TOKYO, (TDI): President Joe Biden’s decision to block the acquisition of US Steel by Japan’s Nippon Steel has strained relations with Tokyo, one of Washington’s closest strategic and economic allies.
Japanese firms are the largest foreign investors in the United States, making the move particularly contentious.
Nippon Steel had framed the $14.9 billion deal as a lifeline for the struggling US steelmaker, but critics warned it could lead to job losses despite assurances to the contrary.
A Politically Charged Decision
The transaction, announced in 2023, became a contentious issue during the lead-up to the US presidential election. US Steel, headquartered in the swing state of Pennsylvania, faced opposition from both major candidates, Donald Trump and Kamala Harris.
A divided Committee on Foreign Investment in the United States (CFIUS) passed the decision to Biden in the final days of his presidency. Biden cited “national security” concerns and criticized global trade practices, particularly pointing to China, the world’s largest steel producer.
“I have taken decisive action to level the playing field for American steelworkers and steel producers by tripling tariffs on steel imports from China,” Biden said, echoing Trump’s trade policies.
Japanese Discontent
The decision sparked sharp criticism in Japan. Industry Minister Koichi Hagiuda called it “incomprehensible,” while Prime Minister Shigeru Ishiba demanded a clear explanation.
Japan, a close ally with 54,000 US military personnel stationed on its soil, has rarely faced such trade barriers from Washington.
Sarah Bauerle Danzman of the Atlantic Council noted it marked the first time CFIUS had halted a deal without Chinese ownership ties.
“This represents a major expansion of how CFIUS has traditionally interpreted national security,” Bauerle Danzman wrote.
Impact on Bilateral Relations
The unpredictability of US policies has raised concerns among Japanese firms, especially manufacturers. Yasuhide Yajima, chief economist at NLI Research Institute, warned of a “chilling effect” on Japanese investments in the United States.
“This decision could deter Japanese firms and others from doing business in the US,” Yajima said.
John Murphy, head of international affairs at the US Chamber of Commerce, echoed these concerns, stating that the move could harm international investment in America and exacerbate protectionist sentiments.
Japan’s $800 billion investment in the United States in 2023 accounted for 14.3% of all foreign investment, supporting nearly one million American jobs.
Keizai Doyukai, a Japanese business group, urged Japan to diversify its trade partnerships to reduce reliance on the United States. “We must strengthen cooperation with like-minded countries like South Korea, Australia, the Philippines, and India,” the group stated.
Also Read: Blinken Visits Japan Amid Steel Deal Tensions
Biden’s decision may erode allies’ trust in the United States as a reliable partner, Bauerle Danzman warned, potentially hindering efforts to develop resilient supply chains for critical items such as minerals, semiconductors, and electric vehicle batteries.
Challenges for the US Steel Sector
US Steel had argued that the acquisition would bolster America’s steel supply chain and strengthen its industry against Chinese competition.
However, the US steel sector, which accounts for less than 5% of global production, may face additional challenges without strong international partnerships.
Also Read: China Welcomes Japanese PM’s Call for Stronger Ties
As Japan reevaluates its economic ties with the United States, Biden’s decision could have long-lasting implications for trade relations and supply chain resilience.
