Abstract

In September 2024, Vice President Kamala Harris opposed Nippon Steel’s acquisition of U.S. Steel, citing national security concerns. This move, aligned with President Biden’s likely decision to block the $14.9 billion deal, is seen as a bid to secure support from the United Steelworkers union in Pennsylvania, a crucial swing state. While politically strategic, the decision raises concerns over U.S. Steel’s future competitiveness and risks thousands of jobs. It also threatens U.S.–Japan relations, vital alliances in the Indo-Pacific. The decision may signal rising economic nationalism, deterring foreign investment and harming long-term economic stability.

In early September 2024, Vice President and Democratic presidential nominee Kamala Harris announced in a speech in Pittsburgh her opposition to the acquisition of U.S. Steel, headquartered in Pittsburgh, by Japan’s largest steel producer, Nippon Steel (Rogin, 2024). Shortly after, The Washington Post reported that President Joe Biden is prepared to veto the $14.9 billion deal on the grounds of national security, asserting that this iconic American company should remain under U.S. ownership (Lynch, 2024; Rogin, 2024). From a short-term political perspective, this move appears strategic—aimed at securing more votes for the Democratic Party. However, from a long-term economic standpoint, the decision is deeply concerning, particularly in relation to Japan, as it risks undermining the trust within the U.S.–Japan alliance.

In December 2023, Nippon Steel (the world’s fourth-largest steel producer) announced its intention to acquire U.S. Steel, aiming to create “the best steelmaker with world-leading capabilities” (Rogin, 2024). At a special shareholders meeting in April of this year, more than 98% of U.S. Steel’s shareholders voted in favor of the deal (Rogin, 2024; United States Steel Corporation, 2024). However, the acquisition plan has faced fierce opposition from the powerful United Steelworkers (USW) union. The union argued that Nippon Steel, as a foreign entity, might not fully understand or prioritize its commitment to American workers, retirees, and communities dependent on the steel industry (PBS News, 2024). The USW expressed skepticism about Nippon Steel’s assurances regarding job security, citing fears that executives based in Tokyo could easily alter or even cancel existing business plans, potentially leading to plant closures or layoffs (PBS News, 2024). Additionally, the union raised concerns about Japan’s financial transparency and the broader implications for U.S. national defense, infrastructure, and supply chain resilience (PBS News, 2024). 

Given the current stage of the U.S. presidential election, Vice President Harris’s statement opposing the deal appears to be aimed at securing the support of the USW, a group strongly against the agreement (Japan Today, 2024; Rogin, 2024). Both the USW and U.S. Steel’s headquarters are located in the critical battleground state of Pennsylvania, which both Harris and fellow presidential candidate Donald Trump regarded as an essential component to win the final election (PBS News, 2024). In a political landscape where the working-class vote could determine the outcome in Pennsylvania—and where Pennsylvania itself may swing the presidential election—powerful unions like the USW wield considerable influence, effectively holding veto power over major deals, especially when securing 270 electoral votes is at stake (Japan Today, 2024; Lynch, 2024).

Harris’s speech emphasized that U.S. Steel is not only a symbol of American industrial prowess but also a critical component of the nation’s economic and national security infrastructure (Rogin, 2024). She declared that “U.S. Steel is an American company with a rich history that is vital to our nation.” She also aligns her stance with President Joe Biden and underscores the importance of keeping U.S. Steel under American ownership and management (Rogin, 2024). While this appeals to nationalist sentiments, it sidesteps the broader economic consequences of blocking foreign investment, especially from key allies like Japan.

However, in economic terms, the suspension and eventual halt of this acquisition not only risks forfeiting significant economic opportunities for the U.S. manufacturing sector but also threatens to inflict long-term damage on the relationship between the U.S. and Japan, one of its key allies. Such a decision could undermine the economic and political foundations of bilateral cooperation, with potential repercussions for the broader strategic partnership between the two countries.

U.S. Steel, once a symbol of industrial might and global influence, operated premier facilities both within the United States and across Central Europe (United States Steel Corporation, 2024). However, after decades of gradual decline, this former industry titan has fallen out of the top ranks of global steel producers, with its competitiveness significantly diminished (Rogin, 2024). The dual pressures of rapid globalization and technological advancements have eroded U.S. Steel’s foothold in the international market. In particular, the company has struggled to keep pace with the aggressive expansion of China’s state-owned enterprises, which benefit from extensive resources and robust government backing. In recent years, China’s steel industry has undergone rapid growth, securing a dominant position in the global market. Statistics show that Chinese companies now account for six out of the top ten global steel producers, while U.S. Steel has slipped to a modest 24th place in the rankings (Rogin, 2024).

In a statement, U.S. Steel expressed that without the Nippon Steel transaction, the company would largely shift away from its blast furnace operations, placing thousands of high-paying union jobs at risk (United States Steel Corporation, 2024). This would negatively impact many of the communities surrounding these facilities and strip the U.S. steel industry of a critical opportunity to remain competitive on the global stage. Beyond forcing the company to abandon its integrated steel production, the failure to reach a final agreement also raises significant concerns about the future of its headquarters in Pittsburgh.

Historically a city that flourished due to the steel industry, Pittsburgh has successfully diversified its economic structure over the past few decades. However, the continued presence of the steel industry remains a crucial factor in the region’s employment rates and overall social stability. Should U.S. Steel choose to relocate, the repercussions for Pittsburgh would be widespread. The withdrawal would not only lead to a reduction in local employment opportunities but would also diminish tax revenues for the local government and curtail the company’s contributions to the community (Klawans, 2024).

According to a 2023 economic impact study, U.S. Steel’s operations in Pennsylvania generated a total economic impact of $3.6 billion, indirectly and directly supporting 11,417 jobs through local procurement and operations (United States Steel Corporation, 2024). Furthermore, the company contributed $138.2 million in state and local taxes through its regular operations and capital investments (United States Steel Corporation, 2024).

As one of the United States’ most important allies in the Indo-Pacific region, Japan holds not only strategic significance but also plays a central role in the Biden administration’s economic policy. During Prime Minister Fumio Kishida’s official visit to the U.S. in April 2024, he reaffirmed his commitment to strengthening the U.S.–Japan global partnership, particularly emphasizing collaboration in the field of economic security (The Government of Japan, 2024). Kishida’s visit underscored Japan’s substantial investments in the U.S., which have significantly contributed to U.S. economic growth through job creation and capital inflow (The Government of Japan, 2024).

Today, Japan stands as the largest foreign direct investor in the United States, with investments totaling approximately $800 billion and supporting nearly one million American jobs. Of these, 500,000 jobs are in the manufacturing sector (The Government of Japan, 2024). Nippon Steel, as an example, was well aware of the potential political challenges when initiating its acquisition plan and thus pledged an additional $3 billion investment to bolster U.S. manufacturing infrastructure (Rogin, 2024). This included investments in union-led plants in Pennsylvania (Rogin, 2024). 

However, these investments may now be at risk if key acquisitions, such as Nippon Steel’s, are blocked, potentially impacting the economic ties between the two nations. The escalating resistance to this acquisition has caused significant unease among Japanese stakeholders.  This not only threatens the sustainability of future investments but also risks undermining the long-standing strategic trust that has been built between the U.S. and Japan. Such a weakening of trust could hinder the depth and breadth of bilateral cooperation in areas such as economic and security collaboration, prompting Japan to reassess its confidence in the U.S. as a reliable global partner. Moreover, these uncertainties have led Japan to question whether the U.S.’ commitment to global cooperation and partnership remains strong, especially in the face of an increasingly complex international landscape.

This deal remains uncertain, as a U.S. government committee has raised concerns about national security and has promised to make a final decision by the end of this year (Lynch, 2024). At this critical juncture, the United States stands at a crossroads where short-term political calculations are overshadowing deeper economic realities—factors that could shape the future of American industry and its international relations. While halting Nippon Steel’s acquisition of U.S. Steel may offer immediate electoral gains, it risks undermining long-term economic vitality and eroding the trust of Japan, a key ally. This move could also raise alarms among other foreign investors: If even companies from America’s closest ally, Japan, face such hurdles, what kind of transaction can escape the rising tide of U.S. economic nationalism?

To safeguard the country’s manufacturing base, protect high-paying union jobs, and strengthen strategic partnerships in an increasingly complex global landscape, U.S. leaders must adopt a long-term vision that extends beyond the upcoming election cycle. Reconsidering this decision would not only help revitalize the American steel industry but also reaffirm the United States’ steadfast commitment to its allies, ensuring shared prosperity and security for years to come.