US President Joe Biden has blocked the takeover of US Steel by a bigger Japanese firm, fulfilling a political pledge despite concerns that it could strain relations with Tokyo and deter other foreign investors.
In denying the Nippon Steel acquisition, Biden cited national security threats, emphasizing the importance of US ownership in maintaining the strength of the US steel industry and its supply chains.
His decision comes after pressure from the United Steelworkers union, which opposed a deal that had become a sensitive political matter during the 2024 US presidential race.
The Japanese government expressed bewilderment over Biden's ruling.
Nippon Steel and US Steel criticized Biden's move, alleging that the deal review had been "tainted" for political purposes.
The two companies, previously prepared to litigate if the deal fell through, stated their intent to take legal action to safeguard their rights.
Accusing President Biden of prioritizing his political agenda over the well-being of American steelworkers, the companies cautioned that the decision would deter companies from US allied nations considering substantial investments in the United States.
Japanese officials also expressed disappointment with the outcome.
Biden's determination raises questions about the future path of US Steel, a company established 124 years ago that was once a symbol of American industrial prowess but has since experienced decline.
After months of seeking a buyer, US Steel entered a partnership with Nippon Steel, the world's fourth-largest steel producer, in December 2023.
US Steel warned of potential factory closures without the infusion of capital from a new owner, a concern echoed by workers and local politicians.
Despite assurances from both companies to maintain jobs and other concessions to gain approval for the deal, Biden remained unconvinced, taking a stance against the transaction early last year during the heightened election season, particularly in the vital swing state of Pennsylvania.
The Committee on Foreign Investment in the United States failed to reach a consensus on national security risks associated with the deal by late December, leading to Biden's decision within a 15-day timeframe.
Emphasizing the importance of a domestically owned and operated steel industry for national security and resilient supply chains, Biden directed the companies to abandon the deal within 30 days.
The United Steelworkers union praised Biden's action as beneficial for its members and national security, underscoring concerns about the industry's long-term viability.
Experts viewed Biden's decision as politically driven, aligning with promises of prioritizing middle-class interests in foreign policy, akin to the Trump administration's "America First" agenda.
The White House dismissed concerns about damaging relationships with allies, asserting that the focus was on preserving a major US steel producer as an American-owned entity.
US Steel's shares dropped by over 5% following Biden's announcement.
While analysts suggested the deal may not be entirely off the table, with provisions allowing for an extension of the deadline to cancel the transaction, they speculated that the companies might reconsider under a potential Trump administration, offering revised terms to secure a more favorable outcome.
Political commentators highlighted the intricate dynamics at play, suggesting that Trump, despite his prior criticism, could seek to revise the decision to maintain strong bilateral relations with Japan.