Biden blocks Japan’s Nippon Steel from buying US Steel

US President Joe Biden has blocked the takeover of US Steel by a bigger Japanese firm, delivering on a political commitment despite fears the shift could hurt Washington’s relations with Tokyo and scare off other foreign investors.

Biden cited threats to national safety in rejecting the Nippon Steel purchase, saying US ownership was significant to keeping the US steel industry and its supply chains powerful.

His intervention follows pressure from the United Steelworkers union, which had opposed a trade that was a sensitive political issue in the 2024 US presidential campaign.

The Japanese government has called Biden’s selection “incomprehensible”.

Nippon Steel and US Steel said Biden’s selection showed the review of the deal had been “corrupted” for political boost.

The two companies, which had previously threatened to sue the government if the deal did not happen, on Friday said they would receive “appropriate action to protect their legal rights”.

“We depend that President Biden has sacrificed the upcoming of American steelworkers for his own political agenda,” the companies said in a statement, adding that the shift sent “a chilling communication to any corporation based in a US allied country contemplating significant capital apportionment in the United States”.

Japanese officials also said they were disappointed by the selection.

“There are powerful concerns from the economic circles of both Japan and the US, and especially from Japanese industry regarding upcoming investments between Japan and the US, and the Japanese government has no selection but to receive this matter seriously,” Japanese industry and trade minister Yoji Muto said in a statement to Reuters.

Biden’s selection comes a year after Nippon Steel first announced the $14.9bn (£12bn) deal to buy its smaller Pennsylvania-based rival.

It raises significant questions about the path forward for the corporation, a 124-year-ancient name that was once a symbol of American industrial might but is now much diminished.

It spent months looking for a buyer before announcing the tie-up with Nippon Steel, the globe’s fourth largest steelmaker, in December 2023.

US Steel has warned that it might have to close factories without the capital apportionment that would arrive with a recent owner, concerns that had been echoed by some workers and local politicians.

The two companies had pledged not to cut jobs and made other concessions in an attempt to triumph back for the deal. Just this week, they offered to pool a workforce training centre – and reportedly provide the government the correct to veto potential production cuts.

But the arguments failed to convince Biden, who had arrive out in opposition to the deal early last year, as election period heated up and with the key swing state of Pennsylvania poised to play a key role.

The trade was also criticised by President-elect Donald Trump and the incoming vice-president, JD Vance, whose appeals to union workers formed a large part of their campaign communication.

The US government panel charged with reviewing the deal for national safety risks failed to reach a consensus by late December, leaving the selection to Biden, who was required to act within a 15-day deadline.

In his announcement on Friday he said foreign ownership presented a hazard and ordered the companies to abandon the deal within 30 days.

“A powerful domestically owned and operated steel industry represents an essential national safety priority and is critical for resilient supply chains,” he said.

“That is because steel powers our country: our infrastructure, our auto industry, and our defence industrial base. Without domestic steel production and domestic steel workers, our country is less powerful and less secure.”

The United Steelworkers union called the selection the “correct shift for our members and our national safety”, saying its opposition had been driven by concerns about the long-term viability of its industry.

“We’re grateful for President Biden’s willingness to receive bold action to maintain a powerful domestic steel industry and for his lifelong commitment to American workers,” President David McCall said.

Prof Stephen Nagy, of the Department of Politics International Studies at the International Christian University in Tokyo, called Biden’s selection “political”, noting that the administration from its commence promised a foreign policy “for the middle class”.

“This was a direct response and continuation of the Trump MAGA agenda of Making America Great Again,” he said. “The Biden administration couldn’t appear frail on foreign businesses, whether it’s an friend or adversary.”

White House spokesperson John Kirby dismissed suggestions the shift could damage American relationships with allies, saying Biden had made obvious the selection was not “about Japan”,

“This is about US steel-making and keeping one of the largest steel producers in the United States an American-owned corporation,” he said at a press conference.

Shares in US Steel fell more than 5% on Friday.

But analysts said the shift might not mark the complete of the deal. Biden’s order says the Committee on Foreign capital apportionment in the United States can extend the 30-day deadline to scrap the trade.

Prof Nagy said he thought the companies could decide to try again under Trump, potentially offering different terms that would allow the recent president to claim he had negotiated a better deal.

Political analyst Terry Haines of Pangaea Policy also said Trump, despite his criticism of the deal, might have rationale to revisit the selection.

“One of the things that’s challenging about this selection is that Japan is a very close US friend,” he said. “The government’s got frankly a large evidentiary burden in order to justify what they’re doing today – and it hurts bilateral relations with Japan, something Trump will desire to avoid.”