Joe Biden plans to intervene in Nippon Steel’s proposed purchase of US Steel, a move that could threaten the deal and anger Japan, one of Washington’s closest allies.
Biden will issue a statement expressing serious concern about the Japanese group’s proposed $14.9 billion takeover of the Pennsylvania-based steelmaker before Prime Minister Fumio Kishida arrives for a state visit to Washington on April 10, according to six people familiar with the decision.
U.S. officials and lawyers drafted the statement, and the White House privately informed the Japanese government of the president’s decision, according to knowledgeable sources. US Steel shares fell more than 12% after the Financial Times published details of Biden’s intentions.
The expression of concern will be interpreted as opposition to the acquisition and will mark the culmination of months of debate at the White House over how to respond to a deal that has sparked a bipartisan backlash in Washington against the sale of a U.S. manufacturing icon to a foreign group .
Although U.S. law gives the administration the power to block some foreign acquisitions on national security grounds, Biden will not say outright that the deal should be blocked, according to people familiar with the matter.
Instead, they say he will issue comments similar to remarks made in December by White House national economic adviser Lael Brainard, who said the president believed the deal deserved “serious scrutiny.”
Pennsylvania is a crucial swing state in this year’s presidential election between Biden and Donald Trump. Both men have courted union votes in the state and Trump has already railed against Nippon Steel’s “horrible” deal to buy the Pittsburgh-based American manufacturer.
The United Steelworkers union, also based in Pittsburgh, opposed the acquisition.
Nippon Steel announced the controversial takeover in December, leading Biden to choose between a powerful union and his constituents and a critical American ally. The president has invested heavily in strengthening alliances, particularly with Japan.
The White House has asked US Ambassador to Japan Rahm Emanuel to resolve the issue, putting him in a difficult position after he publicly hailed the deal as “historic”. Emanuel did not respond to a request for comment.
A person familiar with the deliberations said it was “embarrassing” for an administration that talks about the importance of allies and particularly the U.S.-Japan alliance “to send a signal of distrust of Japanese ownership of U.S. companies.” while Kishida prepares for the visit.
“The president knows all this, but unfortunately it looks like election-year politics will win out,” the person said.
The timing of Biden’s statement is significant because last week Nippon Steel submitted its proposal to the Committee on Foreign Investment in the United States (CFIUS), the interagency panel that reviews inbound investments for national security risks, according to two people familiar with the move. The company declined to confirm the CFIUS filing.
“It is unprecedented for a president to make a substantive comment on a case pending before CFIUS,” said Ivan Schlager, a partner at Kirkland & Ellis and one of the most prominent CFIUS lawyers in the United States.
“While Cfius is normally immune to political pressure, this case involves an iconic asset with unique capabilities paired with an administration that has made protecting manufacturing jobs and the middle class the foundation of its foreign policy.”
The White House declined to comment on whether the president will intervene. The Japanese prime minister’s office also declined to comment.
News of Biden’s expected statement comes as he visits swing states such as Pennsylvania in a bid to shore up votes ahead of November’s election.
United Steelworkers President David McCall said last month that his union had “received personal assurances that Biden supports us” in connection with the deal. Trump has also promised to block the deal if he beats Biden in November.
Nippon Steel hired US lobbying firm Akin Gump, focusing its energies on gaining support from the United Steelworkers.
But for confidentiality reasons, the Japanese group did not contact the union before announcing the agreement and only signed a non-disclosure agreement with the group, which represents 850,000 US manufacturing workers, in late February. Experts in Washington said the company made a grave mistake by not finalizing a deal with the union before announcing it.
Following talks with Nippon Steel last week, United Steelworkers said the meeting produced “no progress.” “We remain convinced that the company does not fully understand its obligations to steelworkers, retirees and our communities,” he said in a letter to his members.
Nippon Steel responded that it would continue talks with the union. “We have provided the USW with specific commitments that we believe address each of the union’s concerns that have been raised,” she said.
A person familiar with Nippon Steel’s thinking said the company does not intend to give up its bid for US Steel even if Biden publicly expresses opposition to the acquisition.
An executive told analysts at an earnings briefing last month that the group did not expect any policy intervention once it launched a review of CFIUS.
The Japanese business community was shocked by Washington’s strong reaction to the deal, especially since the United States remains the most attractive mergers and acquisitions market for Japanese companies.
Nancy McLernon, head of the Global Business Alliance, a trade group that represents foreign multinationals in the United States, said there was a “big risk” in blocking the acquisition for reasons other than national security.
“It would have a material impact on the relationship with a key ally. It is worth noting that Japan is the largest foreign investor in the United States, directly employing nearly one million American workers. Blocking the deal on such a pretext would certainly create an embarrassing state dinner in April.”