By blocking the acquisition of US Steel, President Joe Biden has irked Japan, one of Washington’s closest allies whose firms are the biggest foreign investors in the United States.
– Why did Biden do this? –
Nippon Steel touted the $14.9 billion deal as a lifeline for its rusting US rival, but opponents warned that the Japanese firm would slash jobs
— despite assurances to the contrary.
The transaction announced in 2023 came in the run-up to last year’s presidential election — US Steel is based in swing state Pennsylvania — and both main candidates, Donald Trump and Kamala Harris, opposed it.
A government panel, the Committee on Foreign Investment in the United States (CFIUS), failed to reach consensus and passed the buck to Biden in the waning days of his presidency.
Biden, echoing Trump, cited “national security” and blamed unfair global trade policies — with a nod to China, the world’s biggest producer — for the decline of the US steel industry.
“I have taken decisive action to level the playing field for American steelworkers and steel producers by tripling tariffs on steel imports from China,” Biden said.
– How did Japan react? –
Japan’s industry minister labelled the decision “incomprehensible” while Prime Minister Shigeru Ishiba called on Washington to “explain clearly” its rationale.
Previously the United States has blocked acquisitions by Chinese companies but Japan is a close strategic and economic ally.
The US military has 54,000 personnel in Japan, and Washington is relying heavily on Tokyo to help it counter China.
Sarah Bauerle Danzman, from the Atlantic Council think-tank, said it was the only time the CFIUS had been used to halt a deal that does not have Chinese ownership ties.
Biden’s decision represents a “major expansion of how CFIUS has traditionally interpreted national security”, Bauerle Danzman wrote.
– What do Japanese firms think? –
Yasuhide Yajima, chief economist at NLI Research Institute, said Japanese firms will be worried about the unpredictability of US policies.
“Concerns will amplify from now. This will certainly put up a hurdle for Japanese firms, especially manufacturers, doing business over there,” Yajima told AFP.
John Murphy, head of international at the US Chamber of Commerce, said the decision could have a “chilling effect on international investment in America”.
Biden’s move was a reminder that “the old Japan-bashing ideas based on Japan-as-an-outlier still exist”, said Takehide Kiuchi at the Nomura Research Institute.
“This could have a negative impact on the economies of both Japan and the US, as it could cause future business with the US to be curtailed,” Kiuchi wrote in an online commentary.
– How important is Japan to the US? –
Japanese firms invested almost $800 billion in the United States in 2023, more than any other country and 14.3 per cent of the total, according to official US data.
“The investment of our important and reliable ally, Japan, supports nearly one million American jobs alone,” Murphy said in a statement.
US firms are also the biggest investors in Japan.
– Has the US shot itself in the foot? –
Business group Keizai Doyukai said that with protectionism likely to strengthen under Trump, Japan should diversify.
Japan “should strengthen cooperation with like-minded countries such as South Korea, Australia, the Philippines and India, so as not to become completely dependent on the United States,” it said.
Biden’s decision “could open the door for increasingly dubious claims of national security”, eroding allies’ trust in the United States as a “reliable partner”, Bauerle Danzman said.
“This will frustrate progress in developing more resilient supply chains around a range of critical items beyond steel, including critical minerals, electric vehicle batteries, semiconductors and biotechnologies,” she said.
It will also make life even harder for the US steel sector — which accounts for less than five per cent of global production — without partners.
US Steel said the deal would have bolstered the US steel supply chain, “strengthening America’s domestic steel industry against the threat from China”.
