By David Brunnstrom, Simon Louis (Joe:) Trevor Hunnicutt and Tim Kelly

WASHINGTON/TOKYO (Reuters) – U.S. President Joe Biden’s decision to block Nippon Steel’s $14.9 billion bid for US Steel cast a pall over Secretary of State Antony Blinken’s visit to Japan on Tuesday for farewell meetings with Washington’s most important ally in Asia.

The rejection, announced on Friday, shook US efforts to strengthen relations with its Asian allies, at a time when the political crisis in South Korea may complicate renewed relations between Washington, Seoul and Tokyo. The tripartite alliance is a key element in countries’ efforts to confront the Chinese military buildup.

It is also possible that investment in the United States could be frozen, but analysts say any damage to the broader relationship between the United States and Japan will likely be limited given shared security concerns about China.

Japanese Prime Minister Shigeru Ishiba on Monday called Biden’s decision to block US Steel’s sale to Nippon Steel “baffling.”

Blinken, accompanied by White House National Security Advisor Jake Sullivan, met with Japanese Foreign Minister Takeshi Iwaya in Tokyo and will hold talks later in the day with Ishiba and other senior Japanese officials.

Blinken told Iwaya that the numerous trips to Japan over the past four years “are evidence not only of the importance, but of the centrality that the United States places on our partnership. President Biden has asked me to come on this latest trip to underscore that.”

He added: “Between our two countries we have a partnership that began by focusing on bilateral issues, worked on regional issues, and has now become truly global.”

Ahead of his trip, the State Department said Blinken wanted to build on the momentum of trilateral cooperation between the United States, Japan and South Korea.

In Seoul, Blinken reaffirmed confidence in South Korea’s handling of political unrest, as investigators there sought to extend the arrest warrant for ousted President Yeon Suk-yul.

Before Trump’s re-election on November 5, Reuters reported that allies of US President-elect Donald Trump also reassured Seoul and Tokyo that he would support further improvement of relations and strengthen military, economic and diplomatic cooperation to confront China and North Korea.

Limited stress and damages resulting from Nippon Steel’s decision

Nippon Steel and US Steel filed a lawsuit on Monday accusing Biden of violating the US Constitution by blocking their $14.9 billion merger through what they called a sham national security review. They asked the US Federal Court to annul the decision.

Nicholas Cecchini, a Japan expert at the Washington Center for Strategic and International Studies, said that Biden’s decision will make Blinken’s visit to Tokyo “critical.”

He added, “Japan will not allow Nippon Steel’s decision to poison US-Japanese relations; it is extremely important to Japan’s national security.”

A Japanese diplomat told Reuters that Biden’s decision may discourage foreign direct investment, but he expressed hope that close relations between the United States and Japan would continue, with a strong focus on restoring the strong relations with Trump that we saw during his previous administration, and taking advantage of the increasingly hard-line mood. . In Washington regarding China.

Business lobbies in both Japan and the United States have lobbied hard for the merger, backing their arguments with warnings about the impact of such a merger on the vital relations between the United States and Japan.

But the merger has faced opposition from both Biden and Trump, who takes office on January 20, and Japan has courted him aggressively in the run-up to his re-election.

Trump confirmed after his re-election that he was “absolutely opposed” to the merger and pledged to block it as president and support US Steel with tax breaks and tariffs.

A former senior official in Trump’s first administration told Reuters he believed Trump would have taken the same approach as Biden.

Mark Bush, a fellow at Georgetown University’s McDonough School of Business, predicted “major ramifications” for U.S. efforts to work with allies to create resilient supply chains in the face of Chinese dominance or competition in key areas.

“Japan and other allies will have doubts about investing in or aligning with politically sensitive US supply chains. China must be laughing at itself that it could never have hoped for a better outcome.”