Joe Biden has declared his opposition to Nippon Steel’s proposed $14.9bn purchase of US Steel, saying it was “vital” for the American steel company to remain “domestically owned and operated”.
In a statement on Thursday, the US president characterised his decision as an effort to side with American workers, at a time when he is under pressure in his re-election campaign to retain the blue-collar vote in the face of aggressive courting by his Republican rival Donald Trump.
But the declaration risks damaging Washington’s relationship with Japan, one of its closest allies, even as the US is attempting to rally allies and partners in the region to contain a frequently belligerent regime in Beijing.
“It is important that we maintain strong American steel companies powered by American steel workers,” Biden said. The White House said the president on Thursday called David McCall, international president of the United Steelworkers union, to “reiterate that he has the steelworkers’ back”.
Biden has described himself as the most pro-union president in US history and is banking on the support of organised labour in November. US Steel’s shares dropped a further 6.4 per cent to $38.26 on Thursday, having fallen by more than 12 per cent on Wednesday.
Biden’s intervention comes a day after the Financial Times first reported that he was preparing to voice concerns about the Japanese group’s proposed acquisition of the Pennsylvania-based steelmaker.
Nippon Steel last week formally filed the deal with the Committee on Foreign Investment in the US (Cfius), the inter-agency panel that vets inbound deals for national security threats.
The Japanese group reacted to the intervention by arguing that its deal would increase competitiveness in industries that need American steel and would strengthen US supply chains and economic defences against China.
“We are progressing through the regulatory review, including Cfius, while trusting the rule of law, objectivity and due process we expect from the US government,” Nippon Steel said. “We are determined to see this through and complete the transaction.”
The intervention by Biden raises questions about how Cfius will proceed in its investigation, however.
“Based on past practice, it is likely that Cfius would have been on track to clear the deal, likely with some conditions related to protection of domestic steel production and related jobs,” said Emily Kilcrease, a Cfius expert at the Center for a New American Security think-tank. “But, with the president’s statement opposing the deal, Cfius is potentially in the uncomfortable position of having to reverse engineer their risk assessment to fit a politically determined outcome.”
The intervention comes less than a month before Japanese prime minister Fumio Kishida is due to arrive in Washington for a high-profile visit designed to underscore the importance of the US-Japan alliance.
Heino Klinck, a former top Pentagon Asia official, said the timing of Biden’s statement was “inopportune to say the least” given Kishida’s visit. He said it also came as Congress debates legislation to ban TikTok and could feed a Chinese government narrative about xenophobia in the US.
The move caps months of debate within the White House about how to respond to a deal that has sparked a political backlash in Washington and Pennsylvania, a critical swing state.
Trump, who has also courted union workers in Pennsylvania and in other big industrial states, last month vowed to “absolutely” block the Nippon Steel deal if elected to another term in the White House.
“I would block it instantaneously. Absolutely,” he told reporters after meeting last month with the International Brotherhood of Teamsters, one of the largest US labour unions. Trump said it was a “horrible thing” that US Steel might be sold to a foreign entity.
“We saved the steel industry, now US Steel is being bought by Japan,” Trump added. “It’s so terrible.”
United Steelworkers, which is based in Pittsburgh, has long opposed the takeover.
“Allowing one of our nation’s largest steel manufacturers to be purchased by a foreign-owned corporation leaves us vulnerable when it comes to meeting both our defence and critical infrastructure needs,” United Steelworkers said on Thursday. “The president’s statements should end the debate: US Steel must remain ‘domestically owned and operated’.”
Cleveland-Cliffs, a domestic rival whose $7.3bn bid US Steel rejected last August, signalled on Thursday that it could bid again should Nippon Steel drop out. Chief executive Lourenco Goncalves told Bloomberg that Cleveland-Cliffs would consider a bid “in the $30s” and would have the United Steelworkers’ backing.
Bob Casey, the Democratic US senator from Pennsylvania who is also facing a tough bid for re-election in November, immediately welcomed Biden’s statement, saying he had “long held concerns that this sale could be a bad deal for our workers.”
Casey, who is likely to go head-to-head in November against Republican candidate and former Bridgewater executive David McCormick, added his “number one priority” was “protecting union jobs”, adding: “I’ll work like hell against any deal that leaves our steelworkers behind.”
Source: Economy - ft.com
