This week should have marked a significant triumph for Democrats and the Biden administration’s industrial policy. However, the looming presence of Trump’s influence has left them grappling for a cohesive message.
The announcement on Monday that U.S. Steel would be acquired by Japan’s Nippon Steel for over $14 billion concluded months of negotiations over the fate of the beleaguered U.S. industrial giant. While this deal ostensibly showcases the strength of the U.S. industrial economy under Biden, it has sparked controversy in Washington.
On the surface, the steel deal underscores the success of Biden’s economic initiatives, such as the infrastructure package and Inflation Reduction Act. Both initiatives provide substantial incentives for construction firms to prioritize American-made steel for new infrastructure projects. Additionally, Biden has maintained Trump-era tariffs on steel and aluminum for most countries, safeguarding U.S. Steel and other domestic producers.
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These policies have revitalized U.S. Steel, transforming it from a seemingly hollow entity in the American industrial landscape just a few years ago into a highly attractive investment. Nippon Steel’s 40 percent premium on U.S. Steel’s stock price in this acquisition signifies the Japanese company’s confidence in significant returns. This development should be a cause for celebration—a revered industrial firm from a trusted ally is willing to invest substantially to access the benefits of America’s new economic policies. Encouraging foreign investment aligns with one of the key objectives of Biden’s industrial policy, representing a departure from decades of outsourcing. This deal exemplifies the policies yielding positive outcomes for both workers and investors.
Regrettably, Rust Belt Democrats seem hesitant, driven by an apparent apprehension that Nippon is a Japanese company rather than American. Senators John Fetterman and Bob Casey of Pennsylvania have urged Biden to intervene on national security grounds, while Senator Sherrod Brown of Ohio wishes the company had been sold to U.S.-based Cleveland Cliffs. This sentiment extends to moderate and progressive Democratic House members across the Midwest, along with Biden’s former economic adviser Brian Deese.
Acknowledging the forthcoming reelection challenges in crucial industrial swing states, Biden has taken note. The White House released a statement late Thursday expressing the president’s belief that the planned purchase merits “serious scrutiny” due to potential national security and supply chain concerns.
However, many of these arguments are misguided. A deal with Cleveland Cliffs was on the table months ago but was outbid by the Japanese company. National security concerns lack substantial grounds, especially considering the Japanese government’s status as a steadfast U.S. ally and a pivotal regional counterbalance against China.
While union concerns warrant consideration, the United Steelworkers, previously in favor of an acquisition by Cleveland Cliffs, has spoken out against the Nippon deal. However, the current contract stipulates that any new buyer must agree to a new labor agreement before completing the acquisition. If Nippon is willing to pay a 40 percent premium, some concessions to the union appear negotiable.
The Democratic outcry seems to be rooted in a lingering fear of Trump’s influence, despite him and his allies not yet weighing in on the deal. Still haunted by Trump’s 2016 victory in the industrial Midwest, Democrats have consistently strived to project a more “America-first” image. This motivation is evident in Biden’s robust manufacturing policies, tariff preservation, and the recent decision to scale back Indo-Pacific trade talks.
The underlying concern persists in the U.S. Steel deal—Democrats, even when economic conditions favor them, are reluctant to embrace foreign investments for fear of being labeled as globalists reminiscent of the Clinton era.
These protests may not shield Democrats from GOP attacks. In Pennsylvania, Senator Casey has already faced accusations of being soft on China from his Republican challenger David McCormick, despite Casey’s robust stance on China. If Democrats hope to regain control of the economic narrative, they would do well to heed the advice of retiring Democratic Congressman Dan Kildee from Michigan, emphasizing the importance of making sound policy decisions irrespective of potential political ramifications.
