David Brunnstrom, Simon Lewis (JO:), Trevor Hunnicutt and Tim Kelly
WASHINGTON/TOKYO (Reuters) – U.S. President Joe Biden’s decision to block Nippon Steel’s $14.9 billion bid for U.S. Steel cast a shadow over Secretary of State Antony Blinken’s visit to Japan on Tuesday for farewell meetings with Washington’s most important ally in Asia.
The withdrawal announced Friday undermines U.S. efforts to strengthen ties with Asian allies, while the political crisis in South Korea potentially complicates a renewed relationship between Washington, Seoul and Tokyo. The trilateral alliance is key to countries’ efforts to counter China’s military buildup.
Investment in the U.S. may also be cooled, but analysts say any damage to the broader U.S.-Japan relationship is likely to be limited given overall concerns about China’s security.
On Monday, Japanese Prime Minister Shigeru Ishiba called Biden’s decision to block the sale of US Steel to Nippon Steel “puzzling.”
Accompanied by White House national security adviser Jake Sullivan, Blinken met with Japanese Foreign Minister Takeshi Iwaya in Tokyo and will hold talks with Ishiba and other senior Japanese officials later in the day.
Numerous trips to Japan over the past four years “are a testament to not only the importance, but also the centrality, that the United States places on our partnership. President Biden asked me to come on this latest trip to highlight that,” Blinken told Iwaya.
“There is a partnership between our two countries that first focused on bilateral issues, then worked on regional issues, and has now become truly global,” he added.
Ahead of the trip, the State Department said Blinken wanted to build on the momentum of trilateral cooperation between the United States, Japan and South Korea.
In Seoul on Monday, Blinken reiterated confidence in South Korea’s handling of political turmoil as investigators sought an extension of the arrest warrant against impeached President Yoon Seok-yeol.
Allies of US President-elect Donald Trump also assured Seoul and Tokyo that he would support further improvements in ties and military, economic and diplomatic cooperation to counter China and North Korea, Reuters reported ahead of Trump’s re-election on November 5.
VOLTAGE, LIMITED DAMAGE FROM NIPPON STEEL SOLUTION
Nippon Steel and U.S. Steel filed a lawsuit Monday accusing Biden of violating the U.S. Constitution by blocking their $14.9 billion merger through what they called a sham national security review. They called on the US federal court to overturn this decision.
Nicholas Szechenyi, a Japan expert at the Washington-based Center for Strategic and International Studies, said Biden’s decision would make Blinken’s visit to Tokyo “awkward.”
However, “Japan will not allow Nippon Steel’s decision to poison US-Japan relations; it is too important for Japan’s national security,” he said.
A Japanese diplomat told Reuters Biden’s decision could curb foreign direct investment but said he hoped close US-Japan relations would continue, with a strong emphasis on restoring the strong ties with Trump seen during his previous administration and taking advantage of increasingly hawkish sentiment . in Washington on China.
Business lobbies in both Japan and the United States vigorously pushed for the merger, bolstering their arguments with warnings about its consequences for the vital relationship between the United States and Japan.
But the merger has faced opposition from both Biden and Trump, who takes office on Jan. 20 and has been courted assiduously by Japan ahead of his re-election.
Trump repeated after his re-election that he was “totally opposed” to the merger and vowed to block his presidency and support US Steel with tax breaks and tariffs.
A former senior official in Trump’s first administration told Reuters he believed Trump would have taken the same approach as Biden.
Mark Bush, a research fellow at Georgetown University’s McDonough School of Business, predicts “significant consequences” for U.S. efforts to work with allies to build resilient supply chains in the face of Chinese dominance or competition in key areas.
“Japan and other allies will be hesitant to invest in or cooperate with politically sensitive US supply chains. China must be chuckling to itself that it could never have hoped for a better result.”