Market analysts interpreted Trump’s remarks as a sign that Nippon Steel has secured his backing for its acquisition of US Steel.
In a significant development on the economic front, President Donald Trump conveyed his endorsement of Nippon Steel’s $14.9 billion proposal to acquire US Steel, emphasizing that their “planned collaboration” would foster job creation and bolster the U.S. economy.
Following Trump’s announcement, US Steel shares experienced a remarkable 21% surge, fueled by investor optimism from a post on Truth Social which suggested that Nippon Steel had cleared a major hurdle in gaining presidential approval for the acquisition.
Trump asserted, “This partnership between United States Steel and Nippon Steel is projected to generate at least 70,000 jobs and inject $14 billion into the American economy,” during his post on Friday.
According to Reuters, Nippon Steel plans to invest $14 billion into US Steel’s operations if the merger goes through, with as much as $4 billion earmarked for a new steel mill.
The president noted that the majority of this investment is anticipated to unfold within the next 14 months and announced plans for a rally at a US Steel facility in Pittsburgh next Friday.
Nippon Steel expressed gratitude for Trump’s endorsement of the merger. The White House, however, did not respond immediately to inquiries regarding the announcement.
After market hours, US Steel’s share price climbed higher, reaching $54, closely approaching Nippon Steel’s proposed price of $55-per-share from late 2023. While no specifics were disclosed, investor confidence remained high, with expectations that the deal terms will mirror those previously negotiated. Investors speculated that US Steel would eventually transition to private ownership, leading to cash payouts for shareholders.
A Controversial Deal
The proposed acquisition has generated considerable buzz on Wall Street, particularly due to its political implications amidst concerns that foreign ownership might threaten jobs in Pennsylvania, where US Steel is headquartered. This issue played a notable role in last year’s elections, contributing to Trump’s return to the presidency.
Pennsylvania Senator Dave McCormick characterized the deal as a “partnerhsip” and labeled it a “major victory for America and the US Steel Corporation,” asserting it will safeguard over 11,000 jobs in Pennsylvania while enabling the creation of at least 14,000 additional employment opportunities.
Remarkably, the final barriers to the deal fell into place in swift succession. The Committee on Foreign Investment in the U.S. (CFIUS), responsible for assessing national security risks associated with foreign investments, recently conveyed to the White House that any existing risks could be mitigated, clearing the way for Trump’s decision on the acquisition.
In January, the Biden administration had previously blocked the merger on national security grounds.
The companies subsequently litigated, claiming they were denied a fair evaluation. The Biden White House countered that their review was crucial for safeguarding national security, infrastructure, and supply chains.
Critics noted that Biden’s opposition to the deal stemmed from his campaign strategies aimed at securing support from the United Steelworkers union in battleground Pennsylvania. At one point, Trump himself had also shown hesitation, arguing for the necessity of domestic ownership and operation for US Steel.
Only recently, the United Steelworkers had voiced their opposition, urging Trump to reconsider the deal, despite his investment promises.
For investors, including key hedge funds, this news brings a sense of relief after a protracted waiting period for an outcome. One investor shared, “Today was filled with high-fives. We understood Trump’s mindset and leveraged it to our advantage.”
Investors indicated that the increase in investment commitments has shifted the dynamics favorably for Trump.
“This deal guarantees the future of steel production in Pittsburgh for generations to come,” remarked another investor.