At his recent ‘liberation day’ event, Donald Trump was flanked by hard-hatted steelworkers, some holding posters saying “Thanks Mr President”, those thanks presumably being for his imposing swingeing tariffs on steel and aluminium imports.
Trump’s takeover flip-flop
Recalling that image now, you can’t help but wonder if some steelworkers are having second thoughts, following Trump’s about-turn on the takeover of US Steel by the Japanese company Nippon Steel, and especially given the lack of consultation with the union and ongoing lack of clarity on the details of the deal.
Trump originally opposed the takeover of US Steel, which has 22,000 employees in the US, on national security grounds during his campaign for the presidency and for a period following his election – Joe Biden had taken a similar stance. But following a meeting with the Japanese PM Shigeru Ishibain February, rumours circulated he Trump had changed his mind. Now he has given the deal the green light.
The Pittsburgh-based United Steelworkers union (USW) has consistently opposed the takeover of US Steel by an overseas company and Trump’s failure to consult with the them about Nippon’s investment (once again he signed off a major decision viaexecutive order) led the USW’s international president Dave McCall to comment: “Trust nothing until you see it in writing”.
Steel deal fails to consult unions
McCall’s statement – widely covered in the US media – was as follows:
“We have not participated in the discussions involving US Steel, Nippon Steel, and the Trump administration, nor were we consulted, so we cannot speculate about the meaning of the ‘planned partnership’ between US Steel and Nippon or the ‘golden share’ that some politicians have claimed will be issued to the federal government. Whatever the deal structure, our primary concern remains with the impact that this merger of US Steel into a foreign competitor will have on national security, our members and the communities where we live and work.”
The investment deal stipulates that the Japanese company must comply with a “national security agreement” submitted by the federal government. But as is normal nowadays, Trump’s executive order did not contain details of any of the terms of this agreement.
The mysterious ‘golden share’
US Steel and Nippon Steel said in a joint statement that the agreement stipulates that approximately $11bn in new investments will be made by 2028 and includes giving the US government a “golden share” in the company, but neither company could say how the golden share would work, and what and where Nippon’s investments would actually be.
It was left to US Secretary of Commerce Howard Lutnick to tweet his congratulations to Trump, and add some detail as to what “perpetual golden share” might mean.
Golden shares are in fact not unusual in strategically important companies. The UK has such an arrangement with BAE Systems (defence manufacturing) and NATS (air traffic control). Trump stated he would have total control over US Steel as part of the investment, and stated the deal would preserve “51% ownership by Americans”, which appears to mean the golden share is in US Steel and not Nippon Steel – the US government will only have control over Nippon’s US business (to be called US Steel) and also not its business operations in other countries.
National security concerns over Nippon deal
McCall confirmed the USW had communicated its serious concerns to Trump: “When the CFIUS [Committee for Foreign Investment in the USA] review was announced, we communicated to the Trump administration our concerns and objections.”
The USW pointed out that Nippon has a long history of committing unfair trade practices. The US International Trade Commission determined that the company violated US trade laws in 13 different trade cases. Last month, the Department of Commerce imposed duties of more than 200% on Nippon for the illegal dumping of steel. The USW has described Nippon as a “bad actor” who had violated trade laws, devastating steel communities in Pennsylvania and elsewhere.
Global steel market
The impact of the merger on the global steel market is still being assessed. But combining Nippon Steel’s fourth place in global crude steel production (94mn tons) with US Steel’s 27th position, puts the new entity into 3rd spot behind China’s Baowu Group and Luxembourg-based ArcelorMittal.
Nippon also gains control over US iron ore and scrap metal supplies, which will reduce Chinese imports and could cut costs through economies of scale. The new entity will have US Steel’s expertise in automotive steel making and Nippon’s dominance in the manufacture of electrical arc steel for electric vehicles, putting them into a formidable position in the energy transition market.
As with all things Trump is involved in, there are more questions than answers and steelworkers in the USA – and in other countries – will be watching carefully to see how the merger will work, and not least where the investment money will go, whether into existing plants or a Greenfield site.
As for the UK, although Keir Starmer was able to finalise important parts of the UK-US trade agreement relating to autos and aerospace at the G7 in Canada, an agreement on steel and aluminium is still outstanding.
Reuters reports that “the U.S. intends to impose a quota on steel and aluminium imports from the UK which would be exempt from 25% tariffs, but it is conditioned upon Britain’s demonstrating security on steel supply chains and production facilities. The quota level will be set by US Commerce Secretary Howard Lutnick”.
Unite’s national officer for engineering and steel, Linda McCulloch, said that “the impact of the Nippon–US Steel deal may not directly affect the UK steel industry, but steel is under pressure due to global over capacity. Nippon is now large enough to be a dominant player and there is a risk that UK steel plants could be squeezed even more. That’s why the government’s agreement to save the Scunthorpe mill – to secure major contracts such as HS2 – and the reason we need a zero tariffs deal with the USA, is so important to the industry”.
