Biden's objection to U.S. Steel's takeover by Nippon shows politics swaying national-security decisions

By Chris Matthews

United Steelworkers union praises Biden's statement

President Joe Biden came out forcefully against Nippon Steel's planned acquisition of U.S. Steel on Thursday, stressing the importance of maintaining "strong American steel companies powered by American steel workers."

The statement sent U.S. Steel (X) shares tumbling more than 10% as investors surmised that the deal - currently under review by the Committee on Foreign Investment in the United States (CFIUS) - is likely dead in the face of presidential opposition.

Read more: U.S. Steel shares down 10% after Biden opposes acquisition by Nippon Steel

Federal law gives the president broad authority to block foreign purchases of domestic assets that he deems to be contrary to American national-security interests, according to Greg Gonzalez, former counsel to the assistant attorney general for national security and a partner at the law firm Wilkinson Barker Knauer.

The law says, however, that the president is not supposed to come to a final conclusion on whether to block a transaction until CFIUS reaches an impartial conclusion on the national-security implications of a deal.

"It's unusual to put out a statement before there's been an official finding," Gonzalez said.

Proponents of the deal have pounced on this fact, accusing the president of bringing politics into a process that should be defined by a sober assessment of national-security risks.

"Attempts to politicize the objective CFIUS review of Nippon's acquisition of U.S. Steel are both inappropriate and counterproductive," said John Murphy, senior vice president at the Chamber of Commerce, in a statement.

"That review will surely support the transaction given Japan's status as one of America's most important and reliable allies," he added. "Japanese investment in the U.S. supports nearly 1 million American jobs, and officials must be careful not to send a chilling signal to international companies that U.S. politics may put their job-creating investments in the U.S. at risk."

The political forces arrayed against the deal are formidable. Former President Donald Trump, Biden's presumptive Republican rival in November's election, pledged to block the acquisition by Nippon (JP:5401) in January, while a bipartisan coalition of lawmakers, many from critical swing states where steelworkers are concentrated, have also come out against the merger.

See also: Bipartisan opposition to Nippon takeover of U.S. Steel grows

The AFL-CIO, which counts the United Steelworkers union as an affiliate, released a fulsome statement Thursday in support of Biden's stance, underscoring the political benefits of the president's position.

"The most pro-union president in our lifetime once again today showed he stands firmly with working people," AFL-CIO president Liz Shuler said. "President Biden promised steelworkers he'd always have their backs, and that's precisely what he did today with his call to keep U.S. Steel American owned and operated."

Though Biden's statement made no references to national security, U.S. Steel shareholders will likely have little recourse to contest a CFIUS decision to block the deal.

Federal courts have found that they have jurisdiction to review the CFIUS process if it impinges on constitutional rights like the right to due process, but it's unlikely that courts would grant standing to U.S. Steel shareholders on these grounds, Gonzalez said.

The law doesn't even require the president to heed CFIUS recommendations if he feels that blocking a deal benefits America's national-security interests.

"The president could have in mind solely a political motive," he said. "And the president isn't going to get called into district court to answer his or her decision-making on a topic like this."

-Chris Matthews

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

03-14-24 1627ET

Copyright (c) 2024 Dow Jones & Company, Inc.