Nippon Steel Deal: A Lifeline for U.S. Steel or a Political Battleground?

The potential acquisition of U.S. Steel by Nippon Steel has sparked a heated debate across political circles in America. Many prominent figures, including President Joe Biden, former President Donald Trump, and Senators like Sherrod Brown (D-Ohio) and John Fetterman (D-Pa.), have expressed their opposition. Even Vice President Kamala Harris has joined the chorus, advocating for U.S. Steel to remain under American ownership. Despite this political pushback, the Nippon-U.S. Steel deal may be the key to saving an ailing industry.

The Origins of the Deal

The offer from Nippon Steel, the world’s fourth-largest steelmaker, came after U.S. Steel voluntarily put itself up for sale. It wasn’t an impulsive decision; the management recognized the need for capital and expertise that it lacked to survive in a highly competitive and capital-intensive industry. 

Cleveland-Cliffs, an American company and the 22nd largest steelmaker globally, entered the bidding war, offering $7 billion. But Nippon Steel outbid them, offering a staggering $14.9 billion — a 142% premium on U.S. Steel’s stock price. This bid was overwhelmingly approved by U.S. Steel’s shareholders, with 98% voting in favor of the deal during a special meeting in April.

Cleveland-Cliffs, already dealing with a stock that has dropped 40% this year and financial struggles of its own, is unlikely to make another serious attempt to acquire U.S. Steel. The cash-strapped company is burdened with debt and cutting investments, leaving Nippon as the only real option to save U.S. Steel.

Political Opposition vs. Economic Reality

Opponents of the Nippon deal argue that keeping U.S. Steel in American hands aligns with a broader protectionist sentiment growing within the country. The idea of foreign ownership over what was once the largest corporation in the world stirs nationalist sentiments, especially as steel production is often seen as a symbol of American industrial might. But this patriotic argument risks endangering the very survival of U.S. Steel.

Politicians like Biden, Trump, and others may be capitalizing on this wave of protectionism, hoping it plays well with their voter base. But their opposition ignores the current financial and operational challenges facing U.S. Steel, which has seen its workforce halved since 2011 and a 14% drop in revenues in 2023 compared to the previous year. 

Without Nippon’s infusion of capital, U.S. Steel’s outlook appears bleak. Nippon has committed to investing $2.7 billion in upgrades for U.S. Steel’s aging facilities. As U.S. Steel’s CEO bluntly put it, the company “doesn’t have the money” to make these necessary improvements. Without such investments, key facilities like the Mon Valley Works outside Pittsburgh are likely to shut down, further imperiling the company’s survival and its American workforce.

The United Steelworkers’ Divided Stance

While the United Steelworkers union officially opposes the Nippon deal, many of its rank-and-file members appear to support it. Some believe that the union’s leadership is opposing the deal as a bargaining tactic, hoping to extract better guarantees for American jobs. However, this strategy carries significant risk. Nippon Steel, despite its interest, could walk away from the deal if negotiations continue to stall.

Global business experts, such as William Alan Reinsch from the Center for Strategic and International Affairs, argue that Nippon’s acquisition could ultimately strengthen the domestic steel industry. Reinsch noted, “This is mostly a political issue,” underscoring that the real concerns lie not in the steel market but in the rhetoric surrounding foreign ownership.

National Security and Economic Alliances

One of the primary hurdles standing in the way of the Nippon deal is the review by the Committee on Foreign Investment in the United States (CFIUS). This board evaluates foreign investments on national security grounds, and given the opposition from top political figures, many expected the committee to halt the sale.

However, framing this acquisition as a national security risk is a stretch. Japan has been a steadfast U.S. ally for nearly eight decades, serving as a critical buffer against Chinese and North Korean threats. Moreover, Japan has recently doubled its defense spending and lifted many of its long-standing self-imposed military restrictions. Blocking this sale could be seen as an affront to a key partner at a time when geopolitical tensions are at an all-time high.

In the worst-case scenario, where Japan were to shift allegiances in a future global conflict, the U.S. government would still have the power to seize Nippon’s American steel mills. This reality makes the national security argument even less compelling.

Historically, CFIUS has only blocked six transactions since 2016, and all of these involved high-tech industries, such as semiconductors and software, not manufacturing. There is little precedent to suggest the committee will block the Nippon deal, especially considering the deep economic and military ties between the U.S. and Japan.

Looking Forward

The Nippon-U.S. Steel deal represents a rare opportunity to save an iconic American company. While politicians focus on national ownership, they overlook the fact that this acquisition will keep U.S. Steel operational in the U.S., employing American workers, producing steel on American soil, and contributing to the American economy. Blocking the deal could lead to the collapse of a company that has shaped America’s industrial landscape for over a century.

With the CFIUS review extended by 90 days, it’s likely that a decision won’t be made until after the 2024 elections. But if logic prevails, U.S. Steel’s future may indeed rest in the hands of a Japanese company willing to invest in its survival. If successful, this acquisition will benefit not just U.S. Steel but also the American steel industry, American workers, and the broader U.S. economy.
Nippon Steel’s offer to buy U.S. Steel has reignited debates over foreign ownership, national security, and protectionism. However, for the survival of U.S. Steel, the deal is a necessary step. Whether politicians recognize it or not, Nippon’s investment could be the lifeline that one of America’s oldest corporations desperately needs.