Biden on Friday blocked the merger from proceeding, arguing that foreign control of U.S. Steel would endanger U.S. national security. He said in a statement that it was his responsibility to “prevent foreign ownership of this important American company.”
The move, which comes after months of lobbying, is a blow to Nippon Steel, which remains keenly interested in expanding its business in the United States. This would also send a worrying signal to Japanese companies about the dangers of US politics.
Still, Biden’s decision is not expected to delay attempts by other Japanese companies to do business in the United States. In recent years, Japanese companies have had little choice but to pivot largely to the United States, as investment in China has become difficult. Now, in anticipation of the arrival of the second Trump administration, management is even busier preparing for new investments in the United States.
For decades, Japanese companies have sought growth opportunities abroad, where the population is aging and shrinking and currency fluctuations are putting export activity at risk. Much of that expansion has been directed toward the United States and China, which have long competed as Japan’s biggest trading partners. But unfriendly regulations and state-backed competition are making it increasingly difficult for Japanese companies to do business in China. rivals. China’s share of Japan’s foreign direct investment has steadily declined over the past five years, while the United States’ share has increased. Japan became the largest investor in the United States in 2019 and has maintained that position every year since. Volumes in the U.S., led by Japan, stagnated slightly last year, but trade experts expect investment to accelerate again with President-elect Donald Trump inaugurated. office. That’s because the risk of higher tariffs gives Japanese and other foreign companies a greater incentive to invest and produce in the United States than in other countries, especially China.
Japanese power companies are eyeing a number of potential investments in natural gas and other energy projects promoted by President Trump. At President Trump’s press conference last month, Masayoshi Son, CEO of Japanese technology company SoftBank, pledged to invest $100 billion in the United States over the next four years.
Masahiko Hosokawa, a professor at Meisei University and a former senior official at the Ministry of International Trade and Industry, said, “Business leaders do not consider special cases like Nippon Steel and decide to withhold investment in the United States.”
Still, the failure of Nippon Steel’s bid is expected to further heighten Japan’s concerns about an ally whose moves are not always easy to predict.
When Nippon Steel announced plans to acquire U.S. Steel in December 2023, company executives thought the deal would move quickly. As the Committee on Foreign Investment in the United States reviews the deal, Nippon Steel is doubling down on its bets on the United States and exiting a long-standing joint venture in China that could have drawn regulatory suspicion.
Instead, Nippon Steel’s bid drew fierce opposition from some politicians and union leaders, who argued that a foreign company’s takeover of a prestigious American manufacturer would undermine national security and local industry. Mr. Biden and Mr. Trump said early on that they opposed the deal.
As part of its bid, Nippon Steel offered a hefty premium for U.S. Steel stock and pledged to invest billions of dollars in the U.S. company’s plants. Takahiro Mori, the Nippon Steel executive in charge of the transaction, traveled repeatedly to the United States and met with more than 1,000 employees, local officials, and other parties involved in the transaction.
Nippon Steel executives have met with the White House and labor union leaders in recent months to protect the agreement, according to three people familiar with the discussions, who were not authorized to speak publicly.
The review board, known as CFIUS, sent a letter to the White House late last month saying it could not decide whether to allow Nippon Steel to acquire U.S. Steel. This cleared the way for Biden to terminate the deal.
