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Japanese company Nippon Steel has agreed to buy US Steel for $14.1 billion, and senators from both parties in the Rust Belt are sounding the alarm. “A critical portion of America’s defense industry has been auctioned off to foreigners for cash,” said Senator JD Vance (R-Ohio). Sen. Joe Manchin III (D-Wa.) called it “a direct threat to our national security.” Sen. Sherrod Brown (D-Ohio) claimed the offer “insulted American steelworkers.” They and other critics want the Biden administration to block the takeover based on a federal law that regulates potential security risks from foreign investment. And on Thursday, a senior White House official said the deal “apparently deserves serious consideration.”
The proposed transaction should pass without any problems. Large capital investments by a Japanese company do not pose a threat to the national or economic security of the United States, as the relevant authority – the Committee on Foreign Investment in the United States (CFIUS), chaired by Treasury Secretary Janet L. Yellen – has every reason to conclude .
This bout of Japan-bashing dates back to the panic over Japan's economic rise in the late 1980s – which was also exaggerated. Japan is a U.S. ally and party to a mutual defense pact. The two countries cooperate in the production of microchips and other sensitive technologies. And Nippon, which has been operating in the United States since 1984, would have no interest in, for example, giving up profits to curb steel production for American weapons.
Under the deal, US Steel would retain its brand and headquarters in Pittsburgh as part of a new combined company that would be the world's second-largest steelmaker – and a free rival to China's state-owned Baowu Group. Consolidation is needed to compete with China, which produces more than half of the world's steel.
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The United Steelworkers, which represents about 11,000 US Steel employees, called the company's board “greedy” to accept the best offer. The union wanted the board to sell to Ohio-based Cleveland-Cliffs, even though that company initially made an offer of $7.3 billion, about half of what Nippon countered. However, there is no reason why the takeover should harm the workforce, as the Japanese company promises to honor all existing union contracts.
The irony of ironies: Much of the criticism of Nippon Steel's offer comes from those who support the industrial policies that made US Steel an attractive takeover target in the first place. President Donald Trump imposed a 25 percent tariff on steel imports, which President Biden largely kept in place. Mr Biden's key legislative achievements – a bipartisan infrastructure bill, the Chips Act and the Inflation Reduction Act – included incentives such as tax credits for wind farms built with domestic steel, which gave the Japanese company an incentive to buy an American steelmaker.
Particularly interesting is Mr. Vance's resistance. “Allowing foreign companies to buy up American companies and benefit from our trade protections undermines the very purpose for which these protections were put in place,” Mr. Vance wrote in a letter calling on CFIUS along with two Republican colleagues Block sales. In “Hillbilly Elegy,” the 2016 memoir that catapulted him to national fame, Mr. Vance recounted the initial negative reaction in Middletown, Ohio, when another Japanese company, Kawasaki, acquired Armco, which owned the steel mill where his grandfather worked had worked. It was as if “General Tojo himself had decided to settle in southwest Ohio,” Mr. Vance recalls. Then locals realized that new owners could invest in their declining community. “The Japanese are our friends now,” his grandfather told him.
“The Kawasaki merger presented an inconvenient truth: Manufacturing in America was a difficult business in the post-globalization world,” Mr. Vance wrote in his book. “If companies like Armco wanted to survive, they would have to retool. Kawasaki gave Armco a chance, and Middletown’s flagship company probably wouldn’t have survived without them.”
Mr. Vance got it right the first time. Yes, it's natural to lament the slow decline of the legendary US Steel, America's first billion-dollar corporation that made Andrew Carnegie the richest man in the world in 1901. In recent decades, Nucor has overtaken US Steel in sales and profitability by using electric arc furnaces, which also produce less carbon, to replace US Steel's less efficient blast furnaces. It is no longer 1943, when US Steel's employment peaked at 340,000 workers as the company helped arm the Allies to defeat the Axis powers, including Imperial Japan. The company now has fewer than 15,000 workers, and Japan is one of the best friends of the United States, whose companies already employ tens of thousands of U.S. workers in auto factories across the country – and should also be welcome in the steel sector.
The view of the post | About the editorial team
The editorials reflect the views of the Post as an institution, determined through discussions among editorial board members in the Opinions section and independently of the newsroom.
Members of the editorial board: Opinion editor David Shipley, deputy opinion editor Charles Lane and deputy opinion editor Stephen Stromberg, as well as writers Mary Duenwald, Christine Emba, Shadi Hamid, David E. Hoffman, James Hohmann, Heather Long, Mili Mitra, Eduardo Porter, Keith B. Richburg and Molly Roberts.
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