National View: Biden wants his steel cake and to eat it too – Duluth News Tribune

President Joe Biden’s administration recently announced tariffs on Chinese steel imports. These tariffs are ostensibly acceptable when he imposes them, but they became xenophobic when former President Donald Trump used them. This is another example of Biden showing he wants to have his cake and eat it too when he goes easy on the Rust Belters—much like he resisted the US Steel/Nippon Steel deal.

Pennsylvania-based U.S. Steel has been considering offers for its business. A year ago, Ohio-based Cleveland-Cliffs offered $7.3 billion to buy the company. That offer was quickly surpassed by Tokyo-based Nippon Steel, which offered $14.1 billion, the News Tribune reported Feb. 2. U.S. Steel CEO David Burritt recently said the latest deal would likely close this year.

Nippon Steel’s annual output is 44.37 million tons, compared with 14.49 million tons for U.S. Steel, according to data from the World Steel Association. If the two were to join forces, like some kind of Japanese super-robot, they would become the world’s third-largest steel producer.

Cleveland-Cliffs would now rather acquire its local rival than have it bought by an international competitor. However, rather than shell out an additional $7 billion to outspend Japan, it is using the much cheaper alternative of fearmongering in the middle of an election year to scare US Steel into making a deal.

They are right. Cleveland-Cliffs stock is in free fall, down 30%. The decline in the stock’s value has been attributed to the general economic situation, but Barrons analysts also attribute the decline to operational missteps by CEO Lourenco Goncalves. The Zacks Ranks system gives it a 4/5 (Sell).

The narrative is increasingly changing: U.S. Steel does not need Cleveland-Cliffs to survive as much as Cleveland-Cliffs needs U.S. Steel. Opponents of the Japan deal do not want this narrative to change, imagining a 1950s-style renaissance of domestic manufacturing if the Japanese investment agreement can somehow be stopped. It is a classic example of the fallacy of the false alternative. The truth is that no such renaissance will occur.

Americans—and probably almost everyone—attach a patriotic importance to manufacturing.

Opponents of the Nippon Steel deal are using this kind of strategy. The muscular manufacturers at Bethlehem Steel played a slightly more important role in winning World War II than the nerdy accountants at Ernst & Young.

Spoiler alert: World War II ended 80 years ago. And today, Japan is our fourth largest trading partner. The Americans and the Japanese have been close friends for decades.

If our domestic steel industry is not supported by this kind of capitalization, the much greater threat is an oversupply of Chinese steel that gives the Communist Party another advantage.

If the Nippon-US Steel merger does not go through, the most likely outcome will be the splitting of US Steel into several parts. Cleveland Cliffs is expected to divest its assets because of Federal Trade Commission Chairwoman Lina Khan’s antitrust-friendly attitude that “big companies are bad.” While Nippon Steel has promised to maintain the status quo in its domestic operations, with the exception of moving its headquarters from Houston to Pittsburgh, the uncertainty about any other outcome is questionable for employees’ short-term employment prospects and long-term retirements.

If part of U.S. Steel ends up in the hands of Chinese or foreign rivals, pensions will not be as secure as they would be if the company remained intact. And it will not influence the presidential election.

Businesses in swing states often get a lot of attention during presidential elections, as candidates compete to win over independent voters with their economic message. Trump won Pennsylvania in 2016, lost it to Biden in 2020, and now has a slight lead there. Both have publicly said they oppose the Nippon Steel acquisition.

The merger of Nippon Steel and US Steel would solve serious problems in our domestic manufacturing industry. The shenanigans of a struggling competitor in the middle of an election year should not be used to determine responsibility.

Jared Whitley is a veteran Washington politician, having served in the U.S. Senate, the White House under President George W. Bush and in the defense industry.

Jared Whitley

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