US President Joe Biden has blocked the proposed $14.9 billion acquisition of US Steel by Japan’s Nippon Steel, citing national security concerns and fulfilling a campaign promise to protect American industries. The decision has raised tensions with Japan and sparked fears about its impact on future foreign investments in the US.

Biden explained that foreign ownership of US Steel posed risks to national security, emphasizing that maintaining a strong, domestically-owned steel industry is essential for national defense and infrastructure. “Steel powers our country: our infrastructure, our auto industry, and our defense industrial base,” Biden said in a statement. He also stated that the transaction would undermine the resilience of US supply chains, particularly in critical sectors.

The move follows pressure from the United Steelworkers union, which had expressed concerns over the potential loss of jobs and the long-term viability of the steel industry. The union hailed Biden’s decision as “the right move for our members and our national security.”

Nippon Steel and US Steel, however, strongly condemned the decision, claiming that the review process had been manipulated for political purposes. The two companies stated they would take “appropriate action to protect their legal rights,” signaling the possibility of a legal challenge. They also argued that the merger would have strengthened the US steel industry, improved competitiveness, and safeguarded American jobs.

Japanese officials reacted swiftly, with Yoji Muto, Japan’s industry and trade minister, expressing disappointment over Biden’s decision. Muto warned that it could harm future investment between Japan and the US, adding that the Japanese government would take the matter seriously. The decision has also raised concerns within the business communities of both nations.

The proposed merger, announced in December 2023, had been closely watched by both governments. Nippon Steel, the world’s fourth-largest steelmaker, had aimed to expand its presence in the US by acquiring US Steel, a company with a storied history in American industry. US Steel had warned that without the merger, it might be forced to close factories, affecting workers and local communities, particularly in Pennsylvania, a crucial swing state in the upcoming 2024 election.

Despite the companies’ efforts to allay concerns, including pledges to protect jobs and fund workforce training programs, Biden stood firm in his opposition. The decision has drawn criticism from various quarters, including conservatives and business groups, some of whom argue that it could deter foreign investments in the US.

White House spokesperson John Kirby defended the move, clarifying that it was not aimed at Japan but at preserving US steel-making capabilities. Analysts speculate that Nippon Steel and US Steel may attempt to renegotiate the deal under a future administration, potentially with more favorable terms.

The fallout from the decision could have lasting effects on US-Japan relations, with some questioning the impact on bilateral ties and future economic cooperation.

The euro weakened further against the US dollar, reaching a fresh low not seen in over two years, as concerns grow over the Eurozone’s economic outlook, political instability, and monetary policy divergence between the European Central Bank (ECB) and the Federal Reserve (Fed).

On Thursday, the euro fell 0.9% against the US dollar, reaching 1.02, its lowest level since November 21, 2022. This decline continues the currency’s downward trajectory into the new year, fueled by fears over economic stagnation in the Eurozone and the policy rift between the ECB and the Fed.

The EUR/USD pair has plunged from a high of above 1.12 in September 2024, marking a 9% drop over the past three months. The US dollar has gained strength, aided by a more hawkish Federal Reserve and growing political uncertainty under the presidency of Donald Trump, whose policies have increased market volatility.

Analysts predict that the euro could soon reach parity with the dollar in 2025, a level last seen during the height of the Russian invasion of Ukraine. This outlook is further clouded by escalating geopolitical risks and the economic impact of the war in Ukraine. On Wednesday, Ukraine halted Russian gas transit to Europe after a five-year contract expired, forcing European countries to turn to more expensive heating alternatives during a particularly harsh winter. Natural gas futures surged to a two-year high earlier this week before retreating to $3.66 per million British thermal units (MMBtu).

Adding to the Eurozone’s economic woes, weak manufacturing data has highlighted the region’s ongoing struggles. S&P Global’s December PMI showed continued contraction in both France and Germany’s manufacturing sectors. France recorded its sharpest decline in manufacturing activity since May 2020, while Germany saw its manufacturing output hit a three-month low. France’s central bank has also downgraded its economic growth forecast for 2025, now predicting just 0.9% growth, down from an earlier forecast of 1.2%.

Political instability is also adding to the uncertainty. Both France and Germany are facing internal political challenges, including the collapse of ruling coalitions and the rise of far-right movements. This instability is compounded by the potential impact of Trump’s tariffs on European imports. Although no tariffs have been announced yet, European automakers are particularly vulnerable to possible trade restrictions.

The US dollar has surged recently, propelled by the Fed’s hawkish shift. The dollar index hit a high of 109 on Thursday, the highest level since November 2022. The Fed, after initiating an easing cycle in September with a 50 basis point rate cut, is now signaling a more aggressive stance in response to resilient economic data, including strong jobs growth.

In contrast, the ECB is expected to continue easing its policy in 2025, with analysts forecasting another rate cut next year as the Eurozone grapples with ongoing economic and political challenges. These factors contribute to a bleak outlook for the Eurozone, with the region’s economy under pressure from both internal and external forces.