US-Japan Steel Deal Is Not Just Business—It Helps America to Compete Against China

Prime example of friend-shoring as the allies aim to close the gap on China

- Walter Sim

TOKYO - A trade deal that relieves Japan from hefty auto and "reciprocal" tariffs imposed by its security ally, the United States, remains far off.

Japanese Prime Minister Shigeru Ishiba admitted as much on June 16 when he cited persisting disagreements despite two face-to-face meetings, four telephone summits and six rounds of Cabinet-level negotiations.

But he would be relieved that his personal intervention led to a change of heart by US President Donald Trump towards a multibillion-dollar deal in the steel sector with wider implications outside the boardroom.

On June 18, Japan's Nippon Steel finally signed, sealed and delivered on its acquisition of US Steel after an 18-month takeover battle, forming the world's second-largest steelmaker by production capacity.

The US$14.1 billion (S$18.2 billion) deal was riddled with minefields, having suffered from the political whiplash of the 2024 US presidential election. It was initially blocked on "national security" grounds by Mr Trump's predecessor Joe Biden and opposed by Mr Trump, who then indicated a U-turn after meeting Mr Ishiba for the first time in February.

Much attention has been focused on the "golden share" the US government holds. Although Washington does not hold any actual shares in the company, it has veto power over key corporate decisions.

In getting the transaction across the finish line, Japan demonstrated some savvy in the art of the deal in an undertaking that has geostrategic value. The idea of giving the White House a "golden share", Nippon Steel chief executive Eiji Hashimoto told reporters on June 19, had come from the company.

The acquisition effectively shields Nippon Steel from steel import tariffs, which Mr Trump doubled to 50 per cent from June.

Japan exported 31.4 million tonnes of steel in 2024 including 1.1 million tonnes to the US worth 302.7 billion yen (S$2.7 billion), according to data from Japan's Finance Ministry.