Trump’s Backing of Nippon Steel Deal Sparks Significant Concerns

After more than 17 months of vigorous lobbying and discussions to gain control of United States Steel Corp, Japan’s Nippon Steel Corp. seemed to receive a nod of approval from the president on Friday.

Nonetheless, just a few days later, investors, executives, and diplomats remain uncertain about the specifics of the US president’s endorsement.

Donald Trump declared a “planned partnership” between the two industrial titans, claiming it would generate “at least 70,000 jobs” — nearly five times the number of US Steel’s current American workforce — and inject $14 billion into the US economy. However, his surprising announcement did not explicitly endorse Nippon Steel’s proposed $14.1 billion cash acquisition of US Steel, only noting that the company would “remain in America.”

On Sunday, he provided minimal additional information.

“It’ll be controlled by the United States; otherwise, I wouldn’t make the deal,” Trump told reporters at Morristown Airport in New Jersey, on his way back to Washington. “It’s an investment, and it’s a partial ownership, but it’ll be controlled by the USA.”

Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Monday that the government was awaiting an official announcement.

The two companies, amid this ambiguity, publicly praised the “partnership” and the “bold” decision on Friday. Neither has provided further details since. Nonetheless, US Steel shares closed over 21% higher on Friday, peaking at a 26% increase, a sign of renewed investor optimism regarding the acquisition.

Nippon Steel’s shares surged as much as 7.4% in Tokyo on Monday, driven by similar optimism about potential advantages and a decreased reliance on a dwindling Japanese market. However, those gains have since moderated, and shares were just over 2% higher at 11:10 a.m. local time.

Analysts warned that the magnitude of the deal and additional investments may not bode well for Nippon Steel’s short-term earnings.

“It could divert resources that could be used for capital expenditures and boosting shareholder returns,” noted Kensuke Togashi, chief strategist at Daiwa Asset Management. “I suspect today’s market reaction reflects low expectations.”

Trump, whose approval is the final hurdle in determining whether Nippon Steel’s acquisition can proceed, had previously voiced support for Japanese investments in US Steel but opposed a complete takeover. On social media in December, he referred to himself as “totally against the once great and powerful US Steel being acquired by a foreign company” — a viewpoint he shares with his predecessor, Joe Biden, who thwarted the deal in January after a review by the Committee on Foreign Investment in the United States.

Approval of a full acquisition now would signify a major reversal.

These statements emerge as Japan and the US are engaged in negotiations over trade tariffs. Japan’s chief trade negotiator, Ryosei Akazawa, met with Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer in Washington last week for a third round of tariff discussions, following a phone conversation between Trump and Japanese Prime Minister Shigeru Ishiba.

Trump’s endorsement — coupled with billions of dollars in Japanese investment — could signify a new chapter for the US steelmaker, once the largest globally. However, progressing would require Nippon Steel to defend an investment with significant constraints, including the potential necessity to maintain outdated, less efficient, and higher-cost integrated assets in operation.

“We are somewhat puzzled as to why the market views this positively for the Japanese steelmaker,” remarked Amir Anvarzadeh, a Japan equity strategist at Asymmetric Advisors Pte. “We see the acquisition as very costly and potentially a major challenge regarding what they can and cannot do with the US unit, which will be closely monitored by US policymakers for many years to come — if the purchase eventually goes through.”

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