Getty ImagesUS President Joe Biden has blocked the takeover of US Steel by a major Japanese firm, delivering on a political promise despite fears the move could damage Washington’s relationship with Tokyo and scare away other foreign investors.
Biden cited threats to national security in rejecting the Nippon Steel purchase and said American ownership was important to keeping the U.S. steel industry and its supply chains strong.
His intervention follows pressure from the United Steelworkers union, which had opposed a transaction that was a sensitive political issue in the 2024 US presidential campaign.
The Japanese government has called Biden’s decision “incomprehensible.”
Nippon Steel and US Steel said Biden’s decision showed the review of the deal had been “corrupted” for political gain.
The two companies, which had previously threatened to sue the government if the deal was not completed, said on Friday they would take “appropriate measures to protect their legal rights”.
“We believe that President Biden has sacrificed the future of American steelworkers for his own political agenda,” the companies said in a statement, adding that the move sent “a chilling message to any company based in an American ally that is considering significant investment in the United States”.
Japanese officials also said they were disappointed by the decision.
“There are strong concerns from the economic circles in both Japan and the United States, and especially from Japanese industry regarding future investment between Japan and the United States, and the Japanese government has no choice but to take this matter seriously,” said Japan’s Industry and Trade Minister . Yoji Muto said in a statement to Reuters.
Biden’s decision comes a year later Nippon Steel first announced the $14.9bn (£12bn) deal. to buy its smaller Pennsylvania-based rival.
It raises significant questions about the way forward for the company, a 124-year-old name that was once a symbol of American industrial power but is now much diminished.
It spent months looking for a buyer before announcing the tie-up with Nippon Steel, the world’s fourth-largest steelmaker, in December 2023.
US Steel has warned that it may have to close plants without the investment that would come with a new owner, concerns that had been echoed by some workers and local politicians.
The two companies had promised not to cut jobs and made other concessions in an attempt to win support for the deal. Just this week they offered to fund a training center for the workforce – and allegedly give the government the right to veto potential production cuts.
But the arguments failed to convince Biden, who had come out in opposition to the deal early last year as the election season heated up and with the key swing state of Pennsylvania poised to play a key role.
The transaction was also criticized by President-elect Donald Trump and Vice President-elect JD Vance, whose appeals to union workers formed a large part of their campaign message.
The US government panel charged with reviewing the deal for national security risks failed to reach an agreement in late December, leaving the decision to Biden, who was required to act within a 15-day deadline.
In his announcement on Friday, he said that foreign ownership poses a risk and ordered the companies to abandon the deal within 30 days.
“A strong domestically owned and operated steel industry represents an essential national security priority and is critical to resilient supply chains,” he said.
“That’s because steel powers our country: our infrastructure, our auto industry and our defense industrial base. Without domestic steel production and domestic steelworkers, our nation is less strong and less secure.”
The United Steelworkers union called the decision the “right step for our members and our national security” and said its opposition was driven by concerns about the long-term viability of its industry.
“We are grateful for President Biden’s willingness to take bold action to maintain a strong domestic steel industry and for his lifelong commitment to American workers,” said President David McCall.
Professor Stephen Nagy, of the Department of Politics International Studies at the International Christian University in Tokyo, called Biden’s decision “political” and noted that the administration from the start promised a foreign policy “for the middle class.”
“This was a direct response and continuation of Trump’s MAGA agenda of Making America Great Again,” he said. “The Biden administration could not appear weak to foreign companies, whether an ally or an adversary.”
White House spokesman John Kirby dismissed suggestions the move could damage US relations with allies, saying Biden had made it clear the decision was not “about Japan”.
“This is about American steelmaking and keeping one of the largest steel producers in the United States as an American-owned company,” he said at a news conference.
Shares of US Steel fell more than 5% on Friday.
But analysts said the move may not mark the end of the deal. Biden’s order says the Committee on Foreign Investment in the United States can extend the 30-day deadline to scrap the transaction.
Prof Nagy said he believed the companies could decide to try again under Trump, potentially offering different terms that would allow the new president to claim he had negotiated a better deal.
Political analyst Terry Haines of Pangea Policy also said that Trump, despite his criticism of the deal, may have reason to reconsider the decision.
“One of the things that is difficult about this decision is that Japan is a very close American ally,” he said. “Frankly, the government has a huge burden of proof to justify what they’re doing today — and that damages bilateral relations with Japan, something Trump wants to avoid.”