President Joe Biden decided to block the $14 billion takeover of US Steel by Japan’s Nippon Steel even though some top US officials did not believe there were sufficient national security grounds to kill the deal, a US official told CNN.
The controversial decision to block the US Steel deal has won praise from union officials but faced fierce criticism inside and outside the administration.
US Steel and Nippon Steel alleged in a Monday lawsuit that the process was driven by politics, not national security concerns.
Even though the US Steel takeover offer was from a company based in Japan – a major US ally – like all foreign acquisitions, it faced an intense review from the Committee on Foreign Investment in the United States (CFIUS), a powerful but secretive interagency panel.
However, CFIUS failed to reach a decision about whether the deal posed a national security risk, leaving the decision to the president.
Multiple prominent CFIUS members believed that any national security risk could be mitigated and that there were insufficient grounds to block the deal, including Treasury Secretary Janet Yellen, Defense Secretary Lloyd Austin and Secretary of State Antony Blinken, the US official said.
The presence of those officials in the camp against blocking the deal is notable because Yellen chairs CFIUS and Austin would have insight into whether the US defense industrial base would be threatened by this proposed foreign takeover.
However, other CFIUS members were opposed on national security grounds, including US Trade Representative Katherine Tai, two sources familiar with the CFIUS process told CNN. Officials at the US Energy Department and Commerce Department also had concerns about the deal, one of the sources said.
The Department of Defense referred CNN to the White House. None of the US agencies involved in CFIUS’s decision would comment to CNN on the private deliberations.
Biden specifically cited national security and the importance of a strong domestic steel industry in his statement explaining the decision on Friday.
“This acquisition would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains,” Biden said.
The Washington Post and Wall Street Journal previously reported that Biden rejected appeals of several top advisers in deciding to tank the deal.
“Bad decision,” one senior administration official told CNN’s Kayla Tausche. “Doesn’t actually protect union jobs and may kill the company.”
Another US official told CNN that there are significant frustrations among Biden officials about how the process played out and concerns about the signal it sends about foreign direct investment in the United States.
After all, this foreign takeover was not from a rival nation such as China or Russia, it was from longtime US ally Japan.
“Never before has a President prohibited an acquisition by a company based in Japan, one of our closest allies,” US Steel and Nippon Steel argued in the lawsuit.
Jason Furman, a top economic official during the Obama administration, blasted the decision to use national security to kill the deal.
“President Biden claiming Japan’s investment in an American steel company is a threat to national security is a pathetic and craven cave to special interests that will make America less prosperous and safe,” Furman, who is now a professor at Harvard University and a senior adviser at an Asia-focused consulting firm, wrote in an X post on Friday. “I’m sorry to see him betraying our allies while abusing the law.”
The White House defended the decision in a statement on Monday in response to the lawsuit filed by US Steel and Nippon Steel.
“A committee of national security and trade experts determined this acquisition would create risk for American national security,” White House spokesperson Robyn Patterson said in a statement. “President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains.”
Michael Leiter, who leads the CFIUS and national security practices at law firm Skadden, told CNN in an email that the disagreement among US agencies shows how, like many national security issues, “this wasn’t an easy issue, and there were competing interests.”
“The presence and sufficiency of national security risk is in the eye of the beholder—and under CFIUS the only eye that matters is the President’s,” he said.
Leiter does not believe the US Steel deal will ultimately hurt foreign investment into the United States, the world’s largest economy.
“For those of us who handle billions of dollars of transactions a year,” he said, “we know that this was an outlier. This case will neither have significant precedential value, nor will it so poison the CFIUS well.”
Opposition to the US Steel takeover was bipartisan, including multiple Rust Belt lawmakers from both sides of the aisle.
Both Vice President Kamala Harris and President-elect Donald Trump opposed the deal during the presidential campaign, as did Vice President-elect JD Vance.
Union officials praised Biden’s decision to block the merger.
“We have no doubt that it’s the right move for our members and our national security,” United Steelworkers International President David McCall said in a statement.
