President Trump's backing for a Nippon steel deal leaves big questions

By Tony Czuczka and Toshiro Hasegawa

  After more than 17 months of lobbying and close-fought negotiations to secure control of United States Steel Corp., Japan’s Nippon Steel Corp. appeared on Friday to have received a presidential blessing. 

Days later, however, investors, executives and diplomats are still unsure of what exactly the US president endorsed. 

 

Donald Trump heralded a “planned partnership” between the two industrial heavyweights, claiming it would create “at least 70,000 jobs” — roughly five times US Steel’s current American employees — and add $14 billion to the US economy. But his unexpected announcement stopped short of explicitly endorsing Nippon Steel’s proposed $14.1 billion cash takeover of US Steel, instead asserting that the company would “remain American.”  

 

Speaking on Sunday, he provided little additional clarity.

 

“It’ll be controlled by the United States, otherwise I wouldn’t make the deal,” Trump told reporters at Morristown Airport in New Jersey, as he headed back to Washington. “It’s an investment and it’s a partial ownership but it’ll be controlled by the USA.”

 

The two companies, left to grapple with ambiguity, publicly praised the “partnership” and a “bold” decision on Friday. Neither has since commented on specifics, or elaborated. US Steel shares closed more than 21 per cent higher on Friday anyway — after surging as much as 26 per cent — signaling renewed investor hope around the acquisition.

 

Nippon Steel gained as much as 7.4 per cet in trading in Tokyo on Monday, buoyed by similar optimism around the benefits of what may follow.

 

Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab, cautioned that a short-term boost was plausible, but did not come with certainty.

 

“Given the current situation, though, where things can change drastically depending on Trump’s statements, it’s difficult to see this one event as having absolute significance,” he said.  

 

Trump, whose verdict is the last step in the process of determining whether Nippon Steel’s purchase can go ahead, had previously expressed support for Japanese investment in US Steel, but opposed a full takeover. Writing on social media in December, he said that he was “totally against the once great and powerful US Steel being bought by a foreign company” — a rare area of alignment with predecessor Joe Biden, who blocked the deal in January, following a review by the Committee on Foreign Investment in the United States.

 

An approval of a full purchase now would mark a significant about-face.

 

Still, Trump’s statements late last week come as Japan and the US are also locked in negotiations over trade tariffs. Japan’s top trade negotiator, Ryosei Akazawa, met with Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer in Washington last week as part of a third round of tariff talks. That followed a telephone call between Trump and Japanese Prime Minister Shigeru Ishiba.

 

Trump’s blessing — and billions of dollars of Japanese capital — could bring about a new era for the US steelmaker, once the world’s largest company. But pressing ahead would also force Nippon Steel to justify to its shareholders an investment with significant constraints, including the potential obligation to keep aging, less-efficient and higher-cost integrated assets running.