The US House Committee on Foreign Relations fails to acknowledge the national security risks of the proposed takeover of US Steel.
The decision to allow Nippon Steel to take over US Steel has fallen to United States President Joe Biden after the government failed to agree on national security threats.
The failure of the Committee on Foreign Investment in the US (CFIUS) to agree on a $15bn deal on Monday increases the chances that Biden will prevent impeachment in his final days in office.
Mr Biden expressed his opposition to confiscation during the unsuccessful election campaign, insisting on the need for “a strong American steel industry run by American professionals”.
Following CFIUS's failure to reach an agreement, Mr. Biden has 15 days to approve the agreement or extend the time to make a decision.
US President-elect Donald Trump, who will take office on January 20, also criticized the agreement, referring to the proposed takeover of the Pittsburgh steel producer by Japan's largest steel producer as “a terrible thing”.
Under the terms of the acquisition, US Steel will become part of Nippon Steel but will retain its name and headquarters in Pittsburgh.
The combined company would be one of the largest steel companies in the world.
US Steel and Nippon Steel on Monday both urged Mr. Biden to allow the purchase to go through as planned.
“The agreement between US Steel and Nippon Steel improves national security and the US economy by promoting manufacturing and innovation – and the company is one of the most important partners of the United States – and creates cooperation in steel to eliminate the threat of competition from China, ” US Steel said in a statement.
“This is an experience that should be embraced on its own merits, and one that should serve as a model for more 'hanging out with friends'.”
The United Steelworkers Labor Union (USW), which has expressed doubts that Nippon Steel will keep jobs at the union's factories, reiterated its opposition to the takeover.
“The intent of the US Steel-Nippon transaction is nothing short of corporate greed, selling out American workers and jeopardizing the future of our nation's economy and security,” USW President David McCall said in a statement.
Although Republicans and Democrats are closely united against the deal, the opposition has strained US relations with Japan, one of Washington's closest allies.
Japanese Prime Minister Shigeru Ishiba last month wrote to Biden asking him to approve the deal to avoid damaging relations between the two sides, Reuters reported, citing two people familiar with the matter.