When President Donald Trump sits down with Japanese Prime Minister Shigeru Ishiba tomorrow, he has an opportunity to quickly reverse one of the biggest policy disappointments of the Biden administration, and put the proposed acquisition of U.S. Steel by Nippon Steel back in play. In less than three weeks, Trump has taken major — and controversial — action on foreign policy: dispatching Marco Rubio on his first trip as secretary of state to convey his threats to Panama over the canal; levying tariffs against the two closest U.S. trading partners and neighbors, then suspending them for 30 days, while keeping in place new tariffs against China; and dismantling the 10,000-strong U.S. Agency for International Development (USAID). Amidst this Bannonesque “muzzle velocity” juggernaut, reopening the Nippon Steel deal provides a significant opportunity to secure the best deal possible for U.S. competition against China in a critical national security area.
As a former appointee in the Biden administration (in USAID, no less), I take no pride in admitting that President Joe Biden’s decision to block the deal during his final days in office on national security grounds was a problematic one with enormous ramifications for the domestic steel industry, as well as for U.S. allies and adversaries. The move reportedly contradicted the recommendations of some of his Cabinet secretaries, who voiced their support of the acquisition in the Committee on Foreign Investment in the United States (CFIUS) on fears of alienating Japan, a key ally. Biden apparently stuck with his instincts to support domestically owned production capacity and to heed labor unions that feared job losses with such a deal.
Just as the United States seeks to build strong military-security partnerships to address the global challenges posed by China, it also should encourage allied foreign investments that can strengthen core industrial capacity in the face of economic-security challenges. Just as with Trump’s encouragement of foreign investment for the critical artificial intelligence sector – including Japan’s Softbank in the Stargate initiative to build more AI infrastructure – the new president should seek economic partnerships that benefit domestic steel capacity.
There is perhaps no better way to do so than with Nippon Steel, the fourth-largest steelmaker in the world and the biggest in Japan. Tokyo is one of Washington’s most important – if not the most important – allies in the world today, given the U.S.-China competition. When the late U.S. Ambassador to Japan Mike Mansfield characterized the alliance as the most important bilateral relationship for the United States “bar none” in the early 1980s, the current era of great power strategic competition with China was still off in the distance. But the wisdom of his words — and the need for ever-closer economic partnership between the United States and Japan — is more critical now than ever. The decades ahead will be determined as much by geoeconomic power as geostrategic power, and encouraging Japanese investment and a strong allied partnership of economic statecraft, including in domestic steel production, is an investment not just in U.S. jobs, but in national security.
Even as the world is increasingly dominated by silicon and artificial intelligence, there are stubborn reminders — from Ukraine to the Taiwan Strait — that history is far from over, and that industrial steel production remains a vital source of national power and a wellspring for American jobs and resilient communities. Yet today the United States produces barely a 10th of the steel production of China.
Chinese dominance in global steel production — driven by state-sponsored enterprises and resulting in overcapacity and depressed prices — exacerbates U.S. national security concerns. Beijing’s use of trade cheats and non-market policies, which are not compliant with the World Trade Organization, prevent U.S. steel producers from competing on a level playing field. China is actively using economic statecraft to erode this vital national security capacity.
This is exactly the kind of trade imbalance with China that Trump is aiming to address. If not averted soon, it will continue to threaten U.S. plant closures and job losses. The proposed merger between U.S Steel and Nippon Steel offers the right solution.
Starting with the needs of America’s defense industrial base and the production of military materiel (tanks, ship, aircraft), there is no question that U.S. national security requires resilient domestic steel production capacity. But the future of the U.S. steel industry — and that of U.S. national security — isn’t an abstract question. It is a question of seizing the best tangible deal that can safeguard American jobs and communities, as well as fortify national security in the face of increasingly intense competition from China. And this deal, as the CEO of U.S. Steel has said, assures the future of domestic steel production is “mined, melted and made in America.”
The TikTok saga tells us everything we need to know about Trump’s willingness to reopen, reconsider, and renegotiate deals. Given the grave and very real national security concerns, if TikTok gets to enjoy a second chance after a government rejection — and I am not saying it should — and then receives approval from CFIUS later on, it is difficult to argue that Nippon Steel — a company from Japan, a major U.S. ally — should be any different. Even better, Trump does not need to go through the hassle of arranging a new deal here. A good deal for domestic manufacturing and national security is sitting right in front of him; all he needs to do is reverse his predecessor’s decision and approve it.
As a former official in the predecessor administration, I don’t agree with much of what Trump has done in the first days of his term. However, he has an opportunity to bolster the U.S. relationship with one of its most important allies and strengthen its competitive posture in relation to China in one fell swoop. I hope Trump has the courage to swiftly reverse Biden’s decision and position the United States in this critical sector for the challenges of strategic competition in the years ahead.