President Biden’s decision to block the sale of United States Steel to the Japanese company Nippon Steel is a “back to the future” moment in American politics.
The move is a victory for forces in the Democratic Party who want to turn back the clock to a time before the party endorsed free trade and globalization. It also echoes what another Democratic president, Harry Truman, did 70 years ago when he seized steel mills in this country. Like Biden, Truman acted in the name of national security.
Nippon first made its bid in December 2023. It wanted to invest in the United States because of Biden’s “use of tax incentives and subsidies to spur domestic production. Buying U.S. Steel… would enable it to capitalize on the U.S. industrial rebound.”
The proposed purchase of U.S. Steel by a foreign company also signified the declining fortunes of America’s industrial giants. U.S. Steel, as the Washington Post notes, “boasts an impressive history: It was the nation’s first billion-dollar corporation, was formed by industrial heroes including John D. Rockefeller and provided the raw material that helped win World War II.”
But, the Post explains, “it no longer is the industrial titan it once was.” Today it employs “half as many workers as it did 20 years ago and has lost money in nine of the past 15 years.”
At one time, the Nippon deal would have been welcomed, especially by leaders of the Democratic Party. It would have been regarded as a natural and healthy sign of a well-functioning global economic market.
But no more.
In light of Donald Trump’s November victory, some commentators have been encouraging “Democrats and those on the left … (to) start acting more like Republicans, the MAGA movement especially.” At the heart of such an “imitation is the sincerest form of flattery” approach would be “policies to encourage manufacturing in the United States.”
During the presidential campaign, Trump made his opposition to the sale of United States Steel crystal clear. He reiterated that position last month when he said: “I am totally against the once great and powerful U.S. Steel being bought by a foreign company, in this case Nippon Steel of Japan. I will block this deal from happening. Buyer Beware!!!”
Embracing Trump’s brand of a populist protectionism would have been anathema to the two previous Democratic presidents, Bill Clinton and Barack Obama.
When he was in office, President Clinton talked about globalization as an inexorable force that would, in his view, benefit America and American workers. One sympathetic retrospective on his presidency gave him credit for telling the American people that “nations around the world could not dam up the tides of globalization nor tell their people to sink or swim on their own.”
Encouraging foreign direct investment in this country, like the Nippon’s purchase, was a key part of Clinton’s response to a globalizing economy. Between 1992 and 2000, it increased from $30 billion a year to over $300 billion a year.
And, following Clinton, President Obama proudly announced in 2013 “the first-ever comprehensive, all hands on deck effort led by the federal government to bring jobs and investment from around the world to the U.S.” Obama was eager to take credit for making the United States “the top destination for foreign direct investment.”
On his watch, foreign direct investment increased by more than $100 billion dollars.
But that was then. Today we are living in a world increasingly dominated by economic nationalism and protectionism.
During President Trump’s first term, foreign direct investment in this country plummeted, partially fueled by the pandemic. In 2020 it fell back to its lowest level since 2005.
In Biden’s first year, it rebounded to its pre-pandemic levels. But it has dropped every year since.
As the Carnegie Endowment for Peace’s Bentley Allen reports, the Biden administration “articulated the core principles of a new international economic order centered on industrial policy. In this vision, the U.S. government will take an active role in reshaping supply chains to ensure its national security, fight climate change, and reduce inequality.”
This brings us back to what Biden did about the United States Steel sale. Here we can see how an industrial policy with an emphasis on national security works, and how Biden’s decision would have made Harry Truman proud.
In announcing his decision, the president relied on authority granted to him under Section 721 of the Defense Production Act of 1950. Among other things, that act authorizes the president to ensure “the ability of the domestic industrial base to supply materials and services for the national defense.”
Biden prohibited the proposed sale because he found “credible evidence” that, should it acquire United States Steel, Nippon “might take action that threatens to impair the national security of the United States.”
That decision came after the Committee of Foreign Investment in the United States, made up of representatives from several federal agencies, made no formal recommendation to the president concerning Nippon’s bid.
It cleared the way for Biden to claim that national security would be imperiled if a company located in one of this country’s closest allies purchased United States Steel. He did so even though, as the Post points out, “The U.S. military’s annual steel requirements … amount to just 3 percent of total domestic production, according to the Pentagon, suggesting U.S. Steel by itself is not essential to the national defense.”
He did so to show solidarity with the United Steel Workers of America, whose leadership vigorously opposed the sale.
As any student of American history knows, we’ve seen this all before.
During the Korean War, as the Truman Library notes, steel unions “wanted to capitalize on their importance to the defense efforts by … (securing) wage increases.” When the companies resisted, “the unions threatened to strike, and a domestic crisis began.”
“Truman immediately threw his support behind the union workers, as they were some of his biggest political supporters.” But on April 8, 1952, Truman issued Executive Order 10340 authorizing the seizure and operation by his administration of the steel industries.
Like Biden, he invoked national security as a justification for his action. In a speech to the nation, Truman said, “If steel production stops, we will have to stop making the shells and bombs that are going directly to our soldiers at the front in Korea. If steel production stops … it won’t be long before we have to stop making engines for the Air force planes.”
“As President of the United States,” Truman said, “it is my plain duty to keep this from happening.”
Duty or not, the seizure of the steel mills did not end up well for Truman. The companies sued, and the Supreme Court delivered a stern rebuke to the president. Among other things, it found that the Defense Production Act “affords no ground” for his action.
Like Truman before him, Biden made what The New York Times rightly calls “an extraordinary use of executive power.” Like Truman, his use of that power will soon face a court challenge.
By the time it is finally resolved, Biden will be gone and the burden of a court judgment will fall on the Trump administration. Whatever the outcome, Biden’s decision signals the new posture of the Democratic Party and serves as a reminder of just how much a president can do under the broad and often vague umbrella of national security.
Austin Sarat is the William Nelson Cromwell Professor of Jurisprudence and Political Science at Amherst College. His views do not necessarily reflect those of Amherst College.
