President Trump Approves Nippon Takeover of U.S. Steel

What Happened?

President Trump signed an executive order approving the takeover of U.S. Steel by Japanese owned Nippon. The executive order stipulated that in order for the takeover to go forward, both companies would need to sign a national security agreement with the U.S. government giving the government a ‘golden share’ of the company. 

U.S. Commerce Secretary Howard Lutnik said the golden share gives the U.S. president veto power over any decision to relocate U.S. Steel's headquarters, move the company outside the U.S., rename U.S. Steel, transfer production or jobs outside the U.S., and close or idle plants before certain time frames.

Why it Matters

On Monday U.S. Steel confirmed in a regulatory filing it will become a wholly owned subsidiary of Nippon Steel North America. On news of the approved merger, U.S. Steel shares rose 5% on Monday. Following the issuance of the executive order, U.S. Steel and Nippon issued a joint statement saying, ‘We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership.’ The purchase will make Nippon the second largest steel manufacturer in the world.

The National Security Agreement signed to complete the new partnership includes a commitment to more than $11 billion in new steelmaking investments in the United States by 2028 and the creation of more than 100,000 jobs. U.S. Steel is expected to keep its headquarters location in Pittsburgh, Pennsylvania and its current leadership team. President Trump said the agreement gives the U.S. government ‘total control,’ a likely reference to the fact that the terms give control of several board seats to the U.S. government.

If President Trump’s claim is true, it would essentially make the new company a state-owned enterprise. State owned enterprises are common in Europe and Asia but less prevalent in the United States. There is also a legal distinction between control and ownership, though in practice the two can appear similar. 

The promise of jobs is popular politically but can be difficult to deliver due to changing market conditions. Nippon has yet to publicly provide specifics as to its plans for U.S. Steel going forward, but with the deal now approved those details are likely to become known in the coming weeks. However, Nippon did say they would honor current agreements with United Steelworkers. 

Foreign ownership of U.S. Steel has been controversial politically, due to the prominence of steelmaking in American history. The steel industry helped transform American from an agrarian to an industrial society and played a crucial role in the allied victory in World War II. Though critics maintain there are still national security concerns with the deal, the Trump Administration has said the current terms have resolved those worries.

How it Affects You

Supporters of the deal claim the new partnership could revive U.S. Steel and the American steel industry, but only time will tell if those claims will be proven true or discredited.