President Biden has decided to block the $14 billion takeover of U.S. Steel by Japan’s Nippon Steel in an announcement expected Friday on the grounds that the sale poses a threat to national security, according to people familiar with the matter.
The decision would be an extraordinary use of executive power, particularly for a president who is just weeks away from leaving office. It is also a departure from America’s longstanding culture of open investment, a culture that could have broad implications for the US economy.
The movement of Mr. Biden stopping the transaction could force foreign investors to rethink the wisdom of buying American companies in sensitive industries based in politically important states. It could also damage relations with Japan, a close ally of the United States and one of America’s biggest sources of foreign investment.
The president’s decision to block the deal came after a federal panel reviewing the transaction chose not to make a formal recommendation on whether the takeover should be allowed to go forward, according to letters sent to the companies and the White House last month .
The Committee on Foreign Investment in the United States, which is made up of agencies including the Treasury and Justice departments, expressed reservations about the deal to the companies in a letter last month. CFIUS (pronounced SIFF-ee-yuhs) raised concerns that the transaction could pose a national security threat to the United States, potentially leading to a decline in American steel production. Officials suggested that Nippon’s other global business considerations could in the future outweigh its commitments to invest in US Steel.
The lack of formal recommendation opened the way for Mr. Biden, barring an unexpected change of heart, to end a deal mired in campaign politics.
But that decision could face challenges in court. Nippon had said it was prepared to take legal action if the deal was blocked.
Nippon sent a letter to CFIUS last month that accused the White House of “impermissible influence” in the process. Nippon said the concerns raised by CFIUS were “filled with factual inaccuracies and omissions, misleading and incomplete statements, speculations and hypotheticals that have no basis in fact and are patently absurd.”
US Steel also continued to push for the deal. After CFIUS failed to make a formal recommendation, the company issued a statement saying the deal “is the best way, by far, to ensure that US Steel, including its workers, communities and customers, thrives in future”.
CBS News reported earlier that the decision could be made as early as Friday.
The policy of the decision of Mr. Biden was clear: US Steel is based in the critical state of Pennsylvania, and its powerful union strongly opposed the proposed takeover, in part because of concerns that Nippon would renege on commitments to invest in plants and preserve workers’ pensions. The public debate on the takeover emerged as a key issue ahead of the 2024 presidential election and Mr. Biden, Vice President Kamala Harris and President-elect Donald J. Trump has publicly stated that US Steel should remain American-owned.
Before the election, the Biden administration gave the companies an extra three months to try to address concerns about the deal. By December, however, it was clear the deal was likely doomed when CFIUS told Nippon that the feds were split on whether to proceed and after Mr. Trump said he would block her once she takes office.
“As President, I will prevent this deal from happening,” said Mr. Trump on social media. “Buyer Beware!!!”
Despite his opposition to the steel deal, Mr. Trump last month welcomed a $100 billion investment in the United States promised by SoftBank, a Japanese technology company, which will focus on technology and artificial intelligence over the next four years.
Nippon’s bid has faced political opposition since it was announced in December 2023. Democratic senators such as Sherrod Brown of Ohio and Bob Casey of Pennsylvania, along with Sen. JD Vance, the Ohio Republican who is now the elected vice president, they urged Mr. Biden to review proposed sale to protect against loss of steel production and jobs. Both Mr. Brown as well as Mr. Casey lost their seats to Republican challengers in November.
Shortly before last Christmas, the Biden administration appeared to bow to concerns raised by lawmakers, with Lael Brainard, director of the National Economic Council, issuing a statement saying the transaction “seems to merit serious scrutiny in terms of potential implications her. for national security and supply chain reliability.”
While US Steel shareholders approved the deal in April, the likelihood of it happening decreased as the presidential election neared.
Founded in 1901, US Steel has for years faced financial struggles amid the changing dynamics of global metals markets and rapidly evolving technology, which the company was often slow to adopt. The company, whose metal was used to construct some of the country’s most famous bridges and buildings – such as the Willis Tower in Chicago and the United Nations building in New York – employed 340,000 workers at its peak in the 1940s, but it now has about 20,000 workers total, with about 4,000 in Pennsylvania.
A post-pandemic boost to the steel market, which came from a combination of shortages and demand fueled by federal infrastructure investment, was showing signs of cooling amid concerns about a global economic slowdown. In 2023, a US Steel rival, Ohio-based Cleveland-Cliffs, made an unsolicited bid to buy its competitor. This sparked a bidding war that Nippon won.
As the fourth largest steelmaker in the world, Nippon saw an opportunity to grow even further and gain access to the American market by purchasing US Steel. With major federal investments in infrastructure and climate technology in the pipeline, the United States is seen as a growth market where steel demand will increase in the coming years.
But the United Steelworkers union quickly opposed the deal. The union claimed it had been blindsided by company management and argued that Nippon was unlikely to honor union contracts and protect workers’ pensions. Nippon said it would honor existing contractual commitments.
At the beginning of last year, Mr. Trump said US Steel should remain in American hands. Mr. Trump, who imposed sweeping tariffs on foreign steel imports from allies such as Mexico, Canada and Europe during his first term, said preventing a Japanese company from buying US Steel was a matter of preserving America’s industrial heritage .
Mr. Biden, under political pressure, echoed that sentiment in April, insisting that US Steel remains American-owned and operated. On Labor Day weekend, Ms. Harris, who had replaced Mr. Biden, as the Democratic nominee, echoed that message.
Not everyone, however, was opposed to the deal. Many US Steel workers came out in support, arguing that the company desperately needed the investment. Last month, three members of the Congressional Black Caucus sent a letter to the White House saying the deal was important to the future of American manufacturing.
And Mike Pompeo, who served as secretary of state to Mr. Trump, in his first term and who advised Nippon, wrote in the Wall Street Journal that the deal would allow the United States to challenge China’s global steel dominance.
The company’s fate remains uncertain, and efforts to preserve its American roots could hurt Pennsylvania workers in the long run. US Steel stock fell as prospects for a deal appeared to recede, falling to its lowest level in more than a year during premarket trading on Friday.
Nippon had pledged to keep its headquarters in Pittsburgh and invest in upgrading factories in the state. US Steel executives have warned that without Nippon, it may have to lay off workers, move headquarters and invest in plants it builds in the South. The company has received several additional takeover bids and remains likely to revive one.
