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President Biden blocked the $14 billion takeover of U.S. Steel by Nippon Steel of Japan in an announcement on Friday based on grounds that the sale posed a threat to national security.<\/p>\n
The decision was an extraordinary use of executive power, particularly for a president who is just weeks from leaving office. It is also a departure from America\u2019s long-established culture of open investment, one that could have wide-ranging implications for the U.S. economy. Although the politics of the move were clear, Mr. Biden emphasized that he was acting to protect national security.<\/p>\n
\u201cIt is my solemn responsibility as president to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad,\u201d Mr. Biden said in a statement on Friday morning. \u201cAnd it is a fulfillment of that responsibility to block foreign ownership of this vital American company.\u201d<\/p>\n
Mr. Biden\u2019s move to stop the transaction could cause foreign investors to rethink the wisdom of acquiring American firms in sensitive industries that are based in politically important states. It could also roil relations with Japan, a close ally of the United States and one of America\u2019s largest sources of foreign investment.<\/p>\n<\/div>\n<\/div>\n
The president\u2019s decision to block the deal came after a federal committee reviewing the transaction opted to not make a formal recommendation about whether the takeover should be allowed to proceed, according to letters sent to the companies and the White House last month.<\/p>\n
The Committee of Foreign Investment in the United States, which is made up of agencies including the departments of Treasury and Justice, expressed reservations about the deal to the companies in a letter last month. CFIUS (pronounced SIFF-ee-yuhs) voiced concerns that the transaction could pose a national security threat to the United States by potentially leading to a decline in American steel production. The officials suggested that Nippon\u2019s other global business considerations could in the future outweigh its pledges to invest in U.S. Steel.<\/p>\n
The lack of a formal recommendation cleared the way for Mr. Biden, barring an unexpected change of heart, to end a transaction that became ensnared in election-year politics.<\/p>\n
\u201cAs a committee of national security and trade experts across the executive branch determined, this acquisition would place one of America\u2019s largest steel producers under foreign control and create risk for our national security and our critical supply chains,\u201d Mr. Biden said, pointing to the concerns that the committee highlighted.<\/p>\n
His decision could face challenges in court. Nippon has indicated that it was prepared to take legal action if the deal was blocked.<\/p>\n<\/div>\n<\/div>\n
Nippon sent a letter to CFIUS last month that accused the White House of \u201cimpermissible influence\u201d in the process. The company said the concerns raised by CFIUS were \u201clittered with factual inaccuracies and omissions, misleading and incomplete statements, conjecture and hypotheticals that have no basis in fact and are plainly illogical.\u201d<\/p>\n<\/div>\n<\/div>\n
In a statement on Friday, Nippon assailed Mr. Biden\u2019s decision and said it was \u201cleft with no choice but to take all appropriate action to protect our legal rights.\u201d<\/p>\n
David B. Burritt, the chief executive of U.S. Steel, issued an even more blistering statement, calling Mr. Biden\u2019s action \u201cshameful and corrupt\u201d and saying the company intended to fight it.<\/p>\n
\u201cHe gave a political payback to a union boss out of touch with his members while harming our company\u2019s future, our workers and our national security,\u201d Mr. Burritt said. \u201cHe insulted Japan, a vital economic and national security ally, and put American competitiveness at risk. The Chinese Communist Party leaders in Beijing are dancing in the streets.\u201d<\/p>\n<\/div>\n<\/div>\n
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Jason Furman, an economics professor at the Harvard Kennedy School, also criticized the president\u2019s decision.<\/p>\n
\u201cPresident Biden claiming Japan\u2019s investment in an American steel company is a threat to national security is a pathetic and craven cave to special interests that will make America less prosperous and safe,\u201d he wrote on social media<\/a>. \u201cI\u2019m sorry to see him betraying our allies while abusing the law.\u201d<\/p>\n The politics of Mr. Biden\u2019s decision were clear: U.S. Steel is based in the crucial swing state of Pennsylvania<\/a>, and its powerful union vehemently opposed the proposed takeover, in part over concerns that Nippon would not honor its commitments to invest in plants and preserve the pensions of workers. The public debate over the acquisition emerged as a key issue ahead of the 2024 presidential election, and Mr. Biden, Vice President Kamala Harris and President-elect Donald J. Trump all publicly said that U.S. Steel should remain American-owned.<\/p>\n The union on Friday praised Mr. Biden\u2019s move.<\/p>\n \u201cWe\u2019re grateful for President Biden\u2019s willingness to take bold action to maintain a strong domestic steel industry and for his lifelong commitment to American workers,\u201d said David McCall, the president of United Steelworkers International.<\/p>\n Before the election, the Biden administration granted the companies an additional three months to try to address concerns about the deal. By December, however, it was clear that the deal was most likely doomed when CFIUS told Nippon that federal agencies were divided over whether it should proceed, and after Mr. Trump declared that he would block it upon taking office<\/a>.<\/p>\n<\/div>\n<\/div>\n \u201cAs President, I will block this deal from happening,\u201d Mr. Trump said on social media. \u201cBuyer Beware!!!\u201d<\/p>\n Despite his opposition to the steel deal, Mr. Trump last month welcomed a $100 billion investment<\/a> in the United States pledged by SoftBank, a Japanese technology company, that will focus on technology and artificial intelligence over the next four years.<\/p>\n Representative Chris Deluzio of Pennsylvania, a Democrat whose district includes many steelworkers and who opposed the sale<\/a> of U.S. Steel since it was proposed, said on social media<\/a> on Friday that the decision protected domestic manufacturing jobs.<\/p>\n \u201cFrom the beginning, the workers who power this company should have had a seat at the negotiating table \u2014 their livelihoods hung in the balance,\u201d he said.<\/p>\n The bid by Nippon faced political opposition from the moment it was announced in December 2023<\/a>. Democratic senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, along with Senator JD Vance, the Ohio Republican who is now the vice president-elect, urged Mr. Biden to review the proposed sale to guard against lost steel production and jobs. Both Mr. Brown and Mr. Casey lost their seats to Republican challengers in November.<\/p>\n<\/div>\n<\/div>\n Shortly before last Christmas, the Biden administration appeared to bend to the concerns being voiced by lawmakers, with Lael Brainard, the director of the National Economic Council, issuing a statement saying that the transaction \u201cappears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.\u201d<\/p>\n While U.S. Steel shareholders approved the deal in April<\/a>, the likelihood that it would happen dimmed as the presidential election grew closer.<\/p>\n U.S. Steel, which was founded in 1901, has for years faced financial struggles amid the changing dynamics of global metal markets and rapidly evolving technology, which the company was often slow to adopt. The company, whose metal has been used to build some of the nation\u2019s most famous bridges and buildings<\/a> \u2014 such as the Willis Tower in Chicago and the United Nations building in New York \u2014 employed 340,000 workers at its peak in the 1940s but now has around 20,000 workers overall<\/a>, with about 4,000 in Pennsylvania<\/a>.<\/p>\n A post-pandemic boost to the steel market, which stemmed from a combination of shortages and demand spurred by federal infrastructure investments, had been showing signs of cooling amid worries of a global economic slowdown. In 2023, a U.S. Steel rival, the Ohio-based Cleveland-Cliffs, made an unsolicited offer to buy its competitor. That set off a bidding war that Nippon won.<\/p>\n<\/div>\n<\/div>\n