US President Joe Biden might use the weight of his power to block the foreign acquisition of an American firm.
The Biden administration may block Nippon Steel’s acquisition of US Steel, the Washington Post reported on Thursday. The block may become official as soon as Sunday, the publication said.
The deal involves a $14.3 billion acquisition of US Steel, the largest steel manufacturer in the country, by a foreign firm based in Japan. The merger would form the world’s largest steel company outside of China, though the controlling firm would remain headquartered in Japan.
The agreement was criticized by policymakers on both sides in the United States. Both Presidential candidates Kamala Harris and Donald Trump said they would come out against the deal if elected.
US Steel is a 123-year-old company, formerly the world’s largest in its sector. However, throughout the decades, US Steel slowly declined as US-based firms outsourced their manufacturing abroad.
Nevertheless, steel remains a strong psychological factor and should remain “American-made”, critics of the deal say. “It has a big part in our view of where manufacturing has gone and the threat to manufacturing jobs,” said Alan Wolff, a visiting fellow at the Peterson Institute for International Economics.
“That’s a big part of the Biden administration and it’s a big part of this election,” he added.
The deal is currently being reviewed by the Committee on Foreign Investment in the United States (CFIUS). So far, the CFIUS has blocked only five deals, mostly related to acquisitions from Chinese firms.
Economic backlash
Blocking the deal, however, could cause significant economic backlash for the workers involved, both Nippon Steel and US Steel claimed. Pressed by financial woes, US Steel may be forced to lay off thousands of workers across the countries as well as close down production lines.
Last week, Nippon Steel said it would invest $2.7 billion in new facilities across Pennsylvania and Indiana. US Steel warned that the move could not fall through if the deal collapsed.
US Steel CEO David Burritt threatened to move its headquarters outside Pennsylvania if the government blocked the deal. Pennsylvania is a crucial battleground state for the US elections, one that both candidates recognize could swing the result either way.
“We want elected leaders and other key decision makers to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails,” Burritt said. Without the deal, Burritt added, “US Steel will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting numerous communities across the locations where its facilities exist.”
