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In an extremely unusual situation, the U.S. president has used his authority to block the planned purchase of a U.S. company by a company from Japan, which is a U.S. ally. This decision is unacceptable, as it opens the door to problems in Japan-U.S. relations.
U.S. President Joe Biden has issued an order to block Nippon Steel Corp.’s planned acquisition of major steelmaker United States Steel Corp. Biden said in a statement, “A strong domestically owned and operated steel industry represents an essential national security priority.”
While such orders have often been issued targeting Chinese companies in the past, this is reportedly the first time for a Japanese company to be targeted.
During the review process by the Committee on Foreign Investment in the United States (CFIUS), an argument is believed to have been presented that, if the takeover was approved, steel production in the United States could decrease, and that there could be a shortage of steel supply to industries that are important from a national security standpoint.
However, the committee’s members were unable to reach a consensus on the possible security risks, and the final decision was left to Biden.
Biden cited security risks as his basis for issuing the order. In reality, however, a major factor was likely the strong opposition from the United Steelworkers union — which has been part of Biden’s support base in election campaigning — stemming from fears over job insecurity.
It is greatly disappointing that Biden reached his final decision without fully considering the importance of the Japan-U.S. relationship, which has developed through mutual cooperation after the end of World War II.
U.S. President-elect Donald Trump, who touts an “America First” approach and is set to promote protectionist tariff policies, has also opposed the planned buyout. Even Biden is now leaning toward protectionism and taking an inward-looking stance. This situation is definitely cause for concern.
Established in 1901, U.S. Steel was once the world’s largest steelmaker and a prestigious company that symbolized the U.S. manufacturing industry. There is reportedly strong resistance among the public to the idea of such a company coming under foreign ownership.
However, U.S. Steel has lost its international competitiveness, and its crude steel production has sunk below 20th place in world rankings.
The reality is that the company will be unable to survive unless its production base is strengthened with Nippon Steel’s advanced technology and funding. It is strongly believed that U.S. Steel will be unable to avoid shutting down some of its plants and will have to restructure itself if the situation remains unchanged.
The planned takeover could have created a symbolic framework, in which companies that represent Japanese and U.S. manufacturers worked together and countered the export offensive of cheap products made by Chinese steelmakers. The losses from the block of the takeover are therefore significant.
Japan ranked No. 1 in terms of the balance of direct investment in the United States for five consecutive years until 2023, contributing to the development of the U.S. economy. This unreasonable decision may have a negative impact on investments in the United States.
It is hoped that the Japanese government will call for the U.S. government to provide a concrete explanation about the decision and to explore all possible measures to cope with the situation.
