On Monday, Vice President Kamala Harris announced to a cheering Pittsburgh crowd that she opposes the deal for Japan’s largest steel company to acquire Pittsburgh-based U.S. Steel. Two days later, my Post colleagues reported that President Joe Biden will soon announce that he will formally block the deal (which I confirmed with officials) — on national security grounds.
By Josh Rogin
As a short-term political calculation, this move makes sense: Harris is courting union support for her presidential bid in the key state of Pennsylvania. But Biden’s move could actually cost U.S. manufacturing jobs, harm relations with a key ally, and undermine his own administration’s strategy to compete economically and strategically with China.
Everyone agrees that U.S. Steel, once the largest company in the world, is in desperate need of help. After decades of slow decline, it lacks the resources to compete with huge Chinese state-owned firms. Last year, six of the world’s 10 largest steel producers were Chinese, while U.S. Steel ranked 24th. U.S. Steel had no choice but to seek outside investment.
The bid from Nippon Steel (the world’s fourth-largest steel producer) was by far the most attractive and, in April, was endorsed by 98 percent of U.S. Steel shareholders. Well aware of the political opposition it faces, the Japanese company pledged $3 billion of additional investment in U.S. manufacturing facilities, including for union mills in Pennsylvania.
The political incentives for Biden to block the deal are obvious. Former president Donald Trump and his running mate, Sen. JD Vance (Ohio), with their tendencies toward protectionism, have long opposed the acquisition, and in March Biden, too, announced his opposition to the deal. Harris’s announcement Monday seemed designed to gain support from the United Steelworkers union, which is against the deal.
“U.S. Steel is an historic American company. And it is vital for our nation to maintain strong American steel companies,” Harris said. “U.S. Steel should remain American-owned and American-operated. And I will always have the back of America’s steelworkers.”
The deal has been under examination by the Committee on Foreign Investment in the United States, which is tasked with vetting such acquisitions for their national security implications. After receiving the committee’s report, regardless of its recommendation, the president can choose to block any deal he believes carries national security risks that can’t reasonably be mitigated.
The problem is, neither Harris nor Biden has explained what is “vital” about preventing the acquisition of one of America’s largest steel companies by the United States’ top Pacific ally. The United States trusts Japan to host tens of thousands of U.S. troops and to buy some of the most advanced U.S. military technology. Nippon Steel already owns stakes in several smaller U.S. steel companies. There is no U.S. military dependence on U.S. Steel. What exactly is the potential future scenario in which Japanese ownership of U.S. Steel could harm America? Unless Japan someday flips to become China’s or Russia’s ally (which isn’t likely) and then somehow cuts off our steel supply (even less likely), there isn’t one.
As two of the top Japan experts in the United States, former deputy secretary of state Richard L. Armitage and Harvard professor Joseph S. Nye Jr., wrote in a recent report for the Center for Strategic and International Studies, “The proposed deal would likely support U.S. economic growth, jobs, and innovation without in any way jeopardizing national security.”
Regardless, the union hasn’t budged and remains aligned with Cleveland-Cliffs, an Ohio-based steel producer whose less-generous acquisition bid U.S. Steel had previously rejected. If the Nippon Steel deal dies, Cleveland-Cliffs could be back in the running. In a March interview with CNBC, Cleveland-Cliffs chief executive Lourenco Goncalves said the Nippon Steel deal should be blocked because “Japan is not a friend.”
Really, though, Japan is the best friend America has in Asia, especially when it comes to the China challenge. Japan is also a key pillar of the Biden administration’s economic strategy to counter China’s dominance of key industries such as green energy technology and crane manufacturing. Harris, specifically, has been integral to this effort, as I witnessed while traveling with her in Indonesia last year.
The Biden administration’s plan to block the steel deal comes as it is pressing Japan to stop selling China advanced semiconductor technology. Japan is cooperating, against its own economic interests, even risking retaliation from Beijing. But now the administration is undermining its own argument that Japan and the United States are in this economic competition with China together.
What’s worse, the administration’s action is sure to trigger years of litigation over Nippon Steel’s otherwise valid contract. Meanwhile, U.S. Steel will struggle to court new suitors and could be forced to shrink even more, harming the same union workers Biden and Harris purport to care about.
There is one good-faith argument some make against the Nippon Steel deal: Japan itself is notoriously protectionist about its domestic industries, and any U.S. president should insist on more reciprocity as a matter of trade fairness. But that’s not the argument Biden and Harris are making. They, like Trump, are invoking a national security concern that doesn’t hold up to scrutiny.
Japanese investment in U.S. manufacturing jobs is a good thing. And if Japan really is a valued ally, we ought to treat it like one.
