The writer is executive vice-president of the Global Business Alliance (GBA) 

President Joe Biden’s recent opposition to Nippon Steel’s takeover of US Steel not only signals a worrying continuation of his predecessor’s protectionist policies. It also casts a long shadow over an economic foundation that has bolstered US prosperity for decades. Forget the esoteric economic arguments and unmoored claims of nebulous national security concerns. The driving force behind this decision was simple: President Biden cannot lose union support to Donald Trump in battleground states like Pennsylvania, where US Steel is headquartered.  

Any other rationale is simply a thin veneer over the fear of political defeat.

After all, Japan’s role as the US’s top investor is undeniable. fDi Markets data show it is the US’s biggest investor by capital expenditure on record. Government statistics show the same, revealing it has contributed 15% of the US’s total cumulative foreign direct investment — amounting to a staggering $775bn — through 2022. The same source reveals Japan has shown its commitment to the US economy, increasing its investments by 55% over the past five years. Japanese-headquartered companies in the US support nearly a million US jobs — including in steel mills — a clear indicator of the depth of this valuable economic partnership.

Political contradictions

The US has a long-established process for reviewing cross-border deals to safeguard our national security. It is known as the Committee on Foreign Investment in the United States (Cfius) and its power was strengthened significantly during Mr Trump’s presidency. Cfius’s review of the Nippon Steel-US Steel deal began earlier this spring.

President Biden’s preemptive strike on Cfius’s review of the Nippon deal not only threatens the direct benefits it offers US workers, it undermines the integrity of the Cfius process and sends a strong signal to international investors that the US may no longer accept market-driven outcomes. [The deal is expected to remain under Cfius review until 2025; only then would the president have a chance to officially veto it.] 

The importance of maintaining an open and attractive investment climate cannot be overstated. Foreign companies, including those from Japan, significantly contribute to the US economy, especially in sectors like iron and steel. GBA analysis shows not only that these companies hire 24% of the total workforce in this sector, they also offer wages higher than the US average, underscoring the quality of the jobs they create. 

The opposition to the Nippon Steel-US Steel deal contradicts President Biden’s commendable Open Investment Policy Statement issued in 2021, where he pledged fair and equitable treatment for all investors and reinforced the US’s commitment to being an attractive destination for global business. His new position risks damaging the US-Japan economic and strategic partnership. Such a move is out of line with broad public support for maintaining and strengthening ties with Japan, a country considered an ally by more than three-quarters of Americans, YouGov polls show.

More on US protectionism:

• Nippon Steel flashpoint in politicised US investment screening
• US finalising imminent outbound FDI screening rules
• US outbound screening rules narrower than feared

Political pandering

It may be President Biden’s pen that ultimately unwinds the Nippon deal. But Mr Trump’s earlier bombastic rhetoric in February, claiming he would block the deal if elected, forced his hand. 

Ironically, their political pandering likely just killed the best chance of preserving those steelworker jobs in Pennsylvania. After all, US Steel’s shares have underperformed, and it is closing operations and laying off workers despite enjoying the protection of Trump-era tariffs for the better part of a decade. And no other serious US bidders could clear the antitrust hurdles that are present, given the industry is dominated by a handful of players. Indeed, the company refused domestic competitor Cleveland-Cliffs’ earlier takeover offer in part for the same reason. 

The US stands at a crossroads. It can either continue down a path of economic isolationism and damaged relationships with key allies, or it can choose to uphold the principles of US prosperity, international co-operation and strategic economic alliances.

To safeguard the US’s economic future and its critical alliances, especially with Japan, US workers should demand their political leaders prioritise long-term economic health and strategic relationships over shortsighted special interest gains. To block such ventures is to shut the gate on growth, to slam the door on opportunity itself. 

The economic alliance between the US and Japan deserves more than to be a casualty of political gamesmanship.

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