In December, Japanese steelmaker Nippon Steel offered to pay $15 billion for Pittsburgh-based U.S. Steel. A new report first obtained by the Washington Examiner shows that the deal will revitalize American manufacturing, save jobs, and help our steel industry compete with that of China.
Despite these clear benefits, President Joe Biden has said he will block the deal. Here are three reasons why Biden’s opposition is based in politics, not reality.
First, Biden’s opposition to the Nippon deal is a direct rebuke of Donald Trump’s economic agenda. Despite U.S. Steel’s financial woes, Nippon wants to pay a premium for the company because the Trump tax cuts incentivized foreign direct investment. The former president slashed the corporate tax rate from 35% to 21%, bringing America in line with the rest of the developed world.
Biden wants to repeal the Trump Tax Cuts and Jobs Act and raise the corporate tax rate to 28%. Admitting that the Trump tax cuts encouraged Nippon to invest in U.S. Steel would undermine Biden’s campaign trail lie that business tax cuts do not lead to economic growth.
Second, Biden’s opposition to the Nippon deal is another deliverable for the Big Labor bosses that spent at least $1.8 billion to elect Democrats in 2020. The United Steelworkers vociferously opposes the deal and “strongly [urges] government regulators to carefully scrutinize this acquisition.”
By opposing the Nippon deal, Biden and his Big Labor paymasters can campaign on protecting union jobs from the whims of a greedy multinational corporation. They are lying through their teeth: Nippon has repeatedly promised to honor all of U.S. Steel’s existing commitments to their workers, including collective bargaining agreements negotiated with USW. In a further sign of commitment to U.S. Steel’s workers, Nippon will move its American headquarters to Pittsburgh.
Third, Biden’s opposition to the Nippon deal allows him to prop up his campaign trail image as the biggest trust-buster since Teddy Roosevelt. In April, the Department of Justice opened an antitrust probe into the Nippon deal. Ironically, blocking the Nippon deal would create more antitrust concerns than it would solve.
Biden has repeatedly stressed his desire to keep U.S. Steel under American ownership, which would mean a sale to Ohio-based Cleveland-Cliffs at a price point far lower than Nippon’s offer. But if Cleveland-Cliffs buys U.S. Steel, it would bring 95% of American iron ore production under the control of the new entity.
Instead of following the political winds, Biden should follow the facts. Nippon is not buying U.S. Steel to strip it for parts — the company already operates eight steel mills in the United States. Rather, the company plans to reinvigorate U.S. Steel with new technology that will ramp up domestic steel manufacturing. To fund this, Nippon has pledged $1.4 billion in additional capital if the deal is approved, amounting to a $64,211 investment in each U.S. Steel worker.
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Biden can only block the deal if the Committee on Foreign Investment in the United States recommends that blocking action on national security grounds. There is no case for such a recommendation.
When announcing his opposition to the Nippon deal, Biden said that he would triple tariffs on Chinese steel. Biden should look at the facts and understand that the best way to strengthen the American steel industry is by allowing the Nippon deal to proceed. Short of that, Biden should allow CFIUS to review the deal on its merits without political meddling.
Tom Hebert is Director of Competition and Regulatory Policy at Americans for Tax Reform and executive director of the Open Competition Center.
