Trump Claims Tariffs Will Make U.S. Steel Great Again, He’s Very Wrong

As U.S. Steel and Nippon sue the Biden administration, Trump weighs in on the deal.

Biden’s Block of Nippon Steel Merger Makes the United States Less Secure

On January 4, I wrote Biden’s Block of Nippon Steel Merger Makes the United States Less Secure

Biden blocked the Nippon purchase of U.S. Steel. Trump would have too. It’s union pandering that makes the US less secure.

Multiple Lawsuits

Today, multiple lawsuits were filed.

In joint statements, Nippon Steel and U. S. Steel File Multiple Lawsuits in Response to Wrongful Interference with the Proposed Acquisition of U. S. Steel

Nippon Steel Corporation (“Nippon Steel”) (TSE: 5401), together with its wholly owned subsidiary Nippon Steel North America, Inc. (“NSNA”), and United States Steel Corporation (“U. S. Steel”) (NYSE: X) (together with Nippon Steel, the “Companies”) today jointly filed two lawsuits to remedy the ongoing illegal interference with Nippon Steel’s acquisition of U. S. Steel (the “Transaction”).

The Companies today commented on the litigation:

“From the outset of the process, both Nippon Steel and U. S. Steel have engaged in good faith with all parties to underscore how the Transaction will enhance, not threaten, United States national security, including by revitalizing communities that rely on American steel, bolstering the American steel supply chain, and strengthening America’s domestic steel industry against the threat from China. Nippon Steel is the only partner both willing and able to make the necessary investments – including no less than $1 billion to Mon Valley Works and approximately $300 million to Gary Works as part of the $2.7 billion committed – to protect and grow U. S. Steel for the benefit of employees, the communities in which it operates, and the entire American steel industry. Today’s legal actions demonstrate Nippon Steel’s and U. S. Steel’s continued commitment to completing the Transaction – despite political interference with the CFIUS process and the racketeering and monopolistic conspiracies of Cleveland-Cliffs and USW President David McCall – for the benefit of all stakeholders, including U. S. Steel’s shareholders, who will receive the agreed upon $55.00 per share upon the Transaction closing. We remain confident that the Transaction is the best path forward to secure the future of U. S. Steel – and we will vigorously defend our rights to achieve this objective.”

The litigation brought by the Companies will establish that:

• President Biden ignored the rule of law to gain favor with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (“USW”) and support his political agenda;
• As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the United States (“CFIUS” or the “Committee”) failed to conduct a good faith, national security-focused regulatory review process, depriving Nippon Steel and U. S. Steel of their rightful opportunity for fair consideration of the Transaction; and
• Cleveland-Cliffs Inc. (“Cliffs”), in collusion with the leadership of the USW, has sought to prevent the Transaction from closing and any party other than Cliffs from acquiring U. S. Steel, and to otherwise injure U. S. Steel’s ability to compete, all as part of a broader illegal campaign to monopolize the domestic steel markets.
• President Biden publicly announced his plan to block the Transaction in March 2024, which was before CFIUS even began its formal review, in order to curry favor with the USW leadership in Pennsylvania in his bid for reelection.
• Senior USW leadership stated at the time that President Biden had “personal[ly] assur[ed]” them that he “has our backs” in opposing the Transaction. Less than one week after President Biden publicly announced his plan to block the Transaction, the USW endorsed him for reelection.

Cleveland Cliffs Monopoly

Japan is a longstanding ally of the United States, and, in fact, no transaction involving a Japan-based company of any kind has ever been blocked by the President on national security grounds. Nor have other acquisitions of American steel facilities ever been blocked, even when the acquiring entities were located in countries that posed a direct national security threat to the United States, such as Russia.

Nippon Steel and U. S. Steel are disappointed to see such a clear and improper exploitation of the country’s national security apparatus in an effort to help win an election and repay political favors. Nippon Steel and U. S. Steel are entitled to a fair process and have been left with no choice but to challenge the decision and the process leading to it in court. Nippon Steel and U. S. Steel continue to believe in the sanctity and fairness of the American legal system, which is why the Companies hope and believe the Petition will be reviewed impartially and will result in a just outcome.

The Petition names as respondents Joseph R. Biden, in his official capacity as President of the United States, CFIUS, Janet L. Yellen, in her official capacity as Secretary of the Treasury and Chairperson of CFIUS, and Merrick B. Garland, in his official capacity as United States Attorney General.

Cliffs’ bid – which consisted of 50% cash and 50% stock – was plainly inferior to Nippon Steel’s higher all-cash offer that posed none of the obvious antitrust concerns plaguing Cliffs’ bid. Of the more than 50 participants in the formal review process, Nippon Steel was the only buyer who committed to maintaining U. S. Steel as a standalone integrated steel company. Moreover, a merger with Nippon Steel promised an injection of innovation and capital that would immediately enhance U. S. Steel’s ability to compete with Cliffs and the vitality of the North American steel markets. On December 17, 2023, the U. S. Steel board unanimously approved the Transaction and announced it the next day.

• Despite U. S. Steel stockholders’ overwhelming vote to approve the Transaction and despite the Board of Arbitration decision rejecting the USW’s challenge to it, Cliffs, Mr. Goncalves, and Mr. McCall persisted in their conspiracy to thwart the Transaction and force a deal with Cliffs. Mr. Goncalves continued to publicly denigrate the Transaction and state that Cliffs was the only possible buyer. For his part, Mr. McCall repeatedly stonewalled Nippon Steel’s outreach, even as pro-Transaction sentiment grew among USW members, and his public statements disingenuously implied engagement.
• Cliffs’ anticompetitive and monopolistic goals have been evident throughout its smear campaign. To note just one example, Cliffs’ Senior Vice President of Finance told Cliffs’ investors that killing the Transaction would result in “less competition” and “one less competitor pushing down prices.” Mr. Goncalves himself has repeatedly made similar statements, bragging on a 2023FY earnings call that Cliffs was the sole U.S. supplier of certain electrical steel and stating: “[T]hat’s why we push prices up. We go until we can’t go no more.” If this illegal campaign succeeds, the American economy and American consumers will face significant harm as a result of a reduction in competition in key steel markets.

The Complaint asserts antitrust claims under Sections 1 and 2 of the Sherman Act, violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act, and tortious interference claims and seeks injunctions and substantial damages, which could amount to billions of dollars, against Cliffs, Mr. Goncalves, and Mr. McCall.

There are many more details in the lawsuit. The lawsuit is accurate on all counts.

No National Security Risk

The Pentagon, US Treasury and state department have all concluded that Nippon Steel’s $15bn acquisition of US Steel poses no national security risks, even though President Joe Biden is expected to block the deal. The conclusions come despite Biden’s insistence that the purchase of the Pittsburgh-based steelmaker poses economic and national security risks.

Several senior officials have told the Financial Times that the deal presents no national security risks and that Biden’s opposition was political. “There is no credible analysis in the inter-agency that supports Biden,” said one former US official familiar with the internal debate.

The above from the Financial Times.

Predetermined Outcome

CBS News reports U.S. Steel and Nippon Steel Sue Biden Administration for Blocking their $15 Billion Deal.

“A committee of national security and trade experts determined this acquisition would create risk for American national security. President Biden will never hesitate to protect the security of this nation, its infrastructure, and the resilience of its supply chains,” White House spokesperson Robyn Patterson told CBS News in a statement on Monday in responding to the companies’ lawsuit.

President-elect Donald Trump weighed in as well, questioning the wisdom of the sale given his plans.

“Why would they want to sell U.S. Steel now when tariffs will make it a much more profitable and valuable company? Wouldn’t it be nice to have U.S. Steel, once the greatest company in the World, lead the charge toward greatness again? It can all happen very quickly!” he posted on his social media site, Truth Social.

Yet industry experts question the U.S.-based steel manufacturer’s path forward without an infusion of capital from Nippon Steel, which had proposed investing nearly $3 billion in U.S. Steel under terms of the deal.

“With foreign ownership seemingly off the table, we see limited avenues moving forward,” Bill Peterson, metals and mining analyst for JPMorgan said in a research note. 

U.S. Steel leaders have warned that the company could be forced to curtail its legacy blast furnace investments and shift to cheaper nonunion electric arc furnaces. Further, executives said U.S. Steel may move its headquarters out of Pittsburgh. 

Is Trump an Economic Moron or Simply a Liar?

That is a question I ask myself all the time. Like Biden, Trump wanted to buy union votes as did Biden.

But to call the deal a threat to US security is preposterous. Actually, a Cleveland Cliffs takeover would create a monopoly, raise prices, and make the US less secure.

Cleveland Cliffs Earnings Statement: “We like higher prices. That’s the best thing for our companies, the best thing for our employees, the best thing for our shareholders. So, that’s why we push prices up. We go until we can’t go no more.”

Nippon pledged to invest money to upgrade U.S. Steel. Cleveland Cliffs didn’t. Why would it when the goal is higher prices?

Nippon Steel Bid Agreement

• Nippon would invest $2.7 billion in union-represented local steel facilities. This would allow the US to better compete against China.
• The merger would give American manufacturers access to high-quality, domestically produced steel.
• The merger would strengthen ties with key allies
• The merger would increase US competition within the US, while keeping production here.
• As a result of the above, the merger would produce stronger, cleaner, more advanced steel here at home for the benefit of American consumers and at a cheaper price due to investments.

On December 14, I commented Biden and Trump are Both Wrong on US Steel Nippon Merger

President Biden will block the merger of US Steel and Nippon based on alleged national security risks. It’s really the opposite.

Last year, steelmaker Cleveland Cliffs offered $8.3 billion for USS. The union supported that bid, but the company rejected it. Automakers wrote to Congress, complaining that the combined company would control 65-90% of automotive steel. This is not the case with the Nippon bid.

It’s a steel monopoly that is the national security risk, not the Nippon merger.

My December 14 Comment

What to Expect

Currently, Trump and Biden both say they are against the deal despite the wishes of U.S. steel workers, the UAW, and common sense.

It’s a case of politics over genuine US interests.

The US already has the among the highest prices for steel in the world. The last thing the US needs is higher prices for cars that are already hugely unaffordable.

Even the autoworkers’ unions see that.

Trump’s Idiotic Tariffs

“Tariffs will make it a much more profitable and valuable company,” said Trump.

Yes, at the expense of every user of steel in the United States including the United Auto Workers union, and of course every buyer of autos or parts in the US.

So, is Trump an economic moron or simply a liar for political purposes?