Political Challenges to Friend-Shoring Policy Amid U.S. Steel Acquisition Debate

Friend-Shoring Policy Faces Political Scrutiny

The Biden administration has dedicated the past three years to advocating a policy known as “friend-shoring,” which seeks to contain the influences of China and Russia by cultivating stronger partnerships with U.S. allies, particularly in Europe and Japan. However, this policy seems to hit a roadblock within the borders of Pennsylvania.

As the administration approaches a critical decision regarding the proposed acquisition of Pittsburgh-based U.S. Steel by Japan’s Nippon Steel, the conventional discourse surrounding national and economic security is overshadowed by a more formidable force: the dynamics of presidential politics.

Legal experts, Wall Street analysts, and economists have raised alarms about the implications of President Biden potentially using executive authority to impede a transaction involving a company from an allied nation acquiring an American enterprise. They caution that halting this $15 billion deal would set a significant precedent, marking a drastic shift from the United States’ longstanding tradition of welcoming foreign investment. Such a move could prompt international corporations to reconsider their commitments to the U.S. market.

Christopher B. Johnstone, a senior adviser and the Japan chair at the Center for Strategic and International Studies, stated, “This decision appears to be rooted in political motivations, contradicting the Biden administration’s professed aim of strengthening alliances with like-minded nations to enhance economic competitiveness against China. Ultimately, it reflects a form of protectionism that fails to differentiate between allies and adversaries.”

Administration officials, including Treasury Secretary Janet L. Yellen, who leads the governmental review panel for the steel deal, have consistently highlighted the advantages of reinforcing economic ties with U.S. allies to bolster supply chain resilience. Nevertheless, these sentiments seem to be overlooked amid the fervor of an election year, where domestic political considerations take precedence.

The Biden administration is grappling with mounting pressure to justify blocking the Nippon acquisition, particularly in light of the backlash from the influential steelworkers’ union. The labor organization contends that while Nippon has committed to investing in Pennsylvania facilities and safeguarding jobs, the deal could pose risks to pension agreements and lead to potential layoffs of employees.