Why did Biden block Japan's acquisition of a key steel manufacturer?
As Joe Biden prepares to leave the White House on January 20, he is taking a number of significant actions: from allowing Ukraine to strike Russian territory with ATACMS missiles and "substantial" packages of military aid to banning new oil drilling in U.S. coastal waters and granting clemency to his son Hunter.
Two weeks before Donald Trump's inauguration, Biden made a landmark decision for the U.S. steel industry by blocking the sale of American steel giant U.S. Steel to Japan's Nippon Steel for $14.9 billion.
U.S. Steel agreed to merge with Japan's largest steel producer in December 2023. This decision was not made hastily: the company, founded 125 years ago by the legendary American investor John Pierpont Morgan, is trying to compete with cheap Chinese steel, and its performance is declining. If the merger had gone through, Nippon Steel would have become the third largest steel company in the world.
The review process for the "steel deal" coincided with the peak of the U.S. election campaign. For many months, U.S. Steel argued that selling to Nippon Steel was its only way to survive. Biden thought otherwise.
Ultimately, in early 2025, the president concluded that the acquisition of the steel giant by a close ally of the United States, Japan, was insufficient to alleviate concerns about national security.
The union supported this decision, investors saw risks for relations with the Japanese, and U.S. Steel and Nippon Steel even went to court, accusing Biden of political corruption. The newly elected U.S. President Donald Trump also opposed the sale of U.S. Steel, so the deal is at risk of falling through.
Why did Nippon Steel decide to acquire its American competitor? What arguments did Biden consider when blocking the deal? How does U.S. Steel plan to persuade Trump to change his mind?
Arguments "for" and "against"
Nippon Steel announced its plans to acquire U.S. Steel in December 2023. Nippon Steel claimed that this would allow the combined company to update its production lines and meet the demand for steel in a highly competitive environment. The company committed to maintaining the name U.S. Steel and its headquarters in Pittsburgh.
Nippon Steel described the potential acquisition as a rescue for the American company. They did not oppose such wording, as the American giant is facing financial difficulties due to the influx of cheap Chinese steel into the global market: from January to September 2024, its revenues fell by 12% to $12.1 billion, and net profit dropped by 51.5% to $473 million.
Moreover, U.S. Steel asserted that the agreement would strengthen the national and economic security of the United States and create an effective alliance to compete with China.
However, the potential acquisition almost immediately faced political opposition. Critics warned that the Japanese would cut jobs. In response, Nippon Steel promised to halt any layoffs or closures during the current contract with the union, which expires in September 2026. The Japanese company also granted the U.S. government veto power over changes in production volumes.
3 However, the Committee on Foreign Investment in the United States (CFIUS), after several months of reviewing the application, found no consensus on potential national security threats: on December 24, 2024, the decision was passed on to Biden.
Committee members were concerned that after gaining control of U.S. Steel, Nippon Steel might shift production to its plants in Brazil, Mexico, and India, failing to fulfill promises to maintain production capacity in the U.S.
4 CFIUS warned that the agreement could jeopardize Washington's efforts to curb dumping from China, where heavy industry receives substantial subsidies from the government.
Experts led by Treasury Secretary Janet Yellen believed that the sale could lead to a reduction in steel production in the U.S. This would result in a supply shortage, which would impact the transportation and energy sectors the most.
Biden's Veto and National Security Discussions
U.S. President Joe Biden announced that he does not support the plan for the Japanese to acquire U.S. Steel as early as March 2024. "I told our steelworkers that I would have their backs, and I meant that," he said at the time.
During his tenure, Biden, like Trump before him, implemented protectionist policies to shield the U.S. steel sector from a global supply glut that led to falling prices.
According to WP, White House advisors tried to convince the president to approve the deal, as it would be a significant investment in a struggling American company. They also believed that a veto could harm relations with Japan, one of Washington's closest allies in the Indo-Pacific region.
But there were no surprises: on January 3, Biden blocked the acquisition. He stated that U.S. Steel should remain in American ownership and management. Steelworkers are a backbone of the U.S., the president noted, highlighting the critical importance of this heavy industry for sustainable supply chains.
5 Biden also emphasized that American steel giants have long faced unfair trade practices, as foreign companies (primarily China) supplied steel to the market at artificially low prices. This, he said, led to job losses and factory closures in the U.S.
Participants in the process reacted differently to the blocking of the agreement. Biden's veto was a significant victory for United Steelworkers union president David McCall and other union leaders who opposed the merger, although some rank-and-file union members supported it.
U.S. Steel and Nippon Steel vowed to challenge the blocking of the deal. "The process was manipulated to advance President Biden's political agenda. We have no choice but to take all necessary steps to protect our legitimate rights," the companies stated in a joint statement.
This move also disappointed Japan's Trade Minister Yoji Muto. He called it "difficult to understand" and announced that the government would seek explanations from the White House to alleviate the concerns of Japanese companies investing in the U.S.
Analysts were intrigued by Biden's words about "credible evidence" that Nippon Steel's proposal would create a risk to U.S. national security. He did not provide this evidence but referred to the Defense Production Act of critical goods.
"The Cold War-era law that the president cited has been used for military equipment deliveries. This is another reminder that Biden, like Trump before him, adopted a broader definition of threats to the nation's security, especially concerning trade and investments," explains Bloomberg.
Many were surprised that Biden labeled Japan—a key partner in efforts to counter China's regional ambitions—as a threat to U.S. security.
"It's unusual to declare a friend and one of the main allies a security threat. It seems the definition of security threat is becoming broader than it was before," said Bill Reinsch, a former U.S. Commerce Department official during the Clinton administration.
6 Experts agree: this decision signals how sharply the