Roving Periscope: Biden cancels $15 bn steel bid as Japan is a “security risk!”

Virendra Pandit

New Delhi: Harry S. Truman, a Democrat, was the US President in 1945 when America dropped atomic bombs on Hiroshima and Nagasaki, forcing Japan to surrender and close the Second World War. Now, 80 years on, America still considers Japan a “security risk,”—although the US provides it the overall security cover—and another Democrat, Joe Biden, has canceled a USD 15 billion proposed merger deal, disabling a Japanese steel company to buy out an American counterpart.

The move is also seen as the Democrats taking high moral ground on national security vis-à-vis President-elect Donald Trump, digging the pitch for him before he takes over on January 20, and scuttling his likely step to go ahead with the key business deal.

The decision comes two weeks before Biden will lay down the office, and could potentially damage relations between the US and Japan, which is America’s biggest ally in Asia and its largest foreign holder of US debt.

The fate of the deal, scutteled for now, suggests that outwardly, like a royal couple, the two countries flash broad smiles and proclaim fidelity; inside, however, they deeply distrust each other. Nuclear bombs are never away from their minds–for the US as a guilt, for Japan as a reminder of what it could potentially avenge in the future.

As he packs bags to vacate the White House, Biden, 82, has blocked the USD 15 billion Nippon Steel bid for the Pittsburgh-based US Steel over “national security concerns,” affirming his earlier vow on the presidential campaign trail to prevent the acquisition of Steeltown USA’s most storied steel company, the media reported on Saturday.

Nippon Steel may pursue legal action, claiming the US failed to provide evidence of national security risks associated with the acquisition, the reports said.

The proposed deal kicked up an election-year political maelstrom across America’s industrial heartland and blocking it drew a threat of litigation from Nippon Steel.

“We need major US companies representing the major share of US steelmaking capacity to keep leading the fight on behalf of America’s national interests,” Biden said in a Friday morning statement.

Both the companies, Nippon Steel and US Steel, blasted the decision, saying in a joint statement that Biden’s blocking the deal “reflects a clear violation of due process and the law” in a process it said was “manipulated” to advance the outgoing President’s political agenda.

Biden cited no credible evidence of the deal presenting a national security problem, they asserted, and suggested they would sue, saying “We are left with no choice but to take all appropriate action to protect our legal rights.”

His decision comes after the Committee on Foreign Investment in the United States (CFIUS) failed to reach a consensus on the possible national security risks of the deal last month, and sent a long-awaited report on the merger to Biden. He had 15 days to reach a final decision.

The committee, chaired by Treasury Secretary Janet Yellen and comprising other Cabinet members, can recommend that the President block a transaction, for which the federal law empowers him.

The media quoted an unnamed US official saying last month that some federal agencies represented on the panel were skeptical that allowing a Japanese company to buy an American-owned steelmaker would create national security risks.

In their statement, the two steel companies said it’s “shocking — and deeply troubling” that the US would reject a transaction that advances US interests and “treat an ally like Japan in this way.” “Unfortunately, it sends a chilling message to any company based in a US-allied country contemplating significant investment in the United States,” the companies said.

Biden previously came out against the deal in March 2024, during the presidential campaign — and was backed by the United Steelworkers, concerned over whether the company would honor existing labor agreements or slash jobs, as well as over the firm’s financial transparency.

“It is important that we maintain strong American steel companies powered by American steelworkers,” Biden said in a March statement, while he was still seeking re-election to the presidency before dropping out of the race later.

“US Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.” President-elect Donald Trump has also opposed the acquisition and vowed in December 2024 on his Truth Social platform to block the deal and to use tax incentives and tariffs to grow the company.

On Friday, Steelworkers President David McCall said the union is grateful for Biden’s move to block the sale and called it the “right move for our members and our national security.” McCall had long questioned Nippon Steel’s status as an honest broker for US national trade interests and reiterated that Friday, saying in a statement that “Nippon has proven itself to be a serial trade cheater.”

“Allowing it to purchase US Steel would have offered it the opportunity to further destabilize our trade system from within and in the process, compromise our ability to meet our own national security and critical infrastructure needs,” McCall said.

He insisted that US Steel has the financial wherewithal to make the company strong and resilient.

For its part, Nippon Steel had said it is best positioned to help American steel compete in an industry dominated by the Chinese and to invest billions in United Steelworkers-represented facilities, including the company’s aging blast furnaces.

It pledged to protect US Steel in trade matters and promised not to import steel slabs that would compete with the blast furnaces.

Nippon Steel announced in December 2023 that it planned to buy the steel producer for USD 14.9 billion in cash and debt, and committed to keep the US Steel name and Pittsburgh headquarters.

Despite that, its proposal raised concerns about what the transaction could mean for unionized workers, supply chains, and US national security.

The announcement came during a tide of renewed political support for rebuilding America’s manufacturing sector and followed a long stretch of protectionist US tariffs that analysts say have helped reinvigorate domestic steel.

Nippon Steel waged a public relations campaign to win over supporters, even offering USD 5,000 in closing bonuses to US Steel employees, a nearly USD 100 million expense.

A growing number of conservatives and business groups like the US Chamber had publicly backed the deal, as Nippon Steel began to win over some Steelworkers union members and mayors in areas near its blast furnaces in Pennsylvania and Indiana.