President Biden shocked the financial markets, his own national-security leadership and America’s alliance partners with a ham-fisted decision to block Nippon Steel’s takeover of US Steel last week.
Political machinations were always going to be present in the Japanese acquisition of a dying yet iconic American steelmaker.
Indeed, both Biden and returning President Trump had said they would scuttle the deal, offering the kind of populist rhetoric one would expect from the bully pulpit where Pennsylvania jobs were on the line in the all-important swing state.
Yet, Biden is never expected to return to public life. During this lame-duck period, he could have secured a legacy of putting country ahead of politics and economic prudence over populist cosplay.
He could have demonstrated that America is open to business — especially with our most important allies, and particularly in industries like steelmaking that are critically important for domestic security and yet underfunded and uncompetitive in global markets. He failed.
If today’s multipolar world requires the sophisticated playing of three-dimensional chess, Biden has shown he plays tic-tac-toe — and puts an X where an O would have secured victory.
Trump is unlikely to reverse Biden’s Nippon decision, but the greater question is whether America can unlearn decades of deindustrialization and come to terms with today’s reality: We need all the help we can get — even in our most sensitive industries — if we are to rebuild and reindustrialize for a more abundant, prosperous and secure future.
Deindustrialization has been the industrial policy of choice for America and much of the West since the 1970s.
By offshoring low-value manufacturing to places like East Asia, where labor was cheap and environmental regulations were lax, America could instead focus on higher-value activities from product design to capital allocation.
It was a policy enacted in Washington, slung by investment bankers, management consultants and efficiency-seeking CEOs and backstopped by academic economists.
They weren’t wrong: Deindustrialization has been an extraordinary boon for America’s aggregate wealth. America now hosts seven of the top 10 global companies by market cap.
Yet the flaws of deindustrialization have become glaring.
Yawning inequality has offered great riches to the few, but for millions of others, America’s strategy has meant a large-scale demotion from productive manufacturing jobs to low-end service professions with limited income potential or career growth.
Our complex and distended supply chains also mean thousands of critical products, from semiconductors and biologics to aerospace parts and rare-earth minerals, are no longer produced domestically at globally competitive scale.
The solution is to reverse the osmosis of American manufacturing out and instead import ingenuity back in.
Companies headquartered in allies like South Korea, Taiwan and Japan are interested in building out and acquiring manufacturing plants in the United States under the right conditions.
Which leads us back to US Steel.
America is now the fourth-largest steelmaker in the world, producing an estimated 81.3 million tons and trailing China, India and Japan.
US Steel itself represents about a fifth of the American market, yet it’s no longer internationally competitive — selling steel at significantly higher prices and in need of steep trade tariffs just to keep the company viable.
Such tariffs directly raise the cost of everything that uses steel, from new buildings to heavy machinery.
Nippon Steel’s takeover offer wasn’t just a financial lifeline for a struggling company but also an opportunity to import technical know-how and competitive strategies from a successful business.
A stronger, more global and more competitive US Steel is in the obvious best interest of the United States.
Yet Biden said, “We need major US companies . . . to keep leading the fight on behalf of America’s national interests” — channeling a hubristic, go-it-alone industrial strategy that fails to meet the demands of the 21st century.
In a choice between no industry and an industry underpinned by Japanese capital and experience, we apparently would prefer to go without.
We can no longer afford Biden and his ilk’s nostalgia.
America’s strengths remain what they have always been: openness to new ideas and technologies, as well as a peerless belief in the power of market competition to discipline companies to pursue their own profitable advantages.
In scuttling the takeover of US Steel, Biden made clear that America is neither open nor secure enough to allow one of our most important allies to have a foothold in domestic steelmaking.
It’s time to move on and open America’s mind so we can reindustrialize once again.
Danny Crichton is a fellow at the Manhattan Institute and the head of editorial at Lux Capital. Adapted from RealClear Pennsylvania.
