There are ironies a-plenty in the news that Japan’s Nippon Steel Corp. plans to buy U.S. Steel. The fact that a foreign company would own such a famous American brand is just the most obvious one. The bigger irony is the reason why the Japanese supplier wants to absorb its overseas rival: so it can compete better against China.
That’s the rationale behind the Nippon Steel President Eiji Hashimoto’s effort, according to a report by the Wall Street Journal: “By adding U.S. Steel to his empire, he says he wants to create a free-world champion in an industry dominated by China.” It’s ironic because the very same people lining up to oppose Nippon’s acquisition are the same ones that say China is the biggest threat.
China’s critics include US presidential administrations from both parties who have long claimed that the country has used its production advantage to manipulate steel’s global price. Japan, by contrast, is a modern western economy as well as a friend and ally to the US. Nippon Steel’s acquisition of a major US producer would bolster Japan’s ability to sumo-wrestle China on the global stage while also giving the new owners a stake in keeping American steel mills producing.
Nevertheless, some people cannot get past the fact that such a fabled, red-blooded American company may soon be acquired by foreigners. “NSC does not share U.S. Steel’s storied connection to the U.S. States, and its financial interests are tied to Japan,” Congressman J.D. Vance and Senators Marco Rubio and Josh Hawley declared in a letter to Treasury Secretary Janet Yellen. The letter expressed their “concern” over the deal.
The United Steelworkers are similarly on edge. “To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long,” USW President David McCall announced.
Neither lawmaker nor union has a serious reason for their concern beyond the nativistic, “We don’t want foreigners in charge.”
Well, somebody needs to do something. As McCall alludes, U.S. Steel is far from what it once was. The company’s production peaked in 1953, when it made 36 million tons of steel. It is currently 27th in global steel production, according to CNN, producing 14.5 million metric tons annually. The biggest domestic steel producer, Nucor, is 16th at 21 tons. Nippon is the 4th largest global producer.
This follows years of efforts by the Trump administration to prop up US companies through tariffs. Protecting US steelmakers from Chinese competition was a major focus of that effort. Steelmakers definitely had fans in the administration.
Unions lauded Trump’s efforts at the time. “The admin’s steel & aluminum tariffs are good steps towards fixing predatory practices that hurt workers & cheat companies that produce in US,” the late AFL-CIO President Richard Trumka declared in 2018.
The Biden administration has relaxed Trump’s steel and aluminum tariffs, replacing them with quotas, but as my colleague Jeremy Lott noted the Biden folks have otherwise left Trump’s trade policies largely intact.
The tariffs did not bring U.S. Steel roaring back however. Nor did they boost national security, another supposed rationale the Trump administration claimed. What they did do was raise prices for domestic manufacturers, hurting others throughout the economy.
Letting U.S. Steel be absorbed by a foreign company that vows to take on China may actually be the best way to accomplish the ends that the different US administrations and unions claimed that they wanted all along. If only they would realize this.
Vance in particular used to have a more nuanced take on foreign ownership of US companies, writing in his memoir Hillbilly Elegy that it was ultimately a good thing that Japan’s Kawasaki bought steelmaker Armco, where his father had worked. “If companies like Armco were going to survive, they would have to retool. Kawasaki gave Armco a chance, and Middletown’s flagship company probably would not have survived without it,” Vance wrote.