President Joe Biden made the decision to block Japan’s Nippon Steel’s $14 billion takeover of US Steel, despite some top US officials not seeing enough national security reasons to stop the deal, according to a US official who spoke to CNN. The move to halt the acquisition of US Steel has received support from union representatives but has faced strong criticism both inside and outside the administration.
US Steel and Nippon Steel filed a lawsuit on Monday, alleging that the decision-making process was influenced by political factors rather than genuine national security concerns. Although the takeover bid for US Steel came from a Japanese company, a key US ally, it was subjected to a rigorous evaluation by the Committee on Foreign Investment in the United States (CFIUS), a secretive interagency panel.
CFIUS was unable to come to a consensus on whether the deal posed a national security threat, leading the final decision to be made by the president. While some prominent CFIUS members, including Treasury Secretary Janet Yellen and Secretary of State Antony Blinken, believed the security risks could be managed and saw no compelling reasons to block the deal, others, such as US Trade Representative Katherine Tai, raised concerns on national security grounds. Officials from the US Energy Department and Commerce Department also expressed apprehensions about the acquisition.
President Biden cited national security and the importance of maintaining a robust domestic steel industry when explaining his decision to reject the deal on Friday. Reports from The Washington Post and Wall Street Journal indicated that Biden disregarded advice from several top advisers who had recommended approving the deal.
Critics within the administration expressed dissatisfaction with the decision, with one senior official questioning its impact on preserving union jobs and the company’s future. Concerns were also raised about the implications for foreign direct investment in the US, particularly since the acquisition was proposed by Japan, a longtime ally, and not a rival nation like China or Russia.
US Steel and Nippon Steel contended in their lawsuit that it was unprecedented for a US President to block an acquisition by a Japanese company, emphasizing the historical alliance between the two countries. Jason Furman, a former economic official in the Obama administration, criticized the decision to use national security as justification for thwarting the deal, labeling it as a move that could harm America’s prosperity and security.
In response to the lawsuit, the White House defended its decision, stating that a committee of national security and trade experts had determined that the acquisition would pose risks.
“The protection of American national security is of utmost importance,” stated White House spokesperson Robyn Patterson. “President Biden is committed to safeguarding the security of our nation, its critical infrastructure, and the strength of its supply chains.”
Michael Leiter, who heads the CFIUS and national security practices at the law firm Skadden, shared insights with CNN via email, highlighting the complexities within US agencies regarding national security matters. “This issue was far from simple, with various interests at play,” Leiter remarked. He emphasized that the assessment of national security risks is subjective, and ultimately, it is the President’s perspective that holds the most weight within the CFIUS framework.
Leiter expressed confidence that the recent US Steel deal would not deter foreign investments in the United States, emphasizing its unique circumstances compared to typical transactions. “For those of us handling substantial transaction volumes annually, this case stands out. It is unlikely to set a significant precedent or negatively impact future CFIUS decisions.”
The opposition to the US Steel takeover transcended party lines, garnering bipartisan support from lawmakers representing Rust Belt constituencies. Vice President Kamala Harris, President-elect Donald Trump, and Vice President-elect JD Vance all voiced concerns about the deal during their respective campaigns.
Union officials welcomed President Biden’s decision to block the merger, viewing it as a step in the right direction for both their members and national security. David McCall, International President of the United Steelworkers, affirmed the belief that halting the merger was in the best interest of their members and the country’s security.
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