Every decade presents at least one occasion for a serious evaluation of the state of US-Japan economic relations. Bruce Aronson writes that the tortured course of Nippon Steel’s acquisition of U.S. Steel and highly unusual terms imposed by President Trump, together with the recent imposition of high tariffs on Japanese exports and renewed demands that Japan contribute more to the cost of stationing American troops, prompt such an evaluation now.
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Aug. 2023: U.S. Steel announces it has received multiple unsolicited bids. A domestic rival, Cleveland-Cliffs Inc., announces it has made a $7.25 billion offer for 100 percent of U.S. Steel.
Dec. 2023: A strategic review by U.S. Steel’s management produces a bid from Nippon Steel that is roughly twice as high at $14.1 billion plus $800 million assumption of debt.
Dec. 18, 2023: Nippon Steel and U.S. Steel reach agreement on the sale of U.S. Steel. Nippon Steel pledges to keep U.S. Steel’s name, US-based production, and Pittsburgh headquarters; to invest $1.4 billion in old plants; and to comply with existing labor contracts.
March 14, 2024: President Biden says that US Steel should stay in American hands. The same day, he reportedly calls David McCall, president of the United Steelworkers union, to say that he “has the steelworkers’ back.” One week later the union announces its endorsement of President Biden in the 2024 presidential election. This follows an earlier statement by presidential candidate Donald Trump in January that he would “absolutely” block the deal if elected.
April 12, 2024: Ninety-eight percent of U.S. Steel shares voted are in favor of the transaction.
Aug. 31, 2024: CFIUS reportedly sends a letter to the two parties stating that the proposed transaction poses a risk to national security by threating the supply chain of steel for critical US industries (see “US fears Nippon bid for U.S. Steel could hit vital steel supplies”). Nippon Steel and US Steel reportedly submit a response to CFIUS refuting its arguments (see “Nippon Steel rebuts CFIUS's case against its bid for US Steel-letter”).
Sept. 4, 2024: US Steel CEO David Burritt warns that there may be plant closings and company headquarters may move away from Pittsburgh if the deal does not go through.
Sept. 18, 2024: CFIUS permits the two parties to revise and refile their response to the commission. This begins a new 90-day period for CFIUS to make a recommendation on the transaction – ending after the presidential election.
Nov. 20, 2024: Japan’s Prime Minister Ishiba reportedly sends a letter directly to President Joe Biden requesting US government approval of the deal (see “Japan PM Ishiba urges Biden to approve Nippon-US Steel deal, sources say”).
Nov. 22, 2024: Four House Republicans reportedly send a letter to the secretaries of Treasury and Commerce expressing “serious concerns” that political considerations tainted the CFIUS process in this case, and demanding the preservation of records for any future investigation (see US Steel Review Targeted by Republicans for Potential Probe).
Dec. 23, 2024: Upon expiration of the deadline for CFIUS review, the inter-agency committee fails to reach internal agreement. It sends a letter to the White House and the parties saying it is not making any recommendation and refers the decision to President Biden (see National Security Committee Forgoes Decision on U.S. Steel Acquisition).
Jan. 3, 2025: President Biden blocks the proposed acquisition on national security grounds.
Jan. 6, 2025: Nippon Steel and U.S. Steel file lawsuits contesting President Biden’s decision with the US Court of Appeals for the District of Columbia. The plaintiffs allege that the negative outcome was predetermined based on political considerations, violating their right to due process.
Feb. 7, 2025: In a press conference during Japanese Prime Minister Ishiba’s visit to Washington, D.C., President Trump says he will support Nippon Steel investing in but not outright buying U.S. Steel. Subsequent press reports in Tokyo state that Nippon Steel is only interested in a full purchase.
April 7, 2025: President Trump orders CFIUS to conduct a de novo review of the national security implications of Nippon Steel’s proposed acquisition of US Steel. CFIUS’s report is due in 45 days.
May 20, 2025: News reports say Nippon Steel dramatically raised its pledge of additional investment in U.S. Steel to a total of $14 billion on top of the $14.9 billion purchase price in an effort to obtain approval for the transaction.
May 21, 2025: CFIUS completes its de novo review and submits confidential recommendations to the White House.
May 22, 2025: President Trump meets with a group of Pennsylvania leaders. The following day, he announces on social media a “partnership” between Nippon Steel and U.S. Steel. No terms are disclosed, but the president says that U.S. Steel will be “controlled by the United States”; one participant in the meeting says the US government will receive a “golden share.”
May 30, 2025: On a visit to a U.S. Steel plant near Pittsburgh, President Trump announces that sector tariffs on steel and aluminum will be raised from 25 percent to 50 percent effective June 4, which will aid the domestic steel business and its workers. Trump says that Nippon Steel is making a very big investment, but that he still needs to approve the final terms of the deal.
June 5, 2025: The 14-day deadline for action based on the results of CFIUS’ de novo review is reached.
June 13, 2025: The White House issues an Executive Order declaring that the proposed transaction presents a national security risk, which can be adequately mitigated by attaching conditions. Nippon Steel is required to enter into a national security agreement with the US government that is materially consistent with a draft sent by the US government to the parties on June 13.
On the same day, Nippon Steel and U.S. Steel announce that the US government approved their “partnership” and that the two parties have entered into a national security agreement with the US government. This agreement provides for new investment of $11 billion by 2028 (and additional investment in a greenfield project after 2028), and commitments related to governance (including a “golden share” held by the US government), domestic production, and trade.
June 18, 2025: Nippon Steel closes on its purchase of 100% of U.S. Steel, paying $55 per share for a total price of $14.2 billion. (See Nippon Steel completes takeover of U.S. Steel in $14.2 billion deal.) U.S. Steel shares stop trading on the New York Stock Exchange after the company becomes a wholly owned subsidiary of Nippon Steel North America. (See U.S. Steel ceases trading on the NYSE as Japan’s Nippon finalizes takeover.)
Suggested citation:
“Timeline of Nippon Steel Acquiring U.S. Steel,” USALI East-West Studies, 3, No. 2, July 8, 2025, https://usali.org/nippon-steel/timeline.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
President Donald Trump’s proposal to allow Nippon Steel to invest in U.S. Steel could produce a genuine victory out of the embarrassing saga of the past year. Andrew McDermott, a long-term investor in Japan, says the key question in any new deal will be whether the terms allow Nippon Steel to deploy its management strengths and show Americans the path back to their manufacturing glory days. For this, we need to once again value real engineering over financial engineering.
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By Paul Sheard
Paul Sheard, a former vice chairman of S&P Global, serves on the board of the Foreign Policy Association and is a member of the Council on Foreign Relations. He wrote this essay in early 2025 when the fate of the transaction remained uncertain.
It is hard to give credence to the argument that Nippon Steel’s attempted purchase of U.S. Steel constitutes a threat to US national security.
“Iron is the country.” “Tetsu wa kokka nari.” That is what Japan’s first prime minister, Prince Ito Hirobumi, said in 1901, channeling nineteenth century German statesman Otto von Bismarck, when the first blast furnace of Yahata Steel Works, Nippon Steel’s main antecedent company, was fired up. But that hardly applies to the United States and its iron and steel sector today. The manufacturing share of total employment in the US was 33 percent at the end of World War II, but is now down to eight percent. Within manufacturing, the employment share of the iron and steel sector has fallen, too, and is now less than one percent.
From a national security viewpoint, the inordinate attention paid to Nippon Steel’s bid to take over – and in the reckoning of both companies, attempt to revive the fortunes of – U.S. Steel appears anachronistic. The US is the world’s military superpower; it spends more on the military than the next nine countries combined. If any country has unassailable national security, it is the US. Could a relatively small M&A transaction among friends really threaten that?
In the 124 years since Prince Ito hailed the birth of Japan’s steel industry, modern economies have become information-intensive and service-oriented, driven more by silicon than steel. The five largest companies by market capitalization in the S&P 500 index are all, one way or another, digital companies (Apple, Microsoft, Nvidia, Amazon, and Alphabet), which together make up more than a quarter of the index. A stunning fact is that there is only one “old economy” company among the top 25, that being Exxon Mobil, a descendant of Standard Oil. Threats to national security these days are much more likely to emanate from cyberspace than factory production lines.
From a national security viewpoint, the inordinate attention paid to Nippon Steel’s bid to take over U.S. Steel appears anachronistic.
When foreign capital buys domestic assets, the assets don’t go out of the country – capital comes in. When a foreign firm buys a predominantly bricks-and-mortar domestic firm, it cannot pick up the physical assets and take them home, depriving the country of its precious productive capacity. It brings capital, management, and technological and operational know-how into the country, to the country’s manifest benefit.
How could the foreign takeover of a domestic manufacturer conceivably threaten national security? Two possibilities suggest themselves. Neither of them applies to the Nippon Steel/U.S. Steel case.
One would be if the firm being acquired was a supplier of critical inputs to the military industrial base and the acquiring firm intended to restrict that supply or even eliminate it. Steel is a critical input to the US military industrial base, but that does not mean the output of every single domestic or overseas supplier is a critical input. There is plenty of steel in the world and the market for steel is a highly competitive one. More to the point, unless it has predatory intent – a non sequitur in a competitive market – it can be presumed that the acquiring firm will want to expand its output and market share; otherwise, it wouldn’t be investing billions of dollars. In general, and particularly among allies, economic incentives are aligned with national security ones.
There is plenty of steel in the world and the market for steel is a highly competitive one.
Another way in which a foreign takeover conceivably could threaten national security would be if the firm being acquired possessed critical technology, which would then flow to the foreign firm. This is hardly the case here. U.S. Steel is a technologically lagging company in a mature industry, not a Silicon Valley start-up boasting a transformative technology. One measure of that fact is U.S. Steel’s stock market capitalization: at $9.74 billion, it is a mere 0.4 percent of Nvidia’s, a new economy upstart. Nippon Steel is the No. 4 producer of steel in the world and U.S. Steel is the No. 24. The flow of technological know-how will be overwhelmingly from the former to the latter. Transferring its technological, operating, and managerial know-how to the acquired firm is one of the principal ways that direct foreign investment yields financial returns for the acquiring firm, particularly when it takes the form of equity ownership.
The national security argument against Nippon Steel’s acquisition of U.S. Steel becomes even more shaky when the nature of the security alliance between the US and Japan is considered. The Treaty of Mutual Cooperation and Security between the United States of America and Japan has been the cornerstone of a strong alliance between the two countries since it was signed 65 years ago. While its language may be nuanced, the import of the treaty is that the US underwrites Japan’s security and defense. The treaty grants the US the use of designated land and facilities in Japan for its land, air, and naval forces. As of September 2023, the US had 53,246 active-duty troops in Japan, representing the US’s biggest single overseas military presence and about one-third of all US overseas troops. What sense does it make for the US to invoke national security concerns to stop Nippon Steel from buying U.S. Steel when it commits so much to Japan’s defense? The Japanese could be forgiven for feeling a tad insulted: Are we allies or not? We entrust our national defense significantly to you but you treat our proposal to buy a stake in your steel industry as a threat to your national security!
What better expression could there be of the strong national security ties between the US and Japan than for the best-known steel companies of each nation to become one?
Suggested citation:
Paul Sheard, “The National Security Arguments about Nippon Steel Don’t Survive Scrutiny,” USALI East-West Studies, 3, No.5, July 8, 2025, https://usali.org/nippon-steel/the-national-security-arguments-about-nippon-steel-dont-survive-scrutiny.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
President Joe Biden’s decision to block Nippon Steel’s proposed acquisition of U.S. Steel was criticized as a bid for union support in an election year. Based on information that has come out in subsequent litigation, we now know that the committee charged with reviewing the transaction did identify national security concerns that were rooted in factors unique to the global steel market and Nippon Steel.
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Masanori Bito
By Masakazu Iwakura & Masanori Bito
Masakazu Iwakura (senior partner) and Masanori Bito (partner) are Japanese attorneys at the law firm TMI Associates, where they lead the M&A practice. They finalized this essay as the transaction itself finalized.
Masakazu Iwakura
The corporate strategy driving Nippon Steel’s acquisition of U.S. Steel has been to shake off the limits of its home market and grow as a global player. This case highlights important new challenges faced by Japanese acquirers in the US that have not previously received much attention.
As is widely recognized, leading Japanese companies cannot retreat from international expansion. They depend on overseas growth, including overseas M&A, given the shrinking Japanese market and decline in Japan’s population. Japanese companies seeking significant cross-border mergers and acquisitions in today’s increasingly regulated global market must plan and prepare for a wider range of risks and challenges than in the past, including demands for harsher deal terms from transaction partners and an expanded definition of national security that may include political considerations. Several of the new issues and suggestions for dealing with them are discussed below.
One prominent example was U.S. Steel’s demand for a reverse breakup fee (RBF) to ameliorate the risk of a failed transaction. Historically, RBF clauses have been very rare in Japanese M&A practice. One exception was Japan Industrial Partners' 2023 acquisition of Toshiba Corp. Toshiba explicitly demanded an expensive RBF at the outset of the deal to ensure the buyer’s strong commitment to obtaining regulatory clearances, reflecting Toshiba’s emphasis on deal certainty.
Leading Japanese companies cannot retreat from international expansion.
Despite that newsworthy precedent, RBF provisions still remain uncommon in Japanese M&A transactions. Against this backdrop, Nippon Steel’s agreement to a substantial RBF of $565 million was noteworthy, clearly demonstrating its strong commitment to completing the transaction despite regulatory uncertainties.
This acceptance might indicate a growing recognition among Japanese acquirers that clauses such as RBFs may be necessary to compete effectively in cross-border transactions involving non-Japanese targets, particularly in markets like the US, where regulatory scrutiny has intensified. In any event, given the high-profile nature of the Nippon Steel-US Steel deal, it can be anticipated that there will be increased requests for RBF provisions directed toward Japanese buyers, particularly in transactions involving foreign sellers such as US companies, even if the target company is a Japanese entity.
The second new area for concern is the increasingly political nature of acquisitions in the US and elsewhere. Nippon Steel and U.S. Steel likely thought that this transaction would not encounter major regulatory obstacles under US foreign direct investment (FDI) rules, given the friendly nature of the acquisition and the close and long-term alliance between Japan and the US. In fact, it faced acute challenges, including from the Committee on Foreign Investment in the United States (CFIUS).
In early January 2025, President Biden issued a presidential order blocking the acquisition, citing national security concerns. Nippon Steel and US Steel had announced comprehensive voluntary measures to mitigate the security concerns. As these voluntary measures directly addressed the national security considerations, it appeared that there was no justification for blocking the transaction under the relevant legislation and that political influence likely played a role in the decision.
Political resistance persists within the US toward foreign ownership—even by allied nations—in strategically significant industries.
It is generally understood that Biden’s order reflected deeper political dynamics, including sensitivities linked to the just-concluded US presidential election and the symbolic status of U.S. Steel as a prominent American corporation. Despite Japan's established role as a crucial ally of the United States, political resistance persists within the US toward foreign ownership—even by allied nations—in strategically significant industries. However, protectionism carries the risk of broadly and ambiguously expanding the scope of what constitutes national security, potentially heightening global uncertainty around FDI. Furthermore, by introducing considerable political discretion into the FDI review process, this presidential order may undermine the consistency and predictability of the US regulatory framework for foreign investment. Such intervention could also conflict with the OECD’s principles of capital movement liberalization, to which both the United States and Japan adhere.
Following the change in the US administration later in January 2025, the picture changed. Members of CFIUS were replaced, executives of Nippon Steel engaged in discussions with senior officials from the Trump administration, and President Trump ordered a re-evaluation of the transaction. These developments were considered exceptional and hardly set a reliable precedent for future investors.
The protracted Nippon Steel-US Steel path to closing on June 18, 2025, underscores the necessity for Japanese companies to strategically prepare for an increasingly complex regulatory environment, incorporating deal terms like RBFs, robust regulatory engagement, and comprehensive stakeholder management strategies. It is possible that in this case Nippon Steel accepted a large RBF because it underestimated the newly heightened risk of transaction failure. In the future, Japanese acquirers will need to carefully consider such risks and negotiate deal terms with the expectation that they could, in fact, be triggered.
At the same time, this case highlights emerging challenges associated with politically influenced investment reviews and the global repercussions that could result from such interventions. It is now essential to be prepared to manage CFIUS reviews and other jurisdictions’ national security regulations in addition to the traditional work of obtaining antitrust approvals. Selecting experienced advisors who are familiar with this area is now very critical.
Suggested citation:
Masakazu Iwakura and Masanori Bito, “Observations from Japanese M&A Practice,” USALI East-West Studies, 3, No. 7, July 8, 2025, https://usali.org/nippon-steel/observations-from-japanese-m-and-a-practice.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Hideaki Roy Umetsu
By Hideaki Roy Umetsu and Kohei Takiguchi
Hideaki Roy Umetsu is managing partner of the New York office of the law firm Mori Hamada & Matsumoto. Kohei Takiguchi is a senior associate. They wrote this essay while the fate of the transaction remained uncertain and confirm that the closing does not alter their analysis.
Kohei Takiguchi
It is indisputable that President Biden’s order to block Nippon Steel’s acquisition of U.S. Steel has undermined Japanese businesses’ confidence in the American investment review process. In the wake of the presidential order, Japanese corporate leaders voiced both disappointment and distrust, particularly given their conviction that Japan—as the largest foreign investor in the United States—has made significant contributions to the US economy and job creation. There are now concerns that, absent a comprehensive explanation of how and why the proposed Japanese acquisition may be a threat to US national security, Japanese investors may no longer perceive the US market as fair and open, and may hesitate to invest further.
Even prior to Biden’s order, the processes of the Committee on Foreign Investment in the United States (CFIUS) for evaluating the national security implications of the Nippon Steel acquisition had become increasingly protracted, unpredictable, and susceptible to political dynamics. As a result, Japanese companies have begun to more carefully assess the risk of CFIUS intervention and tailor their investment strategies accordingly, even in transactions that would traditionally be considered low-risk.
Given that notifying CFIUS before a transaction is largely voluntary, one potential repercussion is that Japanese investors may seek to avoid the uncertainty associated with voluntary filings, particularly when the transaction involves a business of relatively low sensitivity. They may choose to proceed without formal approval, leaving the transaction subject to potential future review by CFIUS.
Nevertheless, when viewed within a broader geopolitical context, it does not necessarily follow that Japanese investors will immediately withdraw from the US market. Several factors are likely to limit the chilling effect of the Nippon Steel affair. First, the United States remains the most critical market for Japanese businesses. Second, many may view the case as an unfortunate anomaly, attributable to a unique confluence of circumstances: Nippon Steel sought to acquire an iconic American company, one that even has “US” in its name, during a presidential election year, and the target had significant operations in politically sensitive swing states.
Broader policies are still unfolding that may reshape Japan-US economic relations more profoundly than any single transaction.
In addition, broader policy changes are still unfolding that may reshape Japan-US economic relations more profoundly than any single transaction. These arise from the intensifying rivalry between the US and China, on the one hand, and the Trump administration’s confrontational stance toward allies, on the other hand.
China is a vital market for Japanese businesses. The 25 percent tariffs on steel, aluminum and automobiles, and the 24 percent “reciprocal” tariff that President Trump announced on Japanese goods in early April – if not substantially negotiated down – may drive some Japanese businesses to strengthen ties with China, which is already Japan’s leading trade partner. The Japanese government may also become more reluctant to align with future US restrictions on semiconductor exports to China than it was under the Biden administration.
But both impulses will quickly face limits. China’s opaque political and economic systems continue to raise concerns, particularly risks of technology and data leakage and excessive competition from state-subsidized overcapacity. Japanese businesses also remain acutely aware of the potential for Chinese military action against Taiwan, which would directly disrupt their operations and threaten employee safety.
Japanese businesses are closely monitoring the new US administration’s policies and assessing how to adapt. In response to President Trump’s tariff policies, Japanese manufacturers are considering establishing new supply chains within the United States to mitigate adverse effects. The prospect of pro-business policies, such as deregulation and tax reductions, could spur increased corporate activity. President Trump’s “America First” investment policy has, at times, celebrated the benefits of foreign investments and promised to promote investments by allied nations.
Japanese businesses are closely monitoring the new US administration’s policies and assessing how to adapt.
Even the Nippon Steel decision may be subject to reconsideration. President Trump has directed CFIUS to conduct a de novo review of the proposed transaction. While President Trump has opposed Nippon Steel’s majority acquisition of U.S. Steel, he has expressed openness to a minority investment. Nippon Steel’s legal challenge is currently in abeyance upon the government’s motion, to which the transaction parties consented. Negotiations with the new administration reportedly continue, potentially reviving the deal as a full acquisition. Thus, the change in administration clearly and dynamically influences Japanese business leaders’ decision-making.
Turning to Japan’s attitude toward American investment, it is unlikely that Japanese authorities will tighten foreign direct investment (FDI) screening against American investors in retaliation for the Nippon Steel decision. Japan’s FDI regime is generally more bureaucratic and less aggressively enforced than the CFIUS process. To date, there has been only one official prohibition of a proposed transaction, although it is not uncommon for certain deals to be voluntarily withdrawn following formal or informal discussions with authorities.
Given Japan’s aging and declining population, the economy will increasingly depend on foreign investments. The government has implemented measures to promote incoming investment, aiming to stimulate innovation, reinforce supply chains, invigorate local economies, and enhance corporate governance.
Of course, the government seeks to balance openness with national security. A recently published proposed amendment to the FDI regulations would enhance scrutiny of Chinese investments. Under the proposed amendment, foreign investors would have to meet additional requirements to qualify for exemptions to mandatory pre-closing notification, particularly if foreign law obligates them to collect intelligence—a provision that would apply to Chinese investors under China’s National Intelligence Law. This same amendment would not directly affect US investors.
A noteworthy aspect of the proposed amendment is that it reflects the growing influence of economic security narratives, which could be invoked to justify opposition to a broader range of foreign investments. The amendment would eliminate pre-closing notice exemptions for investments in certain infrastructure operators and advance one of the pillars of the 2022 Economic Security Promotion Act: preventing disruptions to key infrastructure by foreign entities. The FDI regulations have also been amended to incorporate another pillar of that Act—enhancing supply chain protection for strategically essential materials and products—by expanding the industries subject to FDI review. As in the United States, the expanding concept of economic security can facilitate the pursuit of protectionist policies, even against investors from non-adversarial countries.
In sum, while the Nippon Steel case may deter Japanese investments in the United States, there remain compelling reasons to believe that Japanese appetite for US investments will persist. At the same time, the Japanese government is likely to introduce more sophisticated screening processes with heightened attention to national security, although these measures may not directly impact US investments in Japan.
Suggested citation:
Hideaki Roy Umetsu and Kohei Takiguchi, “Looking Past Nippon Steel: Japanese Businesses Choose Caution,” USALI East-West Studies, 3, No. 8, July 8, 2025, https://usali.org/nippon-steel/looking-past-nippon-steel-japanese-businesses-choose-caution.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
