In Japan, a U.S. security ally, anger over ‘tyrannical' steel treatment

Washington Post

4 days ago

SEOUL — For corporate Japan, America's treatment of its steel industry has been one blow after another. First, there were the objections to Nippon Steel's takeover of its U.S. rival, with Washington treating one of its closest friends as a national security threat and a bipartisan political football. Then, there was the reversal that would see the deal go through but with terms favorable to the United States.
Rubbing salt into the wound, as he was hailing the agreement, President Donald Trump doubled his tariffs on steel imports to 50 percent — dealing another potential blow to a critical Japanese industry.
Major Japanese outlets roundly condemned the new tariffs, not mincing words in assessing the situation. Japan's biggest newspaper, the Yomiuri, called the tariffs 'out of line.' The Nikkei, Japan's answer to the Wall Street Journal, described them as 'unacceptable.' A third paper, the Mainichi, called them 'irrational' and 'tyranny of a superpower.'
Japan is no stranger to trade friction with America. But the takeover of an iconic U.S. company has resurfaced those tensions, and it could have lasting ramifications on corporate Japan and its willingness to invest in the United States, said Yuki Tatsumi, director of the Japan program at the Washington-based Stimson Center.
'I definitely think this will make Japanese businesses more cautious,' Tatsumi said.
Nippon Steel first proposed to buy U.S. Steel in 2023 for about $14.9 billion. But the acquisition faced political backlash. Former President Joe Biden moved to block the sale, citing national security concerns. On the campaign trail, Trump called it a 'disaster,' but he has now reversed his position and is expected to make his final decision on the deal by Thursday.
Although both sides have hailed the vague agreement — Nippon Steel touted it as a 'game changer' and Trump said U.S. Steel would still be 'controlled by the USA' — it is unclear exactly what that U.S. control would entail.
Nippon Steel wants 100 percent control of U.S. Steel, and it views full ownership as necessary to protect its high-end technology and proprietary know-how.
The few details that have emerged include an extraordinary move to grant the U.S. government a 'golden share,' which would allow Washington to retain oversight and veto power over certain corporate functions.
The Japanese company had also previously agreed to a corporate board made up of a majority of U.S. citizens and an American chief executive. Earlier this month, it offered another $14 billion in investments to sweeten the deal for Trump.
The company's representatives in Tokyo on Monday declined to comment on the details of the arrangement, citing ongoing negotiations.
But what is clear, some analysts in Japan say, is that it would have been a far simpler transaction had it not fallen victim to the U.S. political calendar. U.S. Steel is headquartered in Pennsylvania, a swing state that was critical in the 2024 presidential election, and powerful steel union leaders opposed the deal.
'There shouldn't have been any need for something as complicated as a golden share in the first place,' said Shinichiro Ozaki, steel analyst at Daiwa Securities in Tokyo.
'This deal shouldn't have become such a political issue,' he added. 'But it ended up getting entangled with the election, and the opposition from the steelworkers' union added fuel to the fire.'
Under the Biden administration, the Committee on Foreign Investment in the United States investigated the acquisition for potential national security implications.
The controversy has raised concerns about American protectionism and what that means for Japanese companies looking to expand into the United States, analysts say.
'If you're sitting on the board of another Japanese company that's looking at making material investments in the USA and you've been watching Nippon Steel, you would be quite nervous,' said Nick Wall, Tokyo-based mergers and acquisitions expert at A&O Shearman.
Still, Wall and others said the deal could end up being a win-win scenario for Nippon Steel and the Trump administration.
For one, there is much at stake for the Japanese steel giant. It is facing intense competition in Asia and has no room for growth in the Japanese market. It already has deals with companies in the Middle East, Africa and South America, and the United States is a key part of its global expansion.
'That leaves the United States as the final missing piece,' said Katsuhiro Sato, corporate strategy expert at the Waseda Business School in Tokyo. 'Unless they fill in this piece, they can't truly call themselves a global steel company. … That's why they're so obsessed with this deal.'
A golden-share scenario could be beneficial to the company depending on the details, experts say.
Nippon Steel can fully acquire U.S. Steel if the golden share only comes with governance authority, rather than the right to receive higher dividends, according to experts.
Plus, the Japanese steelmaker is probably betting that there is little chance that Washington will ever exercise its veto power, said Tomohisa Ishikawa, chief economist at the Japan Research Institute in Tokyo.
'From Nippon Steel's perspective, the only real way to support the argument that 'the U.S. government still maintains control' is through the use of a golden share,' Ishikawa said. 'It saves face for Trump. So it's like giving Trump the name, while Japan takes the substance.'
The agreement also has become more important to Tokyo as Japanese industries grapple with uncertainties from U.S. tariffs on key products, including steel, aluminum and cars.
Trump, who imposed a blanket tariff of 24 percent on Japan during his 'Liberation Day' blitz before lowering it to 10 percent while negotiations took place, wanted a swift trade deal with Tokyo. But Japanese officials are taking their time. Japan's economy minister, Ryosei Akazawa, met with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick in Washington last week in their fourth round of trade negotiations.
A breakthrough in the Nippon Steel deal could inject energy as the two countries are locked in tariff talks, analysts say. It would give Japan fresh leverage and a credible narrative, Ishikawa said: 'We're continuing to invest in your country, so please stop raising tariffs.'
Japan had faced 25 percent levies on steel and aluminum products, which Trump then increased to 50 percent last week during his announcement in Pittsburgh.
Trump told the audience at his rally that a higher tariff rate would 'even further secure the steel industry in the United States.'
'Nobody's going to be able to steal your industry,' Trump told them. 'At 25 percent, [foreign competitors] can sort of get over that fence. At 50 percent, they can no longer get over that fence.'
If the Nippon Steel deal is finalized, the higher tariff rate would work in the company's favor, analysts say. It would make it extremely difficult for foreign steel to enter the U.S. market, and companies with production facilities inside the United States, like Nippon, would gain a huge advantage.
'This is carrot-and-stick rhetoric,' said Tatsumi, of Stimson Center. 'The implication is, 'Hey, Nippon Steel … whatever you take out of this venture in the U.S. will be saved from these taxes I'm going to slap on you, so it will be in your interest to keep that production capacity'.'
But if the acquisition fails, the new rate would be devastating for Japanese firms, especially automakers with large operations in the United States that rely on steel imports.
The final deal may fall short of Nippon Steel's initial hopes, said Kazuto Suzuki, economic security director at the Tokyo-based Institute of Geoeconomics. But reaching a resolution under Trump after nearly two years of limbo will be an important lesson to Japanese industries more broadly, he said.
That takeaway, Suzuki said: 'Trump is negotiable. Biden was ideologically making decisions, but Trump is more flexible.'
Tanaka reported from Tokyo.