Japanese American Ties Strain with Steel Merger Block

Japanese American Ties Strain with Steel Merger Block

Elizabeth Denton

Staff Writer

Presidential candidates Kamala Harris and Donald Trump are seeking to block Japan’s purchase of U.S. Steel to win favor in Pennsylvania ahead of the upcoming presidential election through the Council on Foreign Investments’ recommendation. Japan watches as American officials debate the merger, straining U.S.-Japanese ties.

Japan’s Nippon Steel has been attempting to buy U.S. Steel since late 2023 with the current price standing at $14.1 billion, according to the Council on Foreign Relations. U.S. Steel has received multiple offers from other foreign buyers, such as Cleveland-Cliffs, reports Reuters. However, current presidential candidates Harris and Trump have pledged that, if elected, they will block the purchase from going through. Additionally, according to Reuters, President Biden made a similar proclamation in September, stating that he would block the purchase.

U.S. Steel is located in Pennsylvania, a state that will be key in the upcoming election. The Steelworker Union, which The New York Times reports holds some of the most powerful voters in this election, is currently one of the largest opponents to Nippon Steel’s offer. If a presidential candidate wants to win Pennsylvania, they need to gain the support of the Steelworker Union first, and the union is entirely unfavorable to the merger. 

While union workers may be against the deal, Reuters reports that David Burritt, CEO of U.S. Steel, is in favor of it and wishes for it to move forward. He has even suggested that U.S. Steel will likely move its headquarters if the deal does not go through.

The purchase agreement Nippon Steel put forward, Reuters says, will be favorable to U.S. terms. Nicholas Klein, a lawyer for the Council on Foreign Investments, referred to it as  Japan offering U.S. Steel a financial lifeline. Additionally, the deal would create a global competitor to China in steel production.

The CFIUS investigated Nippon Steel and the proposed agreement, reports Reuters, finding that domestic steel production would decline if the deal goes through. Additionally, Nippon Steel has a history of resisting trade relief for U.S. domestic steel, which U.S. Steel has petitioned for.

This report from the CFIS, according to Reuters, could serve as the basis for the current Biden administration– or future administrations– to block the deal. According to BBC News, a recommendation from CFIUS to block the merger would be the next step in the process to formally block the deal, despite the support of many officials in political and law spheres.

When U.S. Steel initially went on the market, Japanese officials saw an opportunity due to the tariffs Washington put to dissuade buyers from Chinese steel, according to The New York Times. Officials also viewed it as an opportunity to deepen ties between the U.S. and Japan to contain China and Russia. After the merger was announced, Nippon Steel cut ties with its production partner in China to fully invest in U.S. Steel, aiming to hopefully become capable of competing with China, which produces over half the world’s steel.

The New York Times reports that Japanese officials have largely kept their distance from the deal, though a few have expressed offense at the President’s plans to block the deal. While Japan’s economic ministry has attempted to meet with U.S. officials. While Japan is currently an ally of the U.S., the potential failure of this deal due to political intervention may risk straining the relationship between the two countries.

Since the announcement of the merger, shares in U.S. Steel have closed 17.5 percent lower according to Reuters. Both steel companies are prepared to stand ready to close the deal, but with the upcoming election, the odds are not in their favor.

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