In December 2023, Nippon Steel, a Japanese owned steelmaker valued at $21 billion, announced plans for a $15 billion purchase of United States Steel Corporation (U.S. Steel) — a deal representing a 40% premium of share prices at the time and would ensure the viability of an over 100 year old American manufacturing behemoth. However, what will be a beneficial deal, strengthening relations between the United States and Japan, an ally located near China, the world’s largest steel producers, is on the verge of collapse. Lawmakers hiding behind the guise of foreign policy concerns are now looking to block the takeover, not to protect national security but to match the Trump campaign’s rhetoric calling to block the takeover. Rhetoric targeted at Pennsylvania voters, who will play a crucial role in deciding the 2024 election and where, according to U.S. Steel, the company generated in 2022 over 11,000 jobs and $3.6 billion in economic impact. Pennsylvania is also, incidentally, where Nippon has promised to move its American headquarters. However, U.S. Steel has said, according to the Pittsburgh Post-Gazette, that, “without the Nippon Steel transaction, U.S. Steel will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk.”
While the prospect of U.S. Steel continuing under U.S. ownership represents an ideal world, that is unfortunately not the case. In August 2023, U.S. Steel denied Cleveland-Cliffs, another large American steel producer, a $7.3 billion bid to purchase the company, a bid U.S. Steel’s CEO described as “unreasonable” in a letter to Cleveland-Cliffs.
Simply put, the Biden Administration, as well as the Trump and Harris campaigns are all prioritizing an unrealistic hope of continued American ownership over a plan that would increase investment in the American steel industry and protect American jobs. Instead, in a short-sighted attempt to gain votes in Pennsylvania, the deal is on the verge of collapse.
Moreover, the overtly political act of blocking the deal could delegitimize the United States on a global scale. As The New York Times reported, the deal’s collapse could “damage America’s reputation for having open markets” and that “the decision could also be a blow to American relations with Japan, a close ally and economic partner.” Moreover, while the Committee on Foreign Investment in the United States discusses whether or not foreign direct investment from a U.S. ally constitutes a national security risk, the U.S. faces a more serious and immediate risk at home. Chinese-manufactured cranes, which Dustin Volz at The Wall Street Journal reported had modems that “created an obscure method to collect information, and bypass firewalls in a manner that could potentially disrupt port operations.” On the other hand, according to Nancy McLernon, CEO of the Global Business Alliance, “It is far from clear how this deal could post a national security threat.” However, while real national security issues related to U.S. infrastructure exist, election year politics have shifted the focus to a non-issue in the hopes of winning short-term gains without considering long-term consequences.
As of 2023, China produced 1,019.1 million tons of crude steel, while India only produced 140.8 million tons in second place. The United States, once a titan of the steel industry, trails in fourth, producing just 81.4 million tons. While U.S. Steel retaining American ownership represents an ideal outcome, Japanese investment is the next best alternative. First, it blocks an opportunity for increased Chinese investment in America – investment which would most likely pose a larger national security risk than Japanese investment. Second, it strengthens ties with an ally, geographically close to China, and shows continued U.S. commitment to foreign direct investment – especially with key allies. And third, it protects American workers and jobs. If the deal falls through and U.S. Steel moves jobs away from Pennsylvania to other states, those jobs remain in America. However, as U.S. Steel has said that if plants were to close, over 7,000 jobs in Pennsylvania and Indiana could be at risk if the deal falls through—a much bleaker reality than losing American ownership. Cleveland-Cliffs has reiterated its offer to buy U.S. Steel, however, the deal is still only around half the value of that proposed by Nippon Steel.
While the desire for short-term political gain is understandable, blocking the deal does nothing but hurt the United States both at home and abroad. Instead of uniting against the Nippon deal, both candidates and the current administration must face reality and support a deal that, while not perfect, would provide needed and valuable support for one of America’s oldest manufacturers.
Lewis Rand ‘27 studies in the College of Arts & Sciences. He can be reached at l.e.rand@wustl.edu.