Chicago Tribune (TNS)
At the Democratic National Convention in Chicago last month, Vice President Kamala Harris did not say much about China. But we did hear her say she intended to ensure “that America, not China, wins the competition for the 21st century and that we strengthen, not abdicate, our global leadership.”
So why, we wonder, is the administration in which Harris serves planning to block the merger of U.S. Steel with Japan’s Nippon Steel?
Here would appear to be an easy way to follow through on what Harris promised in her acceptance speech. Nippon Steel is interested in this deal not least because it wants to strengthen itself against cheap Chinese imports glutting the market.
We don’t necessarily buy the rhetoric that Japan and the U.S. should use this deal as some kind of alliance against Beijing’s trade practices. But we do think that Nippon Steel was well advised to look for ways to strengthen its hand and that the U.S. Steel board of directors was free to approve the $14.9 billion acquisition offer, as they did in April. Nippon says the investment will revitalize American steel manufacturing and pay dividends in further industrial cooperation, and most economists, liberal and conservative, agree.
Let’s be clear on something else. Japan is a staunch U.S. ally, making very weak tea of whatever national security argument has been dreamed up here. Japan was the largest source of foreign direct investment in the U.S. in 2023, thanks in no small part to the Japanese auto brands. And as China continues to do what China does, the cooperative U.S.-Japan relationship will only grow in importance. So what is going on here?
It’s pretty simple. Both the Democrats and Donald J. Trump’s protectionist Republicans are terrified of losing Pennsylvania, a vital state come November. That means they fear the political might of the United Steelworkers union, even though many employees of U.S. Steel are in favor of the merger with Nippon.
Furthermore, U.S. Steel is not just of interest to Pennsylvanians, even though it’s headquartered in Pittsburgh. The company’s largest domestic operation is Gary Works, a familiar sight on the Indiana shore of Lake Michigan since 1908, and the company also has plants in East Chicago and Portage, Indiana.
The Gary South Shore RailCats play their baseball at U.S. Steel Yard; heck, Gary was founded as a company town and named after the chairman of this very company. To say that U.S. Steel remains a vital economic anchor is an understatement.
Metro Chicago and Indiana both have a big stake in the fate of U.S. Steel. Nippon Steel has promised major new investments in these Midwest facilities, including $300 million for Gary Works alone. Gary’s long-term economic distress hardly needs further detailing; that community is in serious need of the kind of support Nippon has offered. If the deal falls through, U.S. Steel President David Burritt has said, jobs in the older facilities in Gary may go.
Gary is not well positioned to take that kind of risk. There are more than 4,000 workers employed by U.S. Steel in Gary and their well-paying jobs impact the city’s tax base.
Indiana is not a swing state, of course. But that should have no relevance here.
