Biden’s plan to block US Steel takeover alarms foreign investors

President Biden’s opposition to US Steel’s takeover by Japan’s Nippon Steel signals that America is no longer an open market, a group representing British companies with US operations has warned.

The $15 billion deal is expected to be blocked imminently on national security grounds, even though Japan is one of America’s closest allies.

The takeover of the US steelmaker is facing opposition from both Democrats and Republicans who have told voters the company should remain American-owned as they seek to drum up support in Pennsylvania, the battleground state in the presidential election where US Steel is based.

Global Business Alliance, an association in Washington that represents hundreds of international companies with US operations including Anglo American, Balfour Beatty and GSK, said any move to block the deal would damage America’s investment climate.

Jonathan Samford, executive vice-president at the alliance, claimed the deal was at risk of being rejected because of “swing-state politics”, which investors fear could set a precedent. “To have a deal torn down based on blatant politics is really troubling, and it will create a signal that will reverberate to would-be investors around the world, that maybe the United States isn’t as open as it claims to be,” he said.

Samford said the alliance’s members were “paying attention” to the US response to the proposed merger. In its latest poll of members, many of them commented that the deal was “something they were concerned about in terms of precedent-setting”, he said.

Kamala Harris, the Democratic presidential candidate, has said she wants US Steel to remain “American owned and operated”. Donald Trump, her Republican rival, has pledged to block the deal if elected.

David Burritt, US Steel’s chief executive, has warned that without the deal, the company “will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk [and] negatively impacting numerous communities across the locations where its facilities exist”.

Nippon has pledged to invest more than $2.7 billion in union-represented facilities in Pennsylvania and Indiana in support of the future of manufacturing for those communities. It has also said that the core senior management as well as a majority of board members at the US company would be American citizens if the deal went ahead.

International companies contribute significantly to America’s iron and steel mills, employing nearly a quarter of the total workforce in 2021, according to research by the Global Business Alliance. American iron and steel mill workers employed by international companies earn higher wages, with an average of $114,555 compared with the overall US average of $103,631, analysis of US Bureau of Labor Statistics has found. Nippon’s planned takeover has been approved by US Steel’s shareholders. It is now under regulatory review.

The Committee on Foreign Investment in the US warned the deal would create national security risks because it could damage the supply of steel needed for critical transportation, construction and agriculture projects, according to a letter sent to the companies last week and seen by Reuters. The letter also suggested that under Nippon, US Steel would be less likely to seek tariffs on foreign steel importers, and cited a global glut of cheap Chinese steel.

Commenting on the letter on Friday, Michael Leiter, a foreign investment committee lawyer in Washington, who is not involved in the deal, said: “By almost any measure, the issues identified by the committee are not ones that would fall into the national security bucket, but quite clearly into two others: nationalistic trade protectionism and electoral politics.”