biden in January due to security concerns. Now, President Donald Trump is considering whether to revitalise the deal, even as he introduces tariffs on Japanese imports.
In December 2023, Nippon Steel announced it planned to acquire U.S. Steel for $14.9 billion as part of its plan to expand its U.S. assets. It was expected to make Nippon the third-largest global steel producer, contributing around 86 million tons per year of global production. The deal was expected to close in the second or third quarter of 2024. Nippon beat the bids of several other steel producers, including ArcelorMittal and Cleveland-Cliffs.
At the time, the United Steelworkers opposed the sale to Nippon, suggesting it was “the same greedy shortsighted attitude that has guided U.S. Steel for far too long.” The union planned to lobby regulators over the purchase, citing national security concerns. The takeover was also met with concern by several politicians, who were worried about issues such as domestic employment.
Following the announcement, Nippon Steel faced staunch opposition from labour unions and politicians and in September 2024, the deal was put on hold for nine months while it was investigated. Concerns centred around the fact that U.S. Steel provides essential commodities to the automotive, construction, and defence industries and the taking over of the firm by a Japanese company could put national security at risk, forcing the U.S. to rely on a foreign country for critical resources.
While United Steelworkers and others opposed the deal, there was also significant support for the purchase to go ahead. Nippon Steel was expected to invest in the modernisation of U.S. Steel’s infrastructure and operations. It would also likely cut production costs, improve operational efficiency and help the company compete more effectively with major international steel firms, such as India’s Tata Steel and China’s Baowu Steel. Also, as Japan is an ally of the United States, many believed the national security concerns were unfounded.
In January this year, former President Biden blocked the Nippon-U.S. Steel deal, citing security concerns and the need to preserve a strong, domestically owned steel industry. The Committee on Foreign Investment in the United States (CFIUS) quickly extended the deadline for Nippon Steel to abandon the acquisition bid from the 2nd February to 18th June 2025.
Nippon Steel responded in disagreement with the decision. The firm’s Vice Chairman, Takahiro Mori, wrote in a New York Journal opinion piece, “Biden’s decision to block our acquisition of US Steel appears to be driven more by electoral politics than genuine national security concerns. Japan is a close ally of the United States, and this raises a fundamental question: Will major companies from allied nations be treated as partners or political pawns when they seek to invest in America?”
The two steel companies launched two joint lawsuits in January, one against Biden and senior administration officials and another accusing USW and Cleveland-Cliffs of using their longstanding alliance to obstruct the deal through regulatory and political channels.
In April, President Trump ordered CFIUS to conduct a review of the proposed acquisition to determine“whether further action in this matter may be appropriate.” CFIUS has been given 45 days to submit a recommendation on whether the deal should go ahead. Late on Monday, the Trump administration and the two firms requested that the appeals court pause their litigation until 5th June to await the CFIUS verdict. Following the presidential action, U.S. Steel’s stock jumped over 16 percent, closing at $44.49 a share on 7th April. Nippon Steel shares rose by nearly 10 percent in Tokyo the following morning.
Nippon Steel released a statement saying, “We have been confident from the outset that an objective, fact-based review of our proposed partnership with U.S. Steel will show that it strengthens American economic and national security.” Meanwhile, a U.S. Steel spokesperson said the company is looking forward “to continuing to work closely with President Trump and his administration to finalise this significant and important investment.”
Trump had previously opposed the deal, but after a meeting with Japanese Prime Minister Shigeru Ishiba in February, the U.S. president appeared to be more open to Nippon’s involvement in U.S. steel. However, in a phone call with Trump, Ishiba failed to convince the U.S. president to agree to a tariff exemption for Japan, although the two leaders did agree to further discuss the issue. The imposition of tariffs could harm investment by Japanese firms in the U.S., according to Ishiba, which brings the Nippon-U.S. Steel deal into question. Whether the acquisition will go ahead, after over a year of delays and doubt, will depend on several factors, including the CFIUS recommendation, the appeals court decision, and the final decision on U.S. tariffs on Japan.
By Felicity Bradstock for Oilprice.com