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Biden's decision to block US Steel sale raises concerns of national security overreach

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Editor's note: Zhijun Gao is an assistant research fellow of the Chinese Academy of Social Sciences. The article reflects the author's opinions and not necessarily the views of CGTN. 

US President Joe Biden at the Conference of Mayors in Washington, DC, US, Jan. 17, 2025. /CFP
US President Joe Biden at the Conference of Mayors in Washington, DC, US, Jan. 17, 2025. /CFP

US President Joe Biden at the Conference of Mayors in Washington, DC, US, Jan. 17, 2025. /CFP

On January 13, 2025, the Biden Administration delayed enforcing his order of blocking Japanese Nippon Steel's proposed $14.9 billion acquisition of US Steel until June 18, 2025. The controversial order to block the deal was made by Biden about a week ago on the grounds of national security. In fact, the Committee on Foreign Investments in the United States (CFIUS) had made a thorough review of this proposed deal in the past year but failed to reach a consensus on the security front. Hence, it gave the president the decisive vote for the deal's approval. Unsurprisingly, Biden's decision has spurred instant objections from both Japanese Nippon Steel and US Steel. They sued in the federal court three days after Biden's announcement arguing that the CFIUS had been prejudiced by the president's longstanding opposition to this deal.

Why are the two steel companies pressing for the deal?

US Steel, headquartered in Pittsburg, had once been a flagship giant in the American steel industry. Along with the US manufacturing decline in recent decades, the company's market share and competitiveness have been gradually surpassed by its foreign competitors. As its revenue went down, the company has become increasingly strained to update its equipment and talent pool, leading to a negative cycle and ultimately ending in a survival crisis mode.

On the other end, Nippon Steel, the world's fourth-largest steelmaker, has emphasized that it is ready to invest in US Steel's aging blast furnace plants in Pennsylvania and Indiana, so that the new conglomerate will become competitive in the domestic and global markets again. At the same time, Nippon Steel has committed to honor all the US Steel's existing union contracts and retain its name, brand and headquarter location. It is noteworthy that the share of US Steel rose almost 7 percent upon the announcement of deadline extension.

Baseless claim on the national security ground

Biden defended his opposition against the proposed acquisition by citing the Defense Production Act of 1950 and said: "A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains. That is because steel powers our country: our infrastructure, our auto industry, and our defense industrial base." However, according to Sarah Bauerle Danzman, an associate professor at Indiana University, Bloomington and nonresident senior fellow at the GeoEconomics Center, it is somewhat ironic that Biden's justification through the lens of national security is contradictory to his administration’s own executive order (EO 14083) issued in September 2022. In that order, the administration outlined the factors CFIUS should consider when conducting national security reviews and defined critical supply chains in accordance with EO 14017, which did not include steel. From this perspective, Biden's justification for his decision is a substantial expansion of the scope of national security, which could be harmful to the credibility of the White House's executive orders.

The logo of Nippon Steel Corp below the blast furnace at the Kashima plant in Kashima, Ibaraki Prefecture, Japan, December 6, 2024. /CFP
The logo of Nippon Steel Corp below the blast furnace at the Kashima plant in Kashima, Ibaraki Prefecture, Japan, December 6, 2024. /CFP

The logo of Nippon Steel Corp below the blast furnace at the Kashima plant in Kashima, Ibaraki Prefecture, Japan, December 6, 2024. /CFP

National security outreach would be detrimental to everyone

From the perspective of national interest, Biden's decision would create troubling damages to the US steel industry, the communities, and especially the US global economic standing. For US Steel, it would lose an opportunity to upgrade its facilities and modernize its management, being further left behind by its foreign competitors. Republic Representative Dan Meuser has criticized Biden's decision as shortsighted because it "sacrifices Pennsylvania's economic future for political friends, leaving thousands of families and communities uncertain about their future."

Moreover, Biden's blockage would hurt the US business environment. Given the subjective nature of politics, foreign investors might become increasingly concerned about whether their proposed business transactions would run into unexpected obstacles. Biden's justification illustrated that the president can arbitrarily expand the scope of national security that caters to his political constituencies without facing any binding constraints. This might dispel more and more foreign enterprises from investing in the US, which would compromise the administration' policy objective of reshoring of the manufacturing industries.

 It is difficult to be hopeful for the future

The extension of the deadline seemed to be Biden's tactical move to defer the final decision to the upcoming Trump administration. It is notable that Trump also holds a negative attitude towards the proposed deal claiming that he is "totally against the once great and powerful US Steel being bought by a foreign company, in this case Nippon Steel of Japan." In the next several months, although CFIUS would fulfill its obligation to assess if there are workarounds or modifications to the acquisition to allow it to go through, the final decision will still be up to Trump to make. Given Trump's potential of doubling down on American First in the next four years, the prospect for the acquisition to happen would be as bleak as it had ever been.

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