President Trump Supports Nippon Steel Deal, Raising Significant Questions

After more than 17 months of lobbying and intense negotiations to gain control of the United States Steel Corporation, Japan's Nippon Steel Corp. appeared to have received presidential approval on Friday.

Key Highlights

• Trump endorses Nippon Steel's $14.9 billion bid for U.S. Steel, citing job creation and economic growth.
• Despite backing, uncertainties remain about U.S. control and national security implications of the deal.

Days later, however, investors, executives, and diplomats remain unsure of what the US president endorsed. 

Donald Trump announced a "planned partnership" between the two industrial behemoths, claiming it would create "at least 70,000 jobs" — roughly five times US Steel's current American workforce — and contribute $14 billion to the US economy. However, his unexpected announcement did not explicitly endorse Nippon Steel's proposed $14.1 billion cash takeover of US Steel, instead stating that the company would "remain American." 

On Sunday, he offered little clarification.

"It will be controlled by the United States; otherwise, I would not make the deal," Trump told reporters at Morristown Airport in New Jersey as he returned to Washington. "It's an investment and it's a partial ownership but it'll be controlled by the USA."

On Friday, the two companies publicly praised the "partnership" and a "bold" decision, leaving the ambiguity to be worked out. Neither has commented on specifics or elaborated. US Steel shares closed more than 21% higher on Friday, after rising as much as 26%, signaling renewed investor optimism about the acquisition.

Nippon Steel rose as much as 7.4 per cent in Tokyo trading on Monday, boosted by similar optimism about the benefits of what may come.

Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab, cautioned that a short-term boost was plausible but not guaranteed.

"Given the current situation, though, where things can change drastically depending on Trump's statements, it's difficult to see this one event as having absolute significance," said the presidential hopeful.

Trump, whose decision is the final step in determining whether Nippon Steel's acquisition can proceed, has previously expressed support for Japanese investment in US Steel but opposed a full takeover.

In a December social media post, he stated that he was "totally against the once great and powerful US Steel being bought by a foreign company" — a rare point of agreement with his predecessor Joe Biden, who blocked the deal in January after a review by the Committee on Foreign Investment in the US.

Trump's comments late last week come as Japan and the United States are also negotiating trade tariffs. Ryosei Akazawa, Japan's top trade negotiator, met with Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer in Washington last week for a third round of tariff negotiations. This came after Trump and Japanese Prime Minister Shigeru Ishiba spoke on the phone.

Trump's blessing — and billions of dollars in Japanese capital — could usher in a new era for the US steelmaker, which was once the world's largest company. However, proceeding would require Nippon Steel to justify to its shareholders an investment with significant constraints, including the potential obligation to keep aging, less-efficient, and more expensive integrated assets operational.