Growing bipartisan opposition to US Steel purchase by Japanese might not be enough to block deal

By Matt Egan and Chris Isidore, CNN

New York (CNN) — Bipartisan opposition is growing to the proposed $14.1 billion acquisition of US Steel by Japan’s largest steelmaker, but that is unlikely to be enough to block the purchase, according to an expert in foreign investment deals.

A trio of Republican senators Tuesday called for a panel of US officials to block Nippon Steel’s takeover of US Steel due to national security concerns.

Sens. JD Vance, Josh Hawley and Marco Rubio wrote Treasury Secretary Janet Yellen a letter on Tuesday warning the US Steel deal has “dire implications for the industrial base of the United States” and “was not entered into with US national security in mind.”

Yellen chairs the Committee on Foreign Investment in the United States (CFIUS), an interagency panel empowered to review transactions involving foreign investment in America to determine the impact on national security. CFIUS members include the heads of the Department of Defense, State, Homeland Security and Justice.

CFIUS “can and should block the acquisition of US Steel by NSC, a company whose allegiances clearly lie with a foreign state and whose record in the United States is deeply flawed,” Vance, Hawley and Rubio said. They argued CFIUS should launch a review of the deal unilaterally, especially because US Steel received competitive bids from American companies.

The lawmakers note that domestic steel production is “vital to US national security” and cited steps taken by Republican and Democratic administrations to bolster the steel industry. Vance is the junior senator from Ohio, while Hawley and Rubio represent Missouri and Florida, respectively.

“Allowing foreign companies to buy out American companies and enjoy our trade protections subverts the very purpose for which those protections were put in place,” the Republican lawmakers wrote.

Vance, Hawley and Rubio cautioned that Nippon Steel “does not share US Steel’s storied connection to the United States and its financial interests are tied to those of Japan.” The lawmakers note that Nippon has previously been found guilty of unlawfully dumping flat-rolled steel products in the United States.

Ohio’s other senator, Democrat Sherrod Brown, also issued a statement Monday opposing the deal.

“A foreign company should not be able to swoop in, ignore the voices of union workers, and buy a major American steel manufacturer behind closed doors,” said Brown, who faces reelection in 2024. “Nippon and US Steel have insulted American steelworkers by refusing to give them a seat at the table and raised grave concerns about their commitment to the future of the American steel industry.”

Brown said that if US Steel is going to be sold, it should be purchased by Ohio-based Cleveland Cliffs, which had the support of the United Steelworkers union in its failed effort earlier this year to buy US Steel.

Sen. Joe Manchin, the West Virginia Democrat who is not seeking reelection but is still considering an independent campaign for president, also attacked the sale of the company to a foreign rival.

“This is a major blow to the American steel industry which has been instrumental in making us the superpower of the world and a direct threat to our national security,” he said in a statement Tuesday. “At a time when domestic manufacturing – including in the US steel market – is facing increased competition from unfair trade, we must be doing everything we can to prevent any further deterioration of American ownership

Sen. John Fetterman, a Pennsylvania Democrat, also decried the proposed sale.

“It’s absolutely outrageous that US Steel has agreed to sell themselves to a foreign company,” Fetterman said Monday in a statement. “Steel is always about security – both our national security and the economic security of our steel communities. I am committed to doing anything I can do, using my platform and my position, to block this foreign sale.”

And the United Steelworkers union is also on record opposing the deal.

The proposed deal “demonstrates the same greedy, shortsighted attitude that has guided US Steel for far too long,” said USW President David McCall. “We remained open throughout this process to working with US Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company.”

Blocking deal still is ‘quite unlikely’

Despite the growing political opposition to the deal from politicians and the United Steelworkers union, it is unlikely that CFIUS would block the deal by a close US ally such as Japan, said Michael Leiter, head of the CFIUS and national security practices at law firm Skadden, Arps.

“This has never happened before for a Japanese buyer of a US business – even in the height of US-Japan trade tensions in the 1980s and 1990s – and it seems quite unlikely that it would do so here,” he told CNN.

No matter the recommendation of CFIUS, the final decision rests with the president, Leiter said. Even with the political pressure from the both parties and the importance of Ohio and Pennsylvania in next year’s election, Leiter doesn’t think Biden would act to block the deal.

“Were President Biden to reject the deal this would immediately create a significant issue with our Japanese allies given the importance of collaboration on other critical issues such as China and semiconductor production and supply chains,” he said.

Asked about the proposed deal at Tuesday’s White House press briefing, White House Press Secretary Karine Jean-Pierre declined to specifically comment on the acquisition because of the fact that deal “could potentially be a regulatory review.”

The president supports “protecting American manufacturing that supports family sustaining union jobs,” she said, adding he “is committed to competition, because he knows competition means lower costs for consumers and higher wages for workers.”

Representatives from US Steel did not respond to requests for comment on the letter or Brown and Fetterman’s objections. Treasury declined to comment.

US Steel officials touted the deal on Monday, arguing it’s in the best interest of all parties, including the United States. And they said they are confident it will be able to win regulatory approval.

Although US Steel was once the world’s most valuable company, it has been in decline for decades along with the broader domestic steel industry

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