The government's growing concern over a potential takeover of US Steel

One of the biggest steelmakers in the world, Japan’s Nippon Steel, is trying to buy US-based US Steel, but is facing pressure from the US government over concerns about the potential takeover’s effect on the economy. US Steel was once the preeminent steel conglomerate in the world, but is no longer in the top 10 of steel production companies anymore. As a result, the company has been looking for foreign lifelines, but regulators and politicians in the United States are expressing concern.

The deal, first announced last year, would see Nippon acquire US Steel for $14.9 billion, if approved by regulators. However, concerns have been raised that the purchase would not only create the aforementioned economic problems but also open the United States to additional national security risks. Despite this, both companies are trying to go full speed with writing the deal.

The Biden administration as well as the Harris and Trump campaigns have all opposed the deal due to financial and security concerns. As the potential shutdown of the takeover looms, President Joe Biden is preparing to announce that he will formally block the takeover, said Washington Post. Biden’s blocking of the acquisition is a “stunning move to kill a deal with a company from Japan, a close American ally,” the Post said.

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Biden could not officially stop the deal until he received a recommendation to do so from the Committee on Foreign Investment in the United States (CFIUS). But it appears that recommendation is on the way, as the committee believes the deal “would create national security risks because it could harm the supply of steel needed for critical transportation, construction and agricultural projects,” it said Reuters. CFIUS “also cited a global glut of cheap Chinese steel and said that under Nippon, a Japanese company, US Steel would be less likely to seek tariffs on foreign steel importers.”

The White House “has previously described Nippon’s proposed acquisition as a security risk, which many foreign policy experts and some administration officials have privately derided,” it said. Financial Times. Much of this ridicule is a result of Japan be the “most important US ally in the Indo-Pacific region and has worked very closely with Washington on a range of efforts to counter China.” But concerns about the effects the deal would have regarding China remains: China’s “persistent use of market-distorting government interventions has allowed it to unfairly dominate the global steel market, as it exports massive surplus steel that artificially depresses international prices,” says Reuters.

Both Nippon Steel and US Steel have pushed back against claims that the deal would cause financial difficulties or national securitywith the latter arguing that blocking the deal would cost many jobs and could lead to US Steel abandoning its Pittsburgh headquarters. Without the agreement, US Steel “will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting many communities in the places where its facilities are located, and depriving the U.S. steel industry of an opportunity to better compete on the global stage,” the company said in a statement.

Despite the controversy, the U.S. steel industry “will be on a much stronger footing because of Nippon Steel’s investment in US Steel,” a Nippon Steel spokesperson said. Fox Business. But questions surrounding the deal remain, as “while the resilience of US domestic steel capacity is clearly in the national interest, it is unclear how ownership of a company domiciled in a major treaty ally would fundamentally threaten this,” said Sarah Bauerle Danzman , an international studies professor at Indiana University, said CNBC.

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The government’s growing concern over a potential takeover of US Steel

The government’s growing concern over a potential takeover of US Steel

Why is the government concerned about the takeover?