Steel Mergers, Tariffs, and U.S. Competitiveness
TOKYO, JAPAN - JANUARY 7 : View of the Nippon Steel logo displayed at the entrance of the ... More headquarter building of the Nippon Steel corporation in Tokyo, Japan on January 7, 2025, where Chairman and CEO Eiji Hashimoto held a press conference to explain the lawsuit seeking to invalidate the US Biden presidential order prohibiting the acquisition of US Steel. Nippon Steel corporation accused US President Joe Biden of illegally blocking his proposed acquisition of U.S. Steel for political purposes. (Photo by David Mareuil/Anadolu via Getty Images)
The Trump Administration is reported to be taking a second look at the proposed acquisition of U.S. Steel by Japan's largest steelmaker, Nippon Steel. Approval of this merger, which had been blocked in January by the Biden Administration, could help enhance the efficiency and competitive vitality of a major player in the strategically important American steel industry. Appropriate efficiency-focused mergers and joint ventures, during a period of high protective U.S. tariffs, could raise the competitiveness of the American steel sector as a whole, without harming competition.
Merger Background
In April 2024, U.S. Steel shareholders formally approved Nippon Steel's bid to acquire it for $14.9 billion. As a January 2024 Atlantic Council analysis explained, this deal provided benefits to the merging parties and to the U.S. economy:
Furthermore, the merger would not pose significant antitrust problems:
Biden Administration Blocks The Nippon-U.S. Steel Merger
The Biden Administration blocked Nippon Steel's acquisition in January 2025, notwithstanding its apparent benefits, after an evaluation by the Committee on Foreign Investment in the United States. This decision appears to have been inconsistent with longstanding CFIUS practice, which focused on addressing serious national security problems.
As the U.S. Treasury Department explains, CFIUS 'is an interagency committee authorized to review certain transactions involving foreign investment in the United States . . . in order to determine the effect of such transactions on the national security of the United States.'
Congress also empowered the President to terminate acquisitions by foreign entities given 'credible evidence' of a national-security threat, based on a CFIUS evaluation. Congress also specified that this power to terminate 'is not subject to judicial review.'
A 2022 Biden Executive Order expanded the factors for CFIUS consideration to include supply-chain resiliency, U.S. technological leadership, cybersecurity, data security, and industry investment trends. The expanded factors do not appear readily applicable to Nippon Steel's proposed acquisition.
Few transactions have been prohibited following a CFIUS evaluation. Various acquisitions have been authorized, subject to measures to mitigate national-security concerns through behavioral remedies or targeted divestitures (analogous to antitrust merger remedies). The six closed transactions that were blocked in the 2017-2022 period (in the aerospace, medical, and software sectors) involved Chinese acquirers.
Reversing the Biden Prohibition Makes Good Policy Sense
The revived Trump CFIUS review reportedly will be conducted de novo, with no weight given to the Biden prohibition. This would enable the Trump Administration to develop a new tailored agreement authorizing the transaction.
The original prohibition was highly problematic, as I previously argued:
'It is very hard to credibly argue that a Japanese owner of a US business would suddenly stop selling steel to US buyers, particularly since the business rationale for the acquisition is so that Nippon Steel can more competitively serve the North American market. Washington blocking such a sale to a close Group of Seven (G7) partner would indicate that CFIUS has veered from narrow national security concerns to the business of broader economic protection. This would invite retaliation against US companies abroad and undermine US messages about the importance of an open, market-oriented, and rules-based economic system.'
Nothing in this analysis has changed. Indeed, high U.S. tariffs assessed against China would appear to place a premium on raising the efficiency and innovativeness of American steel production – a goal at odds with a CFIUS prohibition of the Nippon Steel-U.S. Steel link-up.
In sum, if allowed, the Nippon Steel-U.S. steel merger should be a major net positive for the American economy, and for American steel industry competitiveness.
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