- U.S. Steel shares surge 16% following Trump’s review order, continuing 3% pre-market gains
- 45-day CFIUS probe to assess foreign ownership risks in critical infrastructure
- Biden and Trump align against deal amid Pennsylvania swing state pressures
- Nippon Steel files lawsuit challenging presidential authority to block mergers
The proposed acquisition of U.S. Steel by Japan’s Nippon Steel has become a geopolitical lightning rod, with President Trump ordering a fresh Committee on Foreign Investment (CFIUS) review days after shares surged nearly 20%. This marks the second White House intervention since President Biden blocked the deal in January 2024, citing unresolved labor concerns from the United Steelworkers union.
Industry analysts note the $14.8 billion transaction represents the largest attempted foreign purchase of a U.S. industrial manufacturer since 2018. Unlike typical merger reviews focusing on antitrust issues, this evaluation centers on whether Japanese ownership could compromise domestic production capacity for military-grade materials. The Department of Defense reportedly raised alarms about specialized alloys used in naval shipbuilding.
Pennsylvania’s role as a presidential bellwether adds complexity. U.S. Steel employs over 4,200 workers in the Mon Valley Works near Pittsburgh – a region that swung Republican in 2016 before flipping back to Democrats in 2020. Both campaigns now face pressure to protect union jobs while avoiding perceptions of anti-investment sentiment. A regional case study shows similar tensions during the 2017 sale of Armstrong Flooring to Chinese firm TOLI Corporation, which ultimately preserved 82% of local jobs through renegotiated collective bargaining agreements.
Three critical industry insights emerge from the stalemate:
- Post-pandemic supply chain reforms prioritize domestic ownership of materials supporting 5G infrastructure and renewable energy systems
- Labor unions now influence 38% of large-scale manufacturing mergers through contract retention clauses
- Swing state economic policies increasingly drive federal merger approvals ahead of election cycles
Legal experts question the viability of Nippon Steel’s federal lawsuit against Biden’s executive order. The 1988 Exon-Florio Amendment grants presidents broad authority to suspend foreign acquisitions threatening national security, though courts have never definitively ruled on challenges to this power. Nippon’s attorneys argue the administration failed to demonstrate material risks beyond speculative employment concerns.
Market reactions suggest investors anticipate a negotiated compromise. U.S. Steel’s stock remains 12% below Nippon’s $55/share offer price, indicating lingering doubts about deal approval. CFIUS may propose mitigation measures like creating a U.S.-controlled subsidiary to manage defense contracts or requiring minimum domestic production quotas – strategies recently applied to Chinese-owned TikTok’s operations.
The Pittsburgh Post-Gazette reports at least three alternative suitors have expressed interest in acquiring U.S. Steel assets should the Nippon deal collapse. However, none possess the Japanese firm’s capitalization reserves to modernize the 122-year-old company’s aging blast furnaces. This modernization dilemma underscores broader challenges facing legacy U.S. manufacturers competing against foreign entities with lower capital costs.