Why Biden Wants to Block the Nippon-U.S. Steel Deal
Analysts say that union members’ votes will play a pivotal role in battleground states during the 2024 election. Trump narrowly won Pennsylvania in 2016, and Biden won the state similarly in 2020. Both presidential candidates have voiced opposition to the deal. Biden has thrown his support behind the USW and said that U.S. Steel should remain “American-owned.” Trump has said he would halt the deal “instantaneously,” citing the need to protect the U.S. steel industry.
Meanwhile, a bipartisan group of lawmakers has raised concerns that Nippon Steel’s operations in China make the acquisition a threat to U.S. national security. Led by senators from steel-producing states in the Midwest, these lawmakers point to Nippon’s partnerships with firms linked to the Chinese Communist Party as especially concerning. Senator Sherrod Brown (D-OH), who is running a tight reelection campaign, was among the first lawmakers to publicly oppose the deal. Nippon says that these accusations are based on “significant inaccuracies and misrepresentations,” and argues that the acquisition would strengthen U.S. national security by forming a stronger competitor against Chinese firms.
What role is CFIUS playing?
Nippon and U.S. Steel are seeking review by the Committee on Foreign Investment in the United States (CFIUS), an executive-branch, interagency panel that scrutinizes proposed transactions involving U.S. and foreign businesses to see whether they raise national security concerns.
CFIUS reviews can take months. They culminate in a recommendation to the president, who has sole authority in preventing transactions. To do so, the president must conclude that there is “credible evidence” of a national security threat. Between the creation of CFIUS in 1975 and 2018, presidents blocked foreign-investment transactions just five times. However, in many other cases, companies have agreed to scrap or alter merger plans after CFIUS alerted them that it would likely recommend a block. (This includes Nippon, which in 1983 abandoned plans to buy the metals unit of another Pittsburgh-based company, Allegheny International, over concerns about potential CFIUS intervention).
Skeptics of the threat posed by the deal, including CFR Senior Fellow Edward Alden, argue that the acquisition of a U.S. firm by a close ally does not raise obvious security risks. “Under the committee’s statutory analytical framework, Nippon Steel’s acquisition of U.S. Steel poses no national-security risk to the U.S.,” writes Thomas P. Feddo, a lawyer who ran the CFIUS process under Trump. Other observers point out that the lawmakers leading the anti-deal charge benefit from union support and face tough reelection contests.
Both companies expect to close the transaction in the fourth quarter of this year, potentially after the November election. The CFIUS review of the deal could extend into 2025; however, the president is authorized to unwind completed mergers if they were not previously approved by CFIUS.
How is the challenge at odds with Biden’s other stated goals?
Biden has sought to elevate economic relationships with U.S. allies, particularly fellow Group of Seven (G7) member Japan and other countries in East Asia. Critics argue that his opposition to a merger with a Japanese firm raises questions about Washington’s commitment to allies and its openness to foreign investment. “If Washington won’t allow this transaction—involving a buyer from a G7 country—then what foreign buyer would it see as a permissible owner?” asks Sarah Bauerle Danzman, a senior fellow at the Atlantic Council.
Some experts note that blocking the transaction would represent a major departure from CFIUS’s typical remit, which has historically focused more narrowly on national security.
Noah Berman writes about economics, technology, and geopolitics for CFR.org. This article is published courtesy of the Council on Foreign Relations (CFR).
