The Politics of a Steel Deal Hangs Over Biden’s Japan Summit

Deal making runs into presidential politics

President Biden holds talks on Wednesday for Fumio Kishida, Japan’s prime minister, part of a state visit designed to show the U.S.’s commitment to a staunch ally. Despite the pomp and ceremony, the presidential election will loom over the meetings, with Biden’s opposition to Nippon Steel’s bid for U.S. Steel showing how the chase for votes is affecting deal making and economic policy.

Biden views relations with Japan as crucial. The summit will be just the fifth state visit of his administration, and reflects a different approach to that of his predecessor, Donald Trump. Both have been tough on China, but Biden has built alliances to hammer home the point. The president has cultivated relationships with Japan and South Korea (neighbors and big trading partners with China) and India (a regional rival), as well as Europe.

Biden is balancing that with swing-state politics. The president has campaigned in Philadelphia more than any other place during his presidency. It’s not quite U.S. Steel country, and some Democrats are urging him to visit other parts of the state where Nippon Steel’s $14 billion bid for the Pittsburgh-based company is deeply unpopular.

The president needs to win over blue-collar voters to win Pennsylvania. Both Biden and Trump have courted union workers, notably during the auto industry strike last year. Biden is the first sitting president to visit a picket line.

Trade policy is key to such efforts. Trump ran in 2016 on an “America first” message. Slapping trade barriers on China was a key part of his argument that he would boost manufacturing at home. Trump has promised more wide-ranging tariffs if re-elected.

Biden has continued many of the same policies and is trying to avoid being outflanked by Trump.

The steel deal has run into that political reality. Nippon Steel thought its offer for U.S. Steel would be straightforward, but the United Steelworkers union pushed back. Biden came out against the deal, citing national security concerns. “I told our steel workers I have their backs, and I meant it,” he said. The union has endorsed Biden.

Japanese officials are said to be surprised by Biden’s opposition. “For the United States to say that a Japanese company investing in an American manufacturing firm constitutes a threat to American national security is strange and troubling,” Michael R. Strain, an economist at the conservative American Enterprise Institute, told The Times.

But Japan sees a bigger potential threat in American politics. The country’s business and political elite is even more worried that Trump could return to the White House. “Hope for the best, but prepare for the worst,” is how one top businessman explained it to Politico.

• In other election news: Ron Klain, Biden’s former chief of staff, reportedly criticized the president’s electoral strategy, saying he was spending too much energy on long-term infrastructure projects rather than immediate economic needs. “I think the president is out there too much talking about bridges,” he said, according to Politico, rather than focusing on the cost of household goods that matter more to voters.

HERE’S WHAT’S HAPPENING

Boeing’s shares fall on new whistle-blower allegations. The F.A.A. is investigating a Boeing engineer’s claims that the plane maker cut corners to assemble the fuselage of the 787 Dreamliner, an accusation the company rejected. Meanwhile, problems swirling around Boeing’s 737 Max 9 planes have hit its business hard. Boeing delivered 83 new planes last quarter, its lowest number since 2021.

Fitch downgrades China’s sovereign debt outlook over growth concerns. The ratings agency cited a slowing economy and the risk of a crunch on public finances for the change. The decision follows a similar move by Moody’s in December and comes as China has struggled to reboot its economy following the pandemic.

Arizona reinstates a 160-year-old abortion ban. The state’s Republican-controlled Supreme Court on Tuesday voted to ban nearly all abortions in Arizona, a decision that appears destined to become a major campaign issue in the swing state. Sensing that the move could hurt their chances at the polls in November, various Republicans politicians have called on the state’s Legislature to repeal it.

A.I.’s power problems

Big Tech has invested billions and dedicated vast computing resources to turbocharge the artificial intelligence boom, which doesn’t appear to be ending any time soon. But a growing chorus of executives see a wild card that could hold back growth: energy constraints.

Arm is the latest to sound the alarm. Rene Haas, C.E.O. of the SoftBank-backed chip designer, warned that A.I. could overwhelm power grids as it becomes more widely used by businesses and consumers. “By the end of the decade, A.I. data centers could consume as much as 20 percent to 25 percent of U.S. power requirements. Today that’s probably 4 percent or less,” he told The Wall Street Journal. “That’s hardly very sustainable.”

Haas hopes that a new $110 million research pact involving leading universities in the U.S. and Japan, and backed by Arm, Nvidia and Amazon, will help.

A.I. is an electricity hog. That’s especially true of generative artificial intelligence, which powers chatbots such as OpenAI’s ChatGPT and Google’s Gemini. The International Energy Agency has noted that a ChatGPT query requires 10 times the amount of energy of a Google search. Global A.I. energy demand at data centers is expected to more than double to 1,000 terawatt-hours annually by 2026 — “roughly equivalent to the electricity consumption of Japan,” the I.E.A. said.

The current power grid won’t cut it. Sam Altman, the C.E.O. of OpenAI, argues that a breakthrough in nuclear power — he’s invested $375 million in the fusion start-up Helion Energy — or cheaper solar storage is needed to meet the sector’s voracious energy requirements. Microsoft is also betting on nuclear to power its needs.

A new chip design could also ease the load. Intel on Tuesday unveiled Gaudi 3, a high-end semiconductor that is targeting Nvidia’s dominance in the sector. Intel said the chip is more power efficient and can be used to more quickly train A.I. models.

And in another sign the chip war is heating up, Google is developing a similar kind of chip in-house to lessen its reliance on Nvidia, as well as defray rising A.I. costs.

Dude Perfect’s multimillion-dollar trick shot

When five roommates at Texas A&M University started making videos of basketball trick shots and posting them on YouTube in 2009, they never expected it to become a multimillion-dollar enterprise.

The friends behind Dude Perfect have just secured a huge investment, the latest example of how content creators are turning the media business on its head.

Dude Perfect is branching out. The group said on Tuesday that they had raised at least $100 million from Highmount Capital, a private investment firm. They will use the money to expand beyond YouTube, including opening a retail store and a streaming platform, as well as a line of games and a theme park.

They’re part of a new wave of streaming entrepreneurs. Under the old model, content creators would pitch studio or network executives to make programs for a big platform like Nickelodeon, and then build on that to find other ways of making money, such as merchandise or live events. Now, it’s possible to build fan engagement on a small budget.

They’re not the only YouTubers to follow this model. Ryans World, a channel featuring 12-year-old Ryan Kanji that started with him opening toy boxes, will release a self-titled feature film that will arrive in U.S. theaters this summer.

There is a Taylor Swift-inspired twist: A big studio won’t distribute the movie, as Swift did when she released her concert tour film last year.

Meanwhile, MrBeast, YouTube’s biggest star, signed a deal with Amazon Prime last month to create a reality competition series; he recently started posting videos on X.

YouTubers know their audience in a way that old media didn’t. “YouTube is the place where new franchises are made,” Will Harrison, managing director at the consultancy Seven Dials Media and a former chief commercial officer for the Harry Potter franchise at Warner Bros., told DealBook. “They’ve done the hard part already by building the audience and the brand.”

What a surge in crypto can buy

With Bitcoin soaring, crypto fervor is back in the markets — and on Capitol Hill. There’s new hope that long awaited legislation on stablecoins, a popular kind of cryptocurrency, will pass this year amid a surge in industry lobbying.

One of the bill’s biggest backers is Patrick McHenry, the North Carolina Republican who leads the House Financial Services Committee and who has picked up donations from various cryptocurrency firms in recent years. The challenge: McHenry is set to retire at the term’s end.

There is bipartisan support for crypto legislation, McHenry said at the Bitcoin Policy Summit in Washington on Tuesday. McHenry and his Democratic counterpart on the committee, Maxine Waters of California, have said they are “very close” to an agreement on how to regulate stablecoins, which have become a popular way for people to trade cryptocurrencies.

As the name suggests, such tokens are considered relatively stable because they are pegged to assets like the U.S. dollar. But some investors were burned by the 2022 collapse of one prominent stablecoin, Terra. And lawmakers, including Senator Elizabeth Warren, Democrat of Massachusetts, have warned that various cryptocurrencies, including stablecoins, are being used to finance terrorism and crime gangs.

A stablecoin bill could appear in the Senate, too. Senators Kirsten Gillibrand, Democrat of New York, and Cynthia Lummis, a Wyoming Republican who has invested in Bitcoin and was also at the summit, said they would unveil similar legislation in days or weeks.

Crypto lobbying is on the rise. Stablecoin companies have been in talks with regulators and lawmakers since 2021. Around that time, the Treasury called on Congress to take up stablecoin legislation. Major issuers like Tether and Circle hope legislation will foster adoption and turn their tokens into common forms of payment. As such, they have ramped up their lobbying spending into the millions.

THE SPEED READ

Deals

• The German generic drugmaker Stada is said to be talking to buyout firms about a potential $8.7 billion sale. (Bloomberg)

• Automattic, the company behind WordPress.com, bought the messaging app Beeper, to develop a single way of sending texts across multiple platforms. (NYT)

Policy

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