09/05 – International Economics Story

The Biden administration last weekend sent over a letter to Nippon Steel indicating that their attempted $15B purchase of U.S. Steel  poses a national security risk due to the possibility of offsetting and harming the American steel industry. 

The Committee on Foreign Investment in the United States (CFIUS) expressed in the previously undisclosed letter that the deal would harm U.S. steel production and reduce the chances of U.S. Steel continuing to actively pursue trade remedies.

 “The committee has identified risks to the national security of the United States arising as a result of the transaction,” the letter stated, as per one of the sources. [Reuters]

Spokespeople for Japan’s Nippon Steel and U.S. Steel declined to comment on the letter, instead pointing Reuters to earlier statements asserting that the deal poses no national security risks and would bolster the U.S. steel industry. 

“We fully expect to pursue all possible legal avenues to ensure that this transaction, which represents the best future for Pennsylvania, American steelmaking, and all of our stakeholders, is completed,” the U.S. Steel spokesperson added. [Reuters]

Recent developments such as these show signs that the administration is preparing to block the deal from going through. The deal has received bipartisan opposition from many Democrats and Republicans. 

Donald Trump pledged to block the deal if elected and Vice President Kamala Harris stated this week that she also wishes to see U.S. Steel remain “American owned and operated”. [Reuters]

In a 100-page response letter sent on Tuesday, Nippon Steel outlined plans to invest billions of dollars to sustain and enhance U.S. Steel facilities that would otherwise be idled, stating this would “indisputably” allow it to “maintain and potentially increase domestic steelmaking capacity in the United States.” [Reuters]

Nippon also reiterated its commitment not to transfer any U.S. Steel production capacity or jobs overseas, while pledging not to interfere with U.S. Steel’s trade-related decisions, including actions against unfair trade practices under U.S. law.

The company emphasized that the deal would “create a stronger global competitor to China grounded in the close relationship between the U.S. and Japan.”

To address CFIUS concerns, Nippon proposed a national security agreement, including a pledge that a majority of U.S. Steel’s board of directors would be non-dual U.S. citizens, with three independent directors approved by CFIUS to ensure compliance with the agreement.

The share price of U.S. Steel fell by more than 17% Thursday in response to widespread anticipation that President Joe Biden is preparing to block the steelmaker’s takeover by the Japanese firm.