Biden, Harris, Trump, Vance and the Dumbest Economic Idea

America’s leaders all oppose Nippon Steel’s bid to make U.S. Steel more competitive

WSJ editorial. 

"A sign of the rotten political times is that President Biden, Kamala Harris, Donald Trump and JD Vance all agree on the dumbest economic idea of the presidential campaign so far: opposing Nippon Steel’s $14.1 billion acquisition of U.S. Steel. 

We’ll admit that the competition for the dumbest economic policy is fierce these days—with prices controls on food, a 10% across-the-board tariff, and national rent control on the table. But opposition to the Nippon deal deserves careful consideration for this distinct dishonor given the deal’s manifest benefits and nonexistent harm.

Ms. Harris is apparently undaunted by economic illiteracy, telling a Monday rally in Pittsburgh that “U.S. Steel should remain American-owned and American-operated.”

A politician with the U.S. national interest in mind would celebrate the Nippon Steel deal, which would boost U.S. manufacturing. The Japanese firm has promised to spend $2.7 billion refurbishing the Pittsburgh steel maker’s aging plants. It has also agreed to honor U.S. Steel’s collective-bargaining agreements with the United Steelworkers.

The union has nonetheless lobbied the Administration to block the deal because it prefers a takeover by Cleveland-Cliffs, a union shop like U.S. Steel. The union wants to create a domestic cartel shielded from competition by the Trump-Biden 25% steel tariffs.

A Cleveland-Cliffs merger with U.S. Steel would have increased market power to raise prices since it would control 100% of U.S. blast furnace production, 100% of domestic steel used in electric vehicle motors, and 65% to 90% of other domestic steel used in vehicles. Where’s antitrust scold Lina Khan when you need her?

Downstream U.S. manufacturers would pay higher steel prices, which is why auto makers opposed Cleveland-Cliffs’ bid last autumn. “Without competition in the U.S. for the production of e-steel, automakers face an increase in the cost of materials which could ultimately increase the cost of finished EVs for customers,” the U.S. auto-making lobby warned.

Cleveland-Cliffs lost the bidding auction to Nippon Steel, but CEO Lourenco Goncalves hasn’t given up. He has continued to lobby the Administration to nix the Nippon deal on dubious national-security grounds. “Japan is not a friend” of the U.S., he claims.

But then why is Washington deepening its defense cooperation with Tokyo? “As our Alliance cooperation reaches new heights, we are expanding our engagement to reflect the global nature of our partnership,” said a U.S.-Japan joint leaders’ statement in April. “Our purpose as partners is to uphold and bolster the free and open international order based on the rule of law that has allowed so many nations to develop and prosper.”

Political opposition from leaders of both major parties does the opposite of this boast. It sends the signal that foreign investment isn’t welcome in the U.S. and buying votes matters more than the rule of law.

After Mr. Trump pledged to block the deal in January, the Biden team ordered the Committee on Foreign Investment in the United States and Justice Department to investigate on security and antitrust grounds, though the deal doesn’t pose concerns regarding either. If anything, the deal would make the U.S. steel industry more globally competitive, which would enhance American security.

Investors now seem to think that politics will doom Nippon’s bid. U.S. Steel’s stock is trading at roughly the same price as before Nippon Steel’s announced takeover in December. Mr. Goncalves has boasted that he plans to offer a 45% discount to Nippon’s offer if the government kills the deal. Don’t expect workers to benefit. Cleveland-Cliffs in April closed a West Virginia plant and laid off 900 workers.

Employment at U.S. iron and steel mills is down roughly 7% compared to January 2020 as U.S. steel makers remain economically uncompetitive even with tariffs and no doubt in part because of them. A market protected from competition has less incentive to innovate.

Nippon Steel’s investment would help revitalize U.S. steel manufacturing. But these days America appears to be led by a confederacy of economic dunces."