Experts warn Biden’s blocking of US Steel-Nippon Deal potentially damaging to US trade, CFIUS

President Joe Biden's decision to block the highly politicized US Steel-Nippon merger could jeopardize the legitimacy of the Committee on Foreign Investment in the United States, international trade experts told S&P Global Commodity Insights.

Biden, who had opposed the $15 billion deal shortly after it was announced in December 2023, only had the opportunity to reject the merger because CFIUS had been unable to come to a consensus. The committee's function is to review foreign investments in the US for national security risks. Observers worry that the legal body may risk becoming more politicized by the executive branch.

"Today is unfortunately not CFIUS's finest moment," David Plotinsky, a partner at law firm Morgan Lewis, said on the social media site LinkedIn. "Speaking as someone who used to run the office that manages DOJ's CFIUS program, I'll say this in partial defense of the Committee: from the public reporting, it sounds like the majority of CFIUS members believed the Nippon Steel-U.S. Steel transaction should clear, so in that sense, CFIUS landed in the right place. However, that ultimately was not sufficient to overcome a President who wanted to block the deal."

Tokyo-based Nippon is one of the top five largest steel producers in the world by production volume, according to S&P Global Market Intelligence data. The two companies challenged Biden's decision in court on Jan. 6. The deal going through would have represented a major investment in the struggling, Pittsburgh-based US Steel.

"The President said the blocking of this deal will help enhance and strengthen our supply chain. I think that it's going to have the opposite effect," Matthew Goodman, a distinguished fellow at the DC-based Council on Foreign Relations, said to Commodity Insights. "US Steel has been a very troubled company for a long time, losing a lot of money. Nippon Steel was promising to bring in new money and new technology to protect the jobs that were there and the production that was there."

A widespread concern amongst experts is damage to the reputation and legitimacy of CFIUS and the politicization of legal processes in place to review foreign investment in the US.

"It's the wrong decision economically and strategically, but it was made for obvious political reasons that Nippon Steel somehow failed to anticipate," said Derek Scissors, a senior fellow at the American Enterprise Institute who focuses on US-Asia economic relations.

The US Steel-Nippon deal became highly politicized in the run-up to the 2024 US presidential election, with Vice President Kamala Harris, Biden, and President-Elect Trump all opposing the deal. Trump said in a Dec. 2 statement that he would revive US Steel through tariffs and other policy measures.

"I worry that this important tool of national security policy, CFIUS, is being misused for other purposes. And yes, I think they're political," said Matthew Goodman. "This runs the risk of misusing this tool when it's needed for real national security cases, which there are, of course, legitimate concerns. So, I'm particularly troubled by that aspect of this decision."

Although the acquisition was blocked, some experts believe this may not be Nippon's last attempt at acquiring US Steel.

"Given the impact of this transaction on US Steel, this may be a transaction where the president – whether Biden or Trump – decide to use Section 3 of the Executive Order, which would allow for additions or changes to the existing order," said Giovanna Cinelli, practice lead of international trade and national security at Morgan Lewis. "This may be important if the parties are willing to consider a different deal structure or approach to manage any national security concerns."

Platts, part of Commodity Insights, assessed the daily TSI US hot-rolled coil index at $690/st on an ex-works Indiana basis on Jan. 3, unchanged from Jan. 2.