January 4, 2025 - 4:31pm
In one of his last official acts US President Joe Biden has issued an order blocking the $14.9 billion acquisition of US Steel by the Japanese company Nippon Steel. It is the first time a US president has blocked the takeover of a US company by a Japanese corporation and it has caused considerable disquiet in Japanese business and political circles. The ramifications for the US-Japanese relationship, and thus the wider Asia Pacific region, as Donald Trump prepares to resume the White House, could be significant.
The Japanese have been watching the progress of this deal with intense interest (the Nikkei Business daily has published over 200 pieces on it since its announcement in December 2023) and the reaction here in Tokyo has been one of shock, incomprehension and anger. Economy, Trade and Industry Minister Muto Yoji called the final decision “unfortunate and incomprehensible. The minister said that he will demand the US explain the decision in more detail and warned that further investment by Japanese companies in the US is now under threat.
Nippon and US steel issued a joint statement condemning Biden’s decision as “unlawful”. Nippon Steel fired back at Biden’s claim that national security was threatened by the deal stating that no “credible evidence” to support such concerns has been presented. The company claimed that the block was a “political decision” and that government oversight had been “deeply corrupted by politics”.
Nippon Steel’s response is understandable given that it had gone to some lengths to reassure US authorities that it would honour existing contracts and labour agreements and not make any redundancies until at least 2026. In addition, the CFIUS (Committee on Foreign Investment in the US) panel which reviewed the deal, failed to reach a consensus, which some saw as a signal it would be green-lit. And though some of the steel workers’ unions had opposed the acquisition, others have been supportive and many neutral observers saw it as US Steel’s best hope of survival.
Where this leaves US Japanese relations on the cusp of the second Trump presidency remains to be seen, but it augurs poorly. Bruce Aronson of the US-Asia Law Institute expects a decline in Japanese investment into the US if the block is interpreted as a sign that such investment is unwelcome. That feeling he says could spread to other countries. It could also reinforce the global trend in protectionist trade polices justified by nebulous “national security” arguments.
A distinct froideur in US-Japanese political relations seems inevitable, which will be a challenge for Trump II. Thanks to a warm personal relationship between Trump and Shinzo Abe (they had an “odd couple” chemistry and a mutual fondness for golf and fast food) the first instalment was relatively benign and reasonably productive. Abe’s widow Akie was even granted an audience at Mar-a-Lago recently, something denied the current prime minister Shigeru Ishiba.
But that relationship will count for little now. The Abe faction is no more and the memories likely to be evoked by the Biden block are the days of regular trade tussles going back as far as the administration of Richard Nixon. There are clear echoes of the “textile wrangle” (1969 -1971) which saw the two nations grapple over a declining industry in a mutually disadvantageous way and set the tone for a series of trade confrontations over the next few decades.
Things were particularly testy in the 80s and 90s, when the success of Japanese imports and supposed link with the evaporation of American jobs saw the emergence of “Japan-bashing” as a popular political strategy. This coupled with the recurring theme of America prioritising the political relationship with China over trade policy with Japan soured relations.
The historical context matters but in reality, the Nippon Steel decision is unlikely to have been a case of Japan-bashing. For Biden, it may be a parting shot, stealing his successor’s America First thunder (Trump has not commented on the block) and claiming one final “achievement” — the “saving” of an iconic American company from foreign ownership, despite the consequences (which he will not have to deal with).
The damage between the two nations has now been done. The girders supporting the structure of friendship and trust between these two supposed allies have been corroded, and may need to be forged anew.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeThis was 100% Biden poisoning the well for Trump before leaving office. Japan hasn’t been a national security threat since 9th August, 1945. China, on the other hand, is a very real national security threat and has been buying up American real estate and companies for years without the Biden administration saying word one.
What are you talking about it? Donald Trump said just last month he would kill the deal himself as soon as he becomes president. Despite Mike Pompeo lobbying his heart out on Nippon Steel’s behalf.
My comment has nothing to do with whether or not Trump was in favor of the deal. It was in relation to the author’s assertion that Biden was trying to steal Trump’s “America First” thunder. In general, Biden appears to be doing all he can to poison the well for Trump, whether it be stealing his thunder or fouling things up to make his job harder when he takes office.
By the way, I agree with you that the best way to save US Steel is to allow Nippon to purchase it.
I get the part about possibly stealing Donald Trump’s thunder (though I don’t think that’s Joe Biden’s motivation), but I don’t see how that could be considered “poisoning the well”. I think Joe Biden wanted to make a statement of support for the labor unions by backing David McCall at the United Steelworkers.
That doesn’t poison anything for Donald Trump. He is still free to do whatever he wants as president with regard to this deal. He could negotiate different terms, and I think he will. As many people have pointed out, Donald Trump’s position on Nippon Steel seems incongruous with the basic principles he espouses.
For instance, Donald Trump has in the past begged for foreign investment in American companies — Masayoshi Son of Softbank made a $100 billion commitment to invest in the US and Donald Trump tried to hit him up to double that amount. There’s no reason to turn up his nose at Nippon Steel’s proposed investments in US Steel. The idea that Nippon Steel is under the control of China is laughable.
But just like with TikTok, both parties have not laughed off the notion but have done just the opposite — raised the menace of red peril to score political points by thwarting the evil foreign adversary China. There are important economic factors to consider, and foreign policy concerns, but they seem to be lost in nonpartisan politics.
So now US Steel has a problem. It needs money and management, two things Nippon Steel would have provided. Cleveland-Cliffs is the other possible buyer, but its finances are shaky and by any application of the Justice Department merger guidelines the department would block the sale as anticompetitive. If we want strong domestic steelmaking the last thing we need is a government-created monopoly in US rolled steel production.
This further cements Biden as the pettiest, meanest, lowest, worst, most corrupt President in US history. Fortunately he’ll be gone in a matter of days. Not a day too soon.
Lame duck gonna lame duck
Interesting story. But why no mention that Mike Pompeo is lobbying hard for this deal? And Donald Trump said on December 2, 2024 that he would block the takeover of US Steel by Nippon Steel or any other foreign company. The deal was doomed one way or another.
That’s a shame. I lived in Japan for 10 years, speak and read Japanese pretty well (my wife is Japanese and doesn’t speak much English, so I have to). The more ties between the two countries, in my opinion, the better. We complement each other in many ways.
Donald Trump says he can save US Steel, but he can’t. Nippon Steel can. He should let them do it.
Let’s see what happens after Jan 20.
The more ties between Japan and the U.S the better, as you say but the fewer ties between Japan and China, even better. Incidentally, I too am married to a Japanese (irrelevant point you raise) and I live in Japan and have done for over 40 years.
Good on Biden, and it’s not often I’d have says that over his term. I wish Britain had been more protectionist over the years rather than selling every industry and piece of infrastructure to foreign interests. Too many confuse foreign investment with simply flogging the family silver
I’d agree with you if the foreign buyer was doing a financial deal to make easy money. Here Nippon Steel would not only invest in the company, but run it Japanese style, instead of the American-style financialization that put US Steel’s life in danger. We Americans gain from the deal, we don’t lose.
There’s little question in my mind that at this point US Steel gets bought by Nippon Steel or it dies. It doesn’t matter much who the owner is — what matters is whether the company lives or dies. Better for the US economy to have a living US Steel than to kill it off in the hope of saving it from foreign ownership.
I’ve heard that argument numerous times before though in Britain so forgive my scepticism. These new foreign owners were always supposed to save the industry, instead what actually happened was thousands were laid off, the business carved up and sold off and eventually it disappeared overseas. Britain now is unable to make virgin steel as a result
Mark Twain said: “We should be careful to get out of an experience only the wisdom that is in it — and stop there; lest we be like the cat that sits down on a hot stove-lid. She will never sit down on a hot stove-lid again — and that is well; but also she will never sit down on a cold one anymore.”
I think that applies here.
US Steel will not be allowed to die. Steel is too important to the defense industries and the country is strategically preparing for war with China. It will either be propped up by the government or the government will grease the wheels and have US Steel bought by one of the American firms that aren’t totally incompetent, probably Nucor. If you haven’t noticed the era of unquestioned globalist economics is over.
Right. The taxpayers will end up being the ‘owners’ of US Steel, but without any say in its management.
Turning down this deal is so stupid – look how well the Japanese auto companies have done with US facilities. It’s not like they can move things to Japan or Mexico. And the Japanese government knows very well that they are beholden to the US for defense in the face of a very hostile China.
I mostly agree with you. I was making a guess at their motivation without approving or disapproving. There’s such a thing as excessive caution.
Personally I am neutral overall on this. I generally applaud when the government rejects any corporate merger/buyout, but the extenuating circumstances here dampen my usual enthusiasm for monopoly busting and promoting greater competition.
My guess is this came from a higher authority than Biden, the Pentagon. US steel in whatever form it exists would surely be a part of the war mobilization in the event of a major power conflict. My guess is that the MIC will do whatever it takes to keep US steel running and didn’t want to have to negotiate with the Japanese government in the event of a conflict with China. I am of the opinion that Japan would likely be supportive of the US economically if not an active participant in the conflict, but I don’t have a mountain of diplomatic and intelligence reports from the CIA and state department to peruse to inform my conclusions. There exists some possibility Japan might remain neutral and refuse to support the war effort. Then a major part of the US war effort would be controlled by a neutral country and we would have to negotiate with the Japanese to get ships built at whatever cost.
The Pentagon and MIC are dead serious about preparing for a major conflict with China, as they should be. The timing is unfortunate as ten years ago this would have been rubber stamped without much thought, but times have changed. In the new era, geopolitical and national security concerns will take precedence over globalist economic dogma and international cooperation. Best get used to this because you’ll see more of this in the future.
I think US might be risking the friendship and alliance with Japan, but the situation seems very complex. There appears to be something emerging or happening beneath the surface that the average reader may not have access to. Refusing to engage trading now, especially while South Korea is experiencing an internal crisis, might underestimate how much of this could be influenced by Chinese interference or influence or just fracturing systems. I’m keeping an open mind, but if Japan steps outside of its alliance with the U.S., the game is over. Japan has its own internal political issues lately too! Something is afoot!
I like to think the US’s relationship with Japan is deep enough to survive one blocked corporate merger when companies are already entirely too large and causing problems with their size. I frankly think all corporate mergers, especially with foreign firms should be considered with skepticism. Clearly this is a time when all nations have to look to their own interests. The reality is that the globalist era is ending. There will be more competition and less cooperation. Military and defense considerations will often supersede economics and the US is in a position to leverage that against China’s economic advantage. Further, it’s possible the US will grant other concessions behind the scenes. A show of public outrage on the part of the Japanese government is both appropriate and expected. It’s probably for domestic political consumption. If Japan starts inquiring about buying Chinese military equipment, that’s when I would start to worry about the longer term alliance.
Test
Test
Test
Many here in Japan applaud the blocking of the deal as Nippon Steel has a long history of kowtowing to China. The Japanese government and establishment including the Keidanren is shifting leftwards, thus their outrage.