The Lombard Review
Business

US Steel's deal is in limbo

Political veto as deal variable

The BlueScope steelworks at Port Kembla, Australia
The BlueScope steelworks at Port Kembla, AustraliaPhoto: Marek Ślusarczyk (Tupungato) Photo gallery / Wikimedia Commons, CC BY 3.0
1 min read Data: Trump vows block (2 Dec)

The proposed $14.9 billion acquisition of US Steel by Japan’s Nippon Steel has been plunged into deep political limbo. President-elect Donald Trump reaffirmed on 2 December his unequivocal intention to block the transaction upon taking office, declaring that the iconic American industrial asset must remain domestic. The arbitrage spread on the deal has blown out to historic widths.

The U.S. Capitol at night
The U.S. Capitol at nightPhoto: Diliff / Wikimedia Commons, Public domain

The Regulatory Black Hole

By subordinating a multi-billion-dollar commercial transaction between allied corporate partners to populist political theater, Washington is sending a chilling signal to foreign direct investors. US Steel’s aging blast furnaces urgently require billions in modern capital investment that only Nippon Steel has pledged to fund. Blocking the deal on national security grounds will leave an American industrial icon starved of capital.

The New York Stock Exchange on Wall Street
The New York Stock Exchange on Wall StreetPhoto: Carlos Delgado / Wikimedia Commons, CC BY-SA 3.0

The political paralysis surrounding US Steel’s acquisition proves that populist protectionism will happily sacrifice capital investment and corporate modernization to preserve nationalistic political optics.