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President Joe Biden is expected to block a $15 billion deal by Japan's Nippon Steel to buy US Steel, ending months of intense lobbying and a setback in Washington's relationship with its closest Asia-Pacific ally.
In one of his last acts in government, Biden – long opposed to the takeover – is expected to announce as early as Friday his decision to kill the proposed acquisition of the American steelmaker, according to two people familiar with the matter.
One of the people said the White House had not been notified Nippon Steel about the decision.
The president's expected move comes after an investment review review by the agency, known as the Committee on Foreign Investment in the US (Cfius), failed to reach an agreement the December 23 deadline for whether the acquisition posed a threat to national security.
Two people close to the situation said Nippon Steel is likely to take legal action against the outgoing president's ruling.
One person said such an action could, during the discovery process, show the extent to which the decision was guided by politics rather than concern for national security. This process will expose the limitations of the Cfius system and its vulnerability to political interests.
Nippon Steel declined to comment.
President-elect Donald Trump too threatened to terminate agreement and pledge to protect the Pittsburgh-based company with a mix of taxes and tax incentives.
The end of this year-long saga marks the failure of the Japanese team's gambling skills in the near future he has turned into a weak political figure in an election year. It also represents a significant departure from the long-standing open investment environment of the US.
Biden's decision risks undermining four years of work to reassure allies such as Japan of their special relationship with the US amid strategic competition with China and a shift to protectionism, support for labor unions and an “America first” sentiment in US politics.
US officials and Japanese government officials fear broad measures in investment and M&A by Japan and other allies in the United States and the impact of strengthening the US-Japan alliance.
Takahiro Mori, a vice president at Nippon Steel, led the Japanese steelmaker's last-ditch effort to win over government officials and union members in Washington and Pennsylvania.
Those efforts include a new proposal this week that allowed the government to review any reductions in steelmaking capacity at most of Nippon Steel's US plants, in addition to a series of other guarantees on jobs and investment.
The signal followed concerns from Cfius that US Steel could reduce domestic steel production under Japanese ownership, affecting key industries in the country.
However, those moves were of little help, as some of Biden's top advisers tried to talk him out of blocking the deal.
Its death marks a victory for Katherine Tai, the US trade representative, and David McCall, president of the United Steelworkers union, who were two adversaries.