Biden to Block Nippon Steel Purchase of US Steel

If True, Opens Door To Court Cases And/Or Trump “Emergency” Ban On Acquisition

Source: https://crsreports.congress.gov/product/pdf/R/R45618/9

President Joe Biden intends to block Nippon Steel’s purchase of US Steel once the Committee of Foreign Investment In the US (CIFIUS) presents its recommendation to him around Dec. 22nd, according to anonymous sources cited by Bloomberg. Biden has 15 days to make his decision. During inter-agency meetings, professional staffers from the State, Defense, and Treasury departments argued that there were no serious security issues, but others contended that there were, according to the Financial Times. Nonetheless, Cabinet Secretaries, the political appointees actually on the CIFIUS committee, usually give the President what he wants, and the Financial Times also cites sources saying Biden will almost certainly block it.

If these reports are correct and Biden does disapprove, Nippon Steel and US Steel “are poised to pursue litigation over the process,” Bloomberg added. If that happens, the issue would not be settled until Donald Trump retakes the White House. In that case, Trump could use Presidential powers under the International Emergency Economic Powers Act (IEEPA) to block or unwind it if the merger process has already begun. Just a couple days ago, Trump repeated his vow to prohibit any such purchase, adding that he would rely on tariffs and tax incentives to make the financially and technologically beleaguered US Steel “strong again.” Assuming these reports are accurate, it’s hard to see a path to a successful acquisition.

Biden Sides with USW Union Leaders, Not Steelworker Members

The union members who actually work at US Steel’s famous Mon Valley blast furnace in western Pennsylvania support Nippon Steel’s purchase of US Steel, believing this is the best chance to save their jobs. So does Pennsylvania Governor Josh Shapiro, a Democrat. US Steel says it will be forced to downsize if the buyout fails. By contrast, Nippon Steel has pledged to spend $1.3 billion on upgrading several plants, including the one at Mon Valley. Blast furnaces are necessary for auto production. And, so it would seem, maintaining and upgrading the blast furnaces is more critical to US security than keeping Nippon Steel from buying it.

Nonetheless, Biden is still siding with United Steelworkers (USW) union President David McCall, who remains adamantly opposed to the merger even after his recent meeting with Nippon Steel executive Takehiro Mori. Despite the union’s name, among its 1.2 million members, both those still working and retirees, only 11,000 now work at US Steel. Biden and his aides reportedly believe that Trump won in 2016 and again in 2024 because America’s blue-collar workers have turned protectionist, and so the Democrats have to do so as well if they hope to win again.

Will Courts Take The Case?

Reportedly, Nippon Steel and US Steel plan to ask the courts to overrule Biden. But it is unclear whether the courts will have any jurisdiction, let alone be willing to overrule the President even if they have jurisdiction.

Firstly. the Biden administration claims this is supposedly a national security issue, and, in such matters, the courts almost always defer to the President. Secondly, the 1988 Exon-Florio amendment—which established CFIUS to look at any foreign investment that might represent a security danger—states explicitly that Presidential decisions on CIFIUS cases cannot be challenged in the courts.

However, in a 2014 decision involving a Chinese company—Ralls vs. CIFIUS—the US Court of Appeals ruled that, if the CIFIUS process itself is tainted because “due process” was not followed, then the President’s decision could be challenged. Nippon Steel and US Steel are expected to argue that CIFIUS and Biden used false national security pretexts to rationalize a decision made for electoral purposes.

It remains to be seen whether the courts would take the case, if so how they’d rule, and how long all this could take. It’s also unclear whether the courts would allow the acquisition to proceed while the case is being decided. However, all this would drag the issue into Trump’s term. In that case, Trump could try to use the National Emergency Act to ban the deal.

Using Emergency IEEPA Powers Over Foreign Investment

As is often the case, if Trump tried to use emergency IEEPA powers to block the purchase, he would be sailing in even more uncharted legal waters than he was when he called Canada and Japan, among others, national security threats in order to raise steel tariffs. Biden kept those tariffs going.

So, here is the scenario. All Trump has to do is declare some emergency under the National Emergency Act and then employ the NEA to put the International Economic Emergency Powers Act (IEEPA) into action. “The [NEA] law gives the President near-total discretion to declare a national emergency; there are no substantive criteria that must be met,” reports the respected Brennan Center. Congress cannot restrain the President unless it can cobble together a two-thirds majority. Meanwhile, as noted earlier, courts very rarely interfere with Presidential decisions made under the garb of national security.

Traditionally, Presidents have used IEEPA only for genuine national security issues. However, Trump “shattered this norm of restraint” and invoked IEEPA for purposes never envisioned in the law. Then Biden did the same. In 2019, when Congress refused to appropriate funding for a wall on the Mexican border, Trump flouted the Constitution—which gave Congress sole “power of the purse—by invoking the NEA over illegal immigration. He then shifted funds appropriated by Congress for other purposes to finance his wall. In 2022, when Congress refused to pass any bill forgiving student debt, Biden used the Covid declaration of an emergency to forgive up to $20,000 per student on the grounds that Covid made it harder for people to pay. After Trump lost the 2020 election, at least one of his aides proposed using IEEPA to seize voting machines based on the lie that Dominion Voting Systems, a foreign-owned corporation, had tampered with the votes. Apparently due to opposition from White House lawyers and others, Trump did not take that advice.

It is widely believed that Trump is considering using IEEPA to impose high tariffs on all sorts of countries, including military allies like Japan. The law says the President can impose tariffs in a national emergency. In his first term, Trump announced he would use IEEPA to impose high tariffs on Mexico until “the illegal migration crisis is alleviated through effective actions taken by Mexico.” He ended up not doing so because he said Mexico had agreed to take action. The only time IEEPA’s predecessor has been used to impose such tariffs was under Richard Nixon, who imposed a 10% tariff on all imports in 1971 on the grounds that a steep fall in the dollar’s value was an emergency. When American importers sued, saying this was not really an emergency, the courts backed Nixon.

If Trump does invoke IEEPA for tariffs, a respected law firm put out a piece on the web saying, “It is likely that courts could continue to broadly defer to the executive in matters of national security and foreign affairs.”

The law also allows using IEEPA to block both American investments overseas and foreign investments in the US. During his first term, Trump did consider using IEEPA to block all sorts of American investments in China and Chinese investments in the US. He ended up using other legal justifications instead.

As far as I know, there is only one precedent for using the IEEPA to block foreign investments and the legal lessons for that make unclear the outcome of any effort to use it to block Nippon Steel. Trump invoked the IEEPA to ban TikTok, a Chinese social media app, from operating in the US. However, in a rare case of defiance, the courts ruled against Trump because the law specifically exempts firms that provide information. That exemption would not apply to Nippon Steel.

Could Nippon Steel and US Steel Get An Injunction To Block Trump?

If Trump did use the IEEPA to block the merger, or any financial transactions between the two companies ever after the merger, Nippon Steel and US Steel could not proceed until the case was decided. To avoid that fate, they would almost certainly try to get a court injunction to prevent Trump’s edicts from being enforced while the case was underway. It’s unclear whether a judge would grant such an injunction, because there are no clear precedents for this sort of circumstance.