US President Joe Biden has blocked a takeover of US Steel by a larger Japanese company, fulfilling a political promise despite concerns that the move could damage Washington’s relations with Tokyo and scare off other foreign investors.

Biden cited national security threats in refusing to buy Nippon Steel, saying American ownership is important to keeping the American steel industry and its supply chains strong.

His intervention comes after pressure from the United Steelworkers union, which opposed a deal that has been a sensitive political issue in the 2024 US presidential campaign.

The Japanese government described Biden’s decision as “incomprehensible.”

Nippon Steel and US Steel said Biden’s decision showed that reviewing the deal was “corrupt” for political gain.

The two companies, which had previously threatened to sue the government if the deal did not go through, said on Friday that they would take “appropriate action to protect their legal rights.”

“We believe President Biden has sacrificed the future of American steelworkers for his own political agenda,” the companies said in a statement, adding that the move sent “a chilling message to any company based in a U.S.-allied country considering a major investment in the United States.” US”.

Japanese officials also expressed disappointment over the decision.

The Japanese Minister of Industry and Trade said: “There are strong concerns among economic circles in both Japan and the United States, especially from Japanese industry regarding future investments between Japan and the United States, and the Japanese government has no choice but to take this matter seriously.” Yuji Muto said in a statement to Reuters.

Biden’s decision comes a year later Nippon Steel first announced the $14.9bn (£12bn) deal. To buy its smaller, Pennsylvania-based competitor.

It raises important questions about the future course of the company, a 124-year-old name that was once a symbol of American industrial power but is now much diminished.

It spent months searching for a buyer before announcing the partnership with Nippon Steel, the world’s fourth-largest steelmaker, in December 2023.

US Steel has warned that it may have to close plants without the investment that would come with a new owner, concerns echoed by some workers and local politicians.

The two companies pledged not to cut jobs and made other concessions in an attempt to gain support for the deal. And just this week, they offered to fund a workforce training center – reportedly giving the government the right to veto potential production cuts.

But the arguments failed to convince Biden, who announced his opposition to the agreement early last year, as the election season intensified and with the key swing state of Pennsylvania poised to play a major role.

The deal has also been criticized by President-elect Donald Trump and incoming Vice President J.D. Vance, whose appeals to unionized workers were a large part of their campaign message.

The US government panel tasked with reviewing the deal for national security risks failed to reach consensus by late December, leaving the decision to Biden, who was required to act within a 15-day deadline.

He said in his announcement on Friday that foreign ownership represented a risk and ordered the companies to abandon the deal within 30 days.

“A strong, domestically owned and operated steel industry represents a key national security priority and is critical to resilient supply chains,” he said.

“That’s because steel powers our country: our infrastructure, our auto industry, and our defense industrial base. Without domestic steel production and domestic steelworkers, our nation becomes less strong and less safe.”

The United Steelworkers union called the decision “the right move for our members and our national security,” saying its opposition was driven by concerns about the long-term viability of its industry.

“We are grateful for President Biden’s willingness to take bold action to preserve a strong domestic steel industry and for his lifelong commitment to American workers,” President David McCaul said.

Professor Stephen Nagy, from the Department of International Political Studies at the International Christian University in Tokyo, described Biden’s decision as “political,” noting that the administration from its inception promised a foreign policy for the “middle class.”

“This was a direct response and continuation of Trump’s MAGA agenda to Make America Great Again,” he said. He added: “The Biden administration cannot appear weak before foreign companies, whether allies or adversaries.”

White House spokesman John Kirby denied suggestions that the move could harm US relations with allies, saying that Biden had made clear that the decision was not about “Japan.”

“It is about the steel industry in the United States and keeping one of the largest steel producers in the United States an American-owned company,” he said in a press conference.

US Steel shares fell more than 5% on Friday.

But analysts said this move may not represent the end of the deal. Biden’s order states that the Committee on Foreign Investment in the United States can extend a 30-day deadline to cancel the deal.

Professor Nagy said he believed companies could decide to try again under Trump, potentially offering different terms that would allow the new president to claim he negotiated a better deal.

Political analyst Terry Haynes of Pangea Policy also said that Trump, despite his criticism of the deal, may have reason to reconsider the decision.

“One of the difficult things about this decision is that Japan is a very close ally of the United States,” he said. “The government has frankly taken on a huge burden of evidence in order to justify what it is doing today — and that is damaging to bilateral relations with Japan, something Trump would like to avoid.”