Biden's promise to steelworkers could be tough to keep
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President Biden on Wednesday reaffirmed his opposition to Nippon Steel's proposed takeover of U.S. Steel, during a Rose Garden presser with Japanese Prime Minister Fumio Kishida.
Why it matters: It's a political promise that Biden may not be able to keep.
Catch up quick: Pittsburgh-based U.S. Steel picked Nippon over domestic rival Cleveland-Cliffs in an act of regulatory arbitrage, preferring a national security review to a domestic antitrust review.
- It also picked Nippon over the wishes of the steelworkers union, which preferred Cleveland-Cliffs.
- Biden sided with the steelworkers, and yesterday added: "I stand by my commitment to American workers. I'm a man of my word, and I'm going to keep it." He also invited union leader David McCall to last night's state dinner.
- Kishida, meanwhile, said that while he's confident that appropriate U.S. laws are being followed, he also stressed the importance of economic ties between the two countries. It wasn't a threat, but it was definitely a jab.
Zoom out: Biden's easiest path to blocking the deal would be to accept a recommendation that he do so from the Committee on Foreign Investment in the U.S. (CFIUS), but it's difficult to imagine him getting that opportunity.
- CFIUS very rarely recommends that deals be prohibited, let alone one involving a geopolitical ally like Japan. Remember, this is the group that hasn't even yet acted on TikTok.
That leaves antitrust, the thing U.S. Steel thought it was avoiding, with Politico yesterday reporting that the DOJ has opened an in-depth investigation.
- But DOJ reportedly is only interested in competition issues related to a specific factory in Alabama, which theoretically could be resolved via some sort of divestiture.
- And, of course, Biden isn't supposed to meddle in such matters.
The bottom line: Biden's best hope is for the steelworkers to reach an agreement with Nippon, thus letting him successfully support labor without twisting the regulatory bureaucracy into pretzels.
- But it might take backroom arm-twisting.
- The union yesterday reiterated its opposition to the Nippon deal, and previously dismissed a draft proposal from the Japanese company that would have prohibited any employee layoffs until at least September 2026.
- Then again, the union also still wants a Cleveland-Cliffs merger that would almost certainly run into the aforementioned antitrust troubles, which could create different problems for Biden in swing states like Pennsylvania.
