Former President Donald Trump laid the groundwork in 2018 for Nippon Steel’s $2 billion investment. Combined, this investment would bring U.S. Steel’s total investment into the ground to nearly $11 billion by 2028. In many ways, this deal is a watershed in U.S. industrial policy. It underscored the growing importance of the nexus between foreign investment and national security concerns.
We know that the answer is U.S. Steel and Nippon Steel joining forces to announce a billion-dollar, green-field project. They have aspirations for at least one more electric arc furnace in the U.S. post 2028. The agreement has generated a lot of excitement given the size and ambition of the agreement. It does go further, highlighting key national security issues at stake, which lie at the heart of liberal arguments demanding scrutiny of foreign investment in critical industries.
The deal cuts the U.S. government into the deal by guaranteeing it a sort of “golden share.” This widely supported, commonsense measure is meant to defend our nation’s security interests. Trump pointed to his decisive role in this deal as evidence, repeating “We have a golden share, which I control.” This provision is intended to prevent the government from losing its voice in vital operational decisions affecting U.S. Steel’s operations.
Given the ownership structure, and despite Trump’s promises, fears remain about who would control it. Publicly, he crowed that the deal would ensure “51% ownership by Americans.” Yet throughout this process, Nippon Steel has maintained that their goal is to take direct control of U.S. Steel and operate it as a wholly owned subsidiary. This seeming conundrum begs the question what actual ownership looks like in this massive investment.
American officials have used all aspects of the entire transaction to conduct an in-depth review. It now claims a valuation of $28 billion, including Nippon Steel’s offer for U.S. Steel and intentions to build the electric arc furnace. We urge the Treasury Department and other federal agencies represented on the Committee on Foreign Investment in the United States (CFIUS) to finalize the agreement. We’re currently awaiting their ruling on this agreement.
The order signed by Trump noted that CFIUS had discovered “credible evidence” suggesting that Nippon Steel “might take action that threatens to impair the national security of the United States.” It noted that these risks might be “sufficiently mitigigated” via the national security agreement outlined above.
The politics on the deal have turned upside down. Trump had opposed the deal while waging his own insurgent campaign for the presidency in 2016. In a move surprising even to industry observers, President Joe Biden personally blocked the transaction just before leaving office. Since returning to power, Trump has made no secret of his desire to cut a deal. His main priority is to ensure that a workable solution is found for Nippon Steel’s investment.
U.S. Steel and Nippon Steel have only released limited information about the workings of the golden share. They disclosed next to nothing about the other myriad provisions within the national security agreement. The two companies’ opacity is indicative of a common pattern in these types of noncompete agreements. James Brower, an attorney with Morrison Foerster, explained that similar deals often stay hidden from the public eye.
While negotiations proceed, Trump still holds power over next steps on this historic investment under the executive order he signed. This agreement will do a great service to the U.S. steel industry. It might set important new precedents for directing and overseeing foreign investment in sensitive sectors going forward.
“We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership.” – U.S. Steel and Nippon Steel
