Will the Nippon Steel acquisition be finalized after the US election? The US uses "national security" to warn its allies

Multiple media outlets quoted people familiar with the matter on the 17th as saying that the U.S. security review of Japanese steel giant Nippon Steel's plan to acquire U.S. Steel for more than $14 billion will be postponed, and a decision on the controversial deal may be made after the U.S. election in November.

The news has not been officially confirmed. A White House spokesman said there was no so-called "delay" and no recommendations had been received from the US Foreign Investment Committee.

At the end of last month, CFIUS said that the proposed transaction threatened US national security, and the two parties in the United States also said "no" to the transaction in order to win the support of labor unions in the election year. If the new information is confirmed, it will bring a glimmer of hope for the acquisition.

Analysts pointed out that the US has a clear tendency to politicize commercial issues. Coupled with the election year factor, this acquisition is particularly politically charged. In the long run, this will also have a certain impact on the US-Japan alliance.

Founded in 1901 and headquartered in Pittsburgh, Pennsylvania, U.S. Steel played a vital role in the industrialization of the United States in the 20th century. However, in recent years, U.S. Steel has continued to lose money, and its steel production and market value are far behind other similar American companies, so it had to announce the sale.

In December last year, Nippon Steel announced plans to spend 2 trillion yen to acquire U.S. Steel. Nippon Steel is the world's fourth largest steelmaker. The company has said that its advanced production technology will improve the operations of U.S. Steel, while promising to keep the name and brand of U.S. Steel unchanged, retain its Pittsburgh headquarters and production facilities, so that its products can continue to be produced in the United States, and will introduce new resources to promote employment.

Some US analysts are optimistic about the benefits of the deal. Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, believes that Nippon Steel's technology is superior to US Steel's and the acquisition will improve the latter's long-term development prospects and mean more job opportunities.

However, the acquisition plan was strongly opposed by the United Steelworkers Union and the Democratic and Republican parties in the United States. Democratic and Republican presidential candidates Harris and Trump also expressed opposition to the deal.

The United Steelworkers Union of America opposed the deal for several reasons: First, steel is related to national security, and the acquisition of steel mills by Japanese companies is not good for the United States. Second, the deal was not notified to the American unions in advance, violating the cooperation agreement between the unions and the companies. Therefore, the unions doubted whether the acquired companies would be able to fulfill the existing labor contracts, including a series of issues such as benefits.

Both parties in the US have also blocked the acquisition in the name of "national security". Trump said that if he wins the election, he will stop the deal and must "take back the manufacturing industry". Harris insisted that US Steel "should be owned and operated by the United States".

In addition, CFIUS stepped in to review the impact of the matter on "national security." The agency said the proposed transaction could harm the supply of steel needed for key industries such as transportation and infrastructure.

Just when the outside world thought that the deal was almost going to fall through, new news brought an unexpected turn to the acquisition.

CFIUS has allowed Nippon Steel to resubmit its application to acquire U.S. Steel Corp., according to people familiar with the matter. The decision will give the two steelmakers an additional three months to convince the U.S. federal government.

The people also said that given CFIUS’s concern about the national security challenges posed by the acquisition, it is expected to take most of the three months to make a decision and continue negotiations with the two companies.

Some people familiar with the postponement decision speculated that there may be several reasons for the postponement.

First, the deal has become a political hot potato, and both parties in the United States have serious concerns about "national security", so the two companies asked for more time to resolve these issues. In previous complex cases, it is common for companies to resubmit applications for approval.

Second, both the United States and Japan are facing heavy domestic and foreign affairs agendas recently. The United States will hold a general election in less than 50 days, Japan will hold a Liberal Democratic Party presidential election next week, and Japanese Prime Minister Fumio Kishida will also visit the United States this weekend. Extending the review period will help ease the pressure on both sides and leave the thorny issues until after the US election is settled.

According to relevant sources, JR will withdraw its application by the 23rd at the latest and resubmit it.

However, in response to the news of the "delay", White House spokesperson Saloni Sharma said in a statement that Biden and Harris still insist that U.S. Steel will be a company owned and operated by the United States. "There is no so-called 'delay', and we have not received any advice from CFIUS."

The twists and turns in Nippon Steel's acquisition of U.S. Steel highlight the interference of U.S. political factors in the market.

Pennsylvania, where U.S. Steel's headquarters is located, is a key swing state in this year's U.S. presidential election. The votes of members of the United Steelworkers are what presidential candidates from both parties want to compete for.

Analysts pointed out that since the United Steelworkers Union insisted on its opposition, the Biden administration obstructed the acquisition plan in order to cater to voters before the election to fight against Trump, and the prospects for whether the transaction can be finally reached are unclear.

Timna Tanners, an analyst at market research firm Wolfe Research, warned that this political manipulation by the United States could harm foreign investment in the United States, hinder U.S. overseas investment, and undermine the U.S.-Japan alliance.

Tanners said, "In the past few decades, there have been many cases like Nippon Steel's attempt to acquire U.S. Steel. It's just that this year coincides with the U.S. election, and this acquisition is particularly political. In order to gain the support of local unions, Biden, Trump and others chose to maintain a united front with them. In the long run, this will also have a certain impact on the U.S.-Japan alliance."

Observers pointed out that although the two countries are allies, the US-Japan relationship is not equal in essence. This acquisition also exposed some differences between the two sides, which will have a certain impact on the US-Japan relationship. However, Japan is the "vanguard" of the US to implement the "Indo-Pacific Strategy" and confront China. It is not ruled out that the US government will consider making a balance of interests in the future to win over and appease Japan.