Benzinga - by Benzinga Neuro, Benzinga Staff Writer.
Donald Trump’s recent announcement to impede Nippon Steel’s (OTC:NPSCY) proposed acquisition of United States Steel (NYSE:X) could have significant implications for Japan. The potential failure of the $15 billion deal may prompt Japanese companies to adopt a more cautious approach to future acquisitions in strategic sectors.
What Happened: Trump’s threat to thwart Nippon Steel’s acquisition of U.S. Steel, if he is re-elected, has sparked concerns among Japanese investors, reported Reuters on Monday. The deal, which symbolizes the limits of “friendshoring” between allies, is already facing criticism from U.S. lawmakers and the United Steelworkers union.
Former Japanese Ambassador to the U.S., Kenichiro Sasae, believes that the collapse of the deal could serve as a cautionary tale for Japanese investors. This could potentially impact future acquisitions in sensitive industries, signaling that countries prioritize their core interests despite increased economic cooperation between allies.
“Failure to strike a deal has the potential to damage investment ties and set back friendshoring initiatives,” said Stefan Angrick, a senior economist at Moody’s Analytics.
A former senior Japanese government official highlighted that the Nippon-U.S. Steel situation is a stark reminder for Japanese firms to look into the political implications of their deals with the U.S.
“We thought we’re completely aligned countries,” he expressed.
Trump’s protectionist policies during his previous term have been a key factor in the opposition to the Nippon-U.S. Steel deal. The deal’s failure could also raise costs for businesses and consumers, affecting Japan’s direct investment in the U.S., which reached 27 trillion yen ($180 billion) in 2022.
Why It Matters: This development follows Japan’s efforts to communicate its concerns about potential China deals to Trump. Japan has been warning Trump against any agreements with China that could destabilize the region, given his recent victories in Republican primaries.
Meanwhile, former Treasury Secretary Larry Summers has defended Nippon’s acquisition of U.S. Steel Corp. amid the Biden administration’s national security concerns. Summers argued that there is no genuine national security rationale for opposing the deal, emphasizing Japan’s status as a staunch ally.
However, the deal’s potential impact on national security and supply chain reliability has led to a review by the Committee on Foreign Investment in the United States, a process that could take months. The deal’s failure could also prompt Japanese companies to reevaluate their approach to future acquisitions, potentially impacting their expansion plans in the U.S.
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