Messy Block of U.S. Steel Sale
Terry H. Schwadron
Jan. 7, 2025
Whatever results from the decision, the messy international politics over industrial investments in the United States is confusing and contradictory. We should be pressing for more clarity.
After study by a commission set up to examine foreign investments, Joe Biden — with the unusual agreement of Donald Trump — -moved to block the acquisition of U.S. Steel by Japan’s Nippon Steel, the world’s fourth largest steelmaker, based on the idea that the sale posed a threat to national security, but it comes across as much more political appeal to steelworkers.
We don’t want essential goods like steel under the control of a foreign company, our government says. The Committee of Foreign Investment in the United States, which includes the departments of Treasury and Justice, had said Nippon’s other global business considerations could in the future outweigh its pledges to invest in U.S. Steel. Biden took that as justifying a decision to block the sale a month before he leaves office.
Trump concurs with stopping the sale, arguing separately that he will save U.S. Steel with tax cuts and tariffs against rivals.
This situation basically comes about because U.S. Steel is in financial trouble and threatens to close or move some operations, putting people out of work. The Japanese company, feeling hemmed in by various limitations in that country, is looking to expand and sees opportunity in the United States, whose leaders blab endlessly about building, returning, and growing manufacturing jobs in the U.S.
The sticking point here is that our warships, aircraft, tanks and lots of non-weaponry products like cars and refrigerators depend on the availability of steel, and we apparently want to guarantee that those means of production remain under American ownership.
The whole thing became ensnared in presidential campaign politics, amid calls from steelworkers in key election states to block the sale. The unions felt that new Japanese owners would not stand by negotiated wage and benefit agreements — which might as well prove true for a new American owner of the company — though many individual workers wanted the sale for fear of job cuts without it.
In any case, Nippon and U.S. Steel filed suit in federal court, so the issue is not settled. The straight investment reasoning behind the issues remains clouded by election politics and extremely muddled as we end one administration and start another that each claim wanting to make manufacturing growth a central plank.
The Complications
At the same time, Trump — like Biden — has sought to invite and welcome foreign investors who want to build plants here. Just two weeks ago,
Trump trotted out Japanese Softbank CEO Masayoshi Son to publicly promise a $100 billion investment in the U.S. over the next four years towards creating 100,000 jobs focused on artificial intelligence and electronics. Despite plans more than a bit fuzzy, Trump made a big deal about a Japanese investment in U.S. manufacturing, despite earlier unfilled promises from this same investor during his first term.
But wait: Isn’t AI considered critical software? Why invite Japanese investment in AI and not steel?
This week, the Supreme Court is hearing that TikTok should be forced to sell to American owners or stop operations — a move voted by Congress, defended by Biden, and now, after campaign fund contributions, opposed by Trump. The issue here is that Chinese ownership of Byte Dance, parent company of TikTok, is considered beholden to the Chinese government — which may have long-term interest in collecting social media information from TikTok users.
Our prescription drugs are being created in foreign-based plants, our cars and appliances are dependent on parts and pieces made overseas, our supermarkets and everyday goods still depend on supply lines and base products built elsewhere. The machinery used in many U.S. manufacturing plants are foreign designed and built.
So is the critical issue being raised in these cases American ownership of anything consumed by Americans? Is it that access to supply lines for goods and services is seen as important? Is it about whether the investment is from Chinese businesses or from a friendlier country, like Japan? If so, why are some Japanese investments ok and others not?
In the end, that required CFIUS review about concerns over national security threat never did issue clear advice about stopping the sale, deciding instead to note that worldwide declines in steel might potentially lead to less U.S. steel production. That, of course, is what prompted this issue in the first place.
Manufacturing Truths
Whether through promises of tariffs or America First politics or jawboning, Trump has set up a straw man about returning manufacturing plants to the U.S. from overseas.
Through the Biden years, the U.S. created nearly 800,000 manufacturing jobs, though we can be sure that if the trend continues, Trump will take credit for it.
Further complicating understanding here is that it some U.S. manufacture apparently required training or retraining that some employers would prefer to skip, instead pressuring Biden and Trump to increase the numbers of H-1B visas for particularly skilled foreign workers. Just for the record, the Nippon investment seemingly would not require foreign workers.
The private sector has committed nearly $900 billion in investments in U.S. manufacturing, construction of factories doubled from the best Trump year after having fallen during Trump’s first four-year term. Supply chain executives report significant shift in manufacturing returning to North America from Asia, though not necessarily to the U.S. since wages in Mexico are much less.
Trump and Kamala Harris made manufacturing a key point in the election.
Biden’s CHIPS and Science Act alone has spurred a reshoring of high-tech semiconductor manufacturing plants, with dozens of incented companies committing to investing nearly $400 billion across this country. Infrastructure projects that Biden got through Congress also has spurred manufacture in steel and building materials.
Trump has targeted the CHIPS bill for cancellation, and his advisors, including Elon Musk and Vivek Ramaswamy, are pushing against government programs to incent businesses.
Also, new manufacturing plants will be based on the inclusion of technology and robots to minimize the number of human jobs.
So, expect that Trump will use his economic policies to seek to lure foreign investors to U.S. businesses — raising more situations like whatever is behind blocking the U.S. Steel sale. At the least, we should be able to get a clearer understanding of what we are seeking.
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