The most telling moment in the Biden Administration’s decision to block Nippon Steel Corp.’s attempted takeover of United States Steel Corp. was unintentional.
In the executive order preventing the deal on spurious national security grounds, staffers for President Joe Biden appeared to accidentally copy-and-paste the title of a previous presidential order — one ordering a Chinese crypto mining company to vacate property near an Air Force base. The left the Nippon Steel directive entitled: “Regarding the acquisition of certain real property of Cheyenne leads by MineOne Cloud Computing Investment.”
It sums up what many in Japan will be thinking of the administration’s baffling rejection of the deal — that as far as the US is concerned, Japan and China might be one and the same, with policy merely copied from one to the other. There’s certainly little else to justify the Biden’s administration treating not just a supposed friend, but perhaps its most vital ally the same as it would a stated adversary.
This rejection was expected: Biden had made no secret of his opposition to the deal. With the presidential election lost and no more votes to be courted, there was still some hope that he might have a change of heart, just as he did with the presidential pardon of his son Hunter. But that was always a long shot.
Don’t get me wrong: There are lots of reasons to dislike this deal. Speaking strictly for Nippon Steel, Biden’s decision might be a blessing in disguise. I wrote last year that the takeover has the whiff of past Japanese purchases of storied US firms, with an underprepared buyer who is overpaying, unable to exert oversight and forced to beat a hasty retreat.
That Nippon Steel thought it could get the deal done in an election year suggests that it isn’t prepared to deal with the murky realities of doing business in the US. The company is now on the hook for a puzzling $565 million breakup fee for a takeover that never looked likely to happen.
Even with those concerns, however, it was still shocking to see the reason for Biden’s opposition put so starkly: That the US president believes he possesses “credible evidence” that Nippon Steel “might take action that threatens to impair the national security” of the US. It’s extraordinary, incendiary language to use to refer to a supposed friend.
The evidence, of course, is nowhere to be seen. The secretive Committee on Foreign Investment in the United States panel had reportedly found no security risks from the deal; instead the opposition came from the US trade representative. Many within the Biden administration, including Secretary of State Antony Blinken and deputy Kurt Campbell, along with Ambassador to Japan Rahm Emanuel, were among those reported to have urged Biden to reconsider.
Both firms said Monday they had filed a lawsuit challenging the decision. Prime Minister Shigeru Ishiba encouraged Washington to explain the supposed security risks, while his trade minister Yoji Muto called the rejection “incomprehensible.” Tokyo has been going along with US export controls on China, which are more damaging for Japanese interests than American ones: Beijing has threatened retaliation, including limiting access to critical minerals. Yet when it comes down to naked political interests, it seems Japan is expendable. What national security risk could there possibly be from a country that houses more than 50,000 US troops and is dependent on America to guarantee its defense?
It’s an insult that won’t soon be forgotten. Worse, the rejection will provide some with evidence of the truth of the words of Chinese Foreign Minister Wang Yi, who attracted controversy in 2023 for saying that “Americans take all visitors from China, South Korea and Japan as Asians. They cannot tell the difference.”
The racially tinged remarks were unpleasant. Spoken at a trilateral forum with Japan and South Korea, it was clear that they were aimed at driving a wedge between the two Asian democracies and their security backer in Washington. Biden is now doing Wang’s job for him.
And with Donald Trump set to return to the White House and South Korea likely to have a more China-friendly leader within months, it could not have come at a worse time.
Ishiba has danced around how close he wants to be to China. But it’s clear from both his writings and those of his advisers that he could at least be described as China-curious. It seems he would prefer Japan to be positioned somewhere more central between Washington and Beijing, rather than moving in lockstep with the US as Tokyo was under his predecessor. Foreign Minister Takeshi Iwaya’s trip to China last month yielded all kinds of warm language and reciprocal deals, showing that Beijing is smart enough to realize the opportunity, now that the most right-leaning voices in Japan’s ruling party have been muted.
It’s an ignominious closing act in a bilateral relationship that Biden did so much to promote. And ironically enough, it leaves one way forward for the deal: for Trump to have one of his trademark changes of heart over his opposition to the takeover. In one fell swoop, he would boost investment, secure US jobs and tweak Biden’s nose — all while improving ties with Tokyo at little cost to himself.
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