Understanding Trump’s Decision to Approve the Nippon Steel Deal

Critical Questions by Kristi Govella

Published June 16, 2025

On June 13, U.S. President Donald Trump issued an executive order enabling Japanese company Nippon Steel to acquire U.S. Steel after 18 months of uncertainty. In doing so, he reversed a prior January 3 decision by former President Joe Biden to block the deal on national security grounds. Although Trump agreed with Biden on the existence of potential security risks, the new executive order proposes that these risks could be mitigated through a national security agreement (NSA) between the two companies and the U.S. government.

On June 14, Nippon Steel and U.S. Steel reached this agreement, which includes $11 billion in new investments to be made by 2028, taking into account an initial investment in a greenfield project that will be completed after 2028. The NSA also contains commitments related to governance, including giving the U.S. government a "golden share" that would grant veto power over important management decisions and ensuring that key corporate leadership roles go to U.S. citizens. Nippon Steel and U.S. Steel are expected to finalize their partnership by June 18.

Q1: Why did Nippon Steel decide to buy U.S. Steel?

A1: Nippon Steel first announced plans to buy U.S. Steel in December 2023. Originally founded in 1901 by Andrew Carnegie and JP Morgan, U.S. Steel was once one of the world's largest companies, but its competitiveness declined over time, and the American company had been looking for a buyer. Nippon Steel claimed that the acquisition would enhance its long-term growth prospects by expanding its footprint in the United States, where the steel industry is expected to grow. The Trump administration's subsequent imposition of 25 percent and then 50 percent tariffs on steel products has also made it harder for companies like Nippon Steel to export steel to the United States, making the deal even more important. For its part, U.S. Steel argued that securing investment from a new owner was necessary and warned that it might otherwise have to close factories.

Once combined, the two companies will become the second-largest steelmaker in the world, allowing them to compete much more effectively in global markets-particularly vis-à-vis Chinese companies, which currently produce 60 percent of the world's steel. Chinese steelmakers with excess capacity have exported their goods to Asia, causing prices to fall and hurting competitors like Nippon Steel.

Q2: Why was the deal initially blocked by Biden?

A2: The decision to block Nippon Steel's acquisition of U.S. Steel was unusual; up to that point, the U.S. government had blocked only eight foreign takeover deals, most of which involved firms from China. The Nippon Steel deal became politicized during the lead-up to the 2024 presidential election. Aside from the fact that the deal involves a foreign entity acquiring a major U.S. company, U.S. Steel has large factories in swing states such as Pennsylvania, which led both Biden and Trump to criticize the deal during their campaigns. Moreover, the steel industry as a whole is considered critical to U.S. manufacturing and to national security, which led to further politicization. Although U.S. Steel management and many employees supported their company's acquisition by Nippon Steel, it was strongly opposed by the United Steelworkers union, which argued that the company should be domestically owned and operated and expressed concerns about potential layoffs and pension issues. A proposed alternative was that U.S. Steel be acquired by other U.S.-based companies such as Cleveland-Cliffs and Nucor.

The decision fell into Biden's hands in late December 2024 when the Committee on Foreign Investment in the United States (CFIUS) panel responsible for reviewing the deal failed to reach a consensus, leaving the president 15 days to make a decision. In his January 3 executive order, Biden ordered the two companies to abandon the deal within 30 days, though the deadline was later extended to June 18. The formal reasons Biden gave were related to national security. He argued that a strong domestically owned steel industry was essential for national security and resilient supply chains, including for the automobile and defense industries. However, the decision was widely interpreted as politically motivated by Biden's desire to follow through on statements he had made during the lead-up to the 2024 presidential election.

Q3: How did Nippon Steel and U.S. Steel react to Biden's decision?

A3: Both Nippon Steel and U.S. Steel filed a lawsuit after the decision, arguing that Biden had blocked the deal to pursue his own political agenda and that the CFIUS review process had been manipulated. The two companies also sued David McCall, president of the United Steelworkers union, and Lourenco Goncalves, CEO of Cleveland-Cliffs, alleging that they had engaged in illegal and coordinated actions to prevent the deal. The parties noted that they had offered a number of conditions to mitigate national security concerns, including having U.S. citizens comprise a majority of the board of directors, appointing CFIUS-approved independent directors to the board, allowing CFIUS to appoint an observer to the board, requiring regular reporting to CFIUS, keeping Nippon Steel out of any U.S. trade measures proposed by U.S. Steel, prohibiting the transfer of any production or jobs outside the United States, and guaranteeing no reduction of capacity at U.S. Steel facilities in the United States for 10 years. While their lawsuit was pending, the two companies continued to pursue the deal after Trump took office, hoping that the new president would have a different interpretation of the issues.

Q4: Why did Trump change his position to support the deal?

A4: Although Trump himself criticized Nippon Steel's bid during the 2024 presidential election and after winning the presidency, the first signs of change came after his meeting with Japanese Prime Minister Shigeru Ishiba on February 7. Speaking at a press conference alongside Ishiba, Trump said that Nippon Steel would instead "invest heavily" in U.S. Steel without taking a majority stake and claimed that he would meet with the head of Nippon Steel to "mediate and arbitrate" the deal. However, the situation remained ambiguous because Nippon Steel claimed that it still wanted to acquire the company, while Trump remained rhetorically opposed to a full takeover and referred to the deal as a "partnership."

Over the subsequent months, several different groups tried to convince Trump to support the deal. Republican lawmakers from Pennsylvania and other states hosting U.S. Steel operations argued that blocking the deal would lead to major manufacturing job losses. Although the extent of their influence is unclear, Trump acknowledged that members of Congress had been pushing for the approval of the deal, along with local unions of U.S. Steel workers. Nippon Steel argued that the deal was consistent with the Trump administration's focus on manufacturing, job creation, and promotion of investment in the United States. This argument also appeared to resonate with Trump, who posted on social media on June 13 that the partnership would create at least 70,000 jobs and add $14 billion dollars to the U.S. economy.

Trump also cited the increases in the proposed investment by Nippon Steel as a factor. The Japanese company increased their bid from an initial $2.7 billion in September 2024 to $14 billion, including an investment in a new steel mill. These actions supported Trump's economic agenda of using foreign investment to revitalize U.S. manufacturing and appeared to resonate with the president. At a rally at a U.S. Steel plant near Pittsburgh on May 30, Trump said that "the deal got better and better and better for the workers."

Consequently, Trump took steps to make the deal possible. On April 7, he ordered CFIUS to take another look at the deal to determine whether "further action" in this matter was appropriate and whether any measures proposed by the companies addressed the national security risks previously identified by the committee. He also asked an appeals court to pause their litigation until June 5 while CFIUS reviewed again, noting that the process had the potential to "fully resolve" the companies' claims. CFIUS submitted its recommendation to Trump on May 21, giving him another opportunity to create conditions to make the deal possible.

Q5: What is a "golden share" and why does it matter?

A5: President Trump's approval of the deal hinged on a governance mechanism known as a "golden share," a type of share that gives its holder potential veto power over specific company decisions. The concept of the golden share arose in the United Kingdom under Prime Minister Margaret Thatcher in the 1980s, when it was used prominently by the British government as it began privatizing state-owned enterprises yet wished to retain control over them. Golden shares have been used in other countries such as Portugal, Italy, Spain, Germany, Brazil, and China, but their use waned in Europe after the European Court of Justice ruled that several cases were illegal because they posed unjustified restrictions on the free movement of capital. Golden shares are not typical in acquisitions of U.S. companies.

In the case of the Nippon Steel acquisition of U.S. Steel, a golden share would grant the U.S. government veto power over decisions that could threaten U.S. national security. The existence of a government-held golden share mitigates security concerns over foreign ownership of U.S. Steel, but details of its operational rules remain ambiguous, which could pose future challenges related to how the U.S. government chooses to interpret the meaning of national security. For example, the U.S. government could ensure its access to critical materials like high-grade steel used in defense systems, which would be a relatively uncontroversial protection of national security interests. However, strategic decisions such as plant closures, import levels, or technology transfers could also be subject to U.S. government oversight on these grounds.

Q6: What does this mean for future foreign investment in the United States and for U.S.-Japan relations?

A6: After Biden initially blocked the deal, many Japanese government and business leaders expressed concerns that it would discourage future foreign investment in the United States. If investment from a company in Japan, a key U.S. military ally, could be seen as a threat to national security, this suggested that companies from many other countries could also be blocked on the same grounds. In this sense, Nippon Steel's acquisition of U.S. steel was regarded as a litmus test for U.S. investment policies beyond those directed specifically at Japan.

Now, the Nippon Steel deal has the potential to become a model for how foreign investments can be made in strategic industries with connections to national security. A similar approach could be taken in shipbuilding, for example, where Secretary of the Navy John Phelan has suggested that the United States and Japan should cooperate on dual-use ships. This approach could also be applied in cases involving critical and emerging technologies, such as semiconductors, that also have connections to national security. However, the use of golden shares is already controversial, and expanding their application to these situations has potential hazards. Specifically, the shifting-and generally expanding-definition of national security could become a slippery slope where the government seeks to control wider aspects of corporate affairs in ways that are seen as problematic by the private sector.

Although Japanese government officials were careful to consistently emphasize that the Nippon Steel deal would not be allowed to negatively impact U.S.-Japan relations as a whole, Trump's decision to approve the acquisition comes as a relief to many policymakers. The assertion that investment from a Japanese company posed a threat to U.S. national security seemed to contradict the close military alliance between the two countries and their shared security concerns. Many questions remain about the future of U.S. economic and security policy, and the two countries continue to negotiate over impending U.S. tariffs, but the Nippon Steel case seems to suggest that there is room for positive surprises from the Trump administration if the necessary political conditions can be met. Many stakeholders from both countries will be glad to see this deal finalized, in hopes that this will allow the two governments to focus more on mutual interests in U.S.-Japan relations moving forward.

Kristi Govella is senior adviser and Japan Chair at the Center for Strategic and International Studies (CSIS) and associate professor of Japanese politics and international relations at the University of Oxford.

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