BANGKOK (AP) — President Joe Biden’s recent decision to block Nippon Steel’s bid to acquire U.S. Steel on national security grounds has stirred tension in the trade and investment relationship between the United States and Japan. This is not the first time such disputes have arisen between the two close allies in Asia. Secretary of State Anthony Blinken visited Tokyo on Tuesday to ease tensions and reassure Japanese officials.
Nippon Steel’s CEO, Eiji Hashimoto, has emphasized the company’s commitment to its proposed $15 billion acquisition despite the setback. Nippon Steel and U.S. Steel have filed a federal lawsuit challenging the Biden administration’s ruling, arguing against the notion that the deal could pose a threat to U.S. national security. This decision has been perceived as a betrayal by some in Japan, especially after years of pressure from the U.S. to open up trade and investment barriers. Additionally, the timing of this decision, amid concerns of potential tariff increases under the incoming administration, has added to the strain.
Prime Minister Shigeru Ishiba cautioned that disrupting the deal could impact Japanese investment in the U.S., underscoring the significance of the issue. The relationship between the U.S. and Japan, highlighted by mutual investment and economic ties, is crucial for both nations. Blinken, during his visit to Tokyo, expressed confidence in the growing strength of the alliance between the two countries over the past four years.
Ishiba and other Japanese officials have strongly criticized the national security rationale behind the decision, calling for a clearer explanation to avoid further complications in future discussions. Trade Minister Yoji Muto labeled the ruling as “very regrettable,” echoing widespread disappointment in Japan over the outcome.
The U.S.-Japan alliance, rooted in history and strategic cooperation, plays a vital role in regional security dynamics, particularly in countering China’s influence. However, some critics view the rejection of Nippon Steel’s bid as a sign that the U.S. may not regard Japan as a trusted partner in economic matters, drawing unfavorable comparisons with its approach to China. The incident has raised concerns about the impact on future investment and economic relations between the two countries.
National security has been described as “incomprehensible,” with a noted decline in trust and uncertainty about the necessary steps to repair the damage.
Track record on trade
Both Biden and Trump have advocated for increased tariffs on steel and aluminum imports from China, citing the need to shield American producers from unfair trade practices and an influx of low-cost imports. In 2018, Trump enforced 25% tariffs on Japanese steel imports on the basis of “national security” concerns. Subsequently, the Biden administration reached an agreement in 2022 to permit a specific quota of certain steel products to enter the country without tariffs. Any quantity exceeding this agreed quota is subject to the 25% tariff.
The current trade tensions are the culmination of years of negotiations that prompted Japan to significantly expand its market access to foreign goods and services. This transformation has seen a shift from traditional department stores and small family-owned shops to large outlet malls and discount stores. Foreign pressure, known as “gai-atsu” in Japan, incentivized Japanese automakers and other manufacturers to invest in U.S.-based facilities, resulting in the creation of hundreds of thousands of jobs.
Nippon Steel and U.S. Steel argue that their agreement would safeguard American jobs, with business groups on both sides expressing objections to potential repercussions from the collapse of the deal. This situation reflects a broader trend in recent years moving away from increased openness in trade relations.
