From U.S. Steel to the ‘Art of the Deal’ — Trump’s opportunity for economic statecraft

The Biden administration's recent decision to block Nippon Steel's acquisition of U.S. Steel highlights a concerning shift away from strategic economic diplomacy.

By rejecting this deal — which included commitments for ongoing U.S. investment and production — the administration has not only spurned deeper economic integration with a key Indo-Pacific ally but also signaled a troubling lack of confidence in America's ability to leverage such investments for broader diplomatic gains.

This moment of retreat from economic statecraft comes as presidential administrations are about to shift in Washington, offering an opportunity to reassess what direction the new Trump administration will take on the world stage. While most predict either an isolationist model or one that continues to pursue a more assertive and interventionist global stance, President-elect Trump's return to the White House offers a third possibility — transactional diplomacy, where the “Art of the Deal” helps achieve broader U.S. foreign policy objectives.

Rather than relying on coercive, costly or lethal military measures, this strategy emphasizes the power of investment to strengthen America's global position — precisely the kind of opportunity lost in the recent U.S. Steel decision, where an opportunity for even deeper economic ties with Japan could have enhanced our strategic position in Asia.

International diplomacy has always incorporated elements of both carrot and stick, with enticing trade agreements and partnerships on the one hand and punishing sanctions and economic isolation on the other. Biden’s politically motivated protectionism, if carried forward by Trump, would deprive the U.S. of the "carrot" element of this equation.

Take the recent commitment from Softbank's CEO Masayoshi Son to Trump at Mar-a-Lago to invest $100 billion in the U.S. over the next four years. This commitment signals an opportunity for strategic alignment by foreign money and investors in U.S. industry and its future. And it reinforces that the U.S. is at the epicenter of global leadership and innovation.

On the flip side, it reminds foreign governments and companies alike of the dangers of economic isolation and the potential for economic penalties for failing to deal constructively with the United States across a broad range of matters.

In this way, Trump's deal-focused orientation of can serve as both the carrot and the stick in a new diplomatic paradigm. The U.S. is open for business, eager to forge mutually beneficial partnerships, welcoming foreign investment and poised to invest in critical and emerging technologies developing internationally — a stark contrast to the message sent by blocking established allies from investing in American industry.

If foreign governments want to enable these opportunities to turbocharge their own industries through access to American technology and partnerships, they must commit to abide by conditions that serve broader U.S. geopolitical interests, including support for global security priorities and a commitment to democratic norms and human rights. And if these conditions are not met, the U.S. may impose sanctions, restrict market access, or take other costly diplomatic measures.

Of course, investment partnerships will only be allowed if they don't compromise U.S. national security. To ensure this, the Committee on Foreign Investment in the United States will evaluate cross-border deals for national security risks. Similarly, U.S. investments in foreign technology will be scrutinized for potential national security risks, particularly in such areas as artificial intelligence, microchips, cybersecurity, and 5G.

While this scrutiny is essential, most deals can still proceed, provided that Trump does not use claims of national security risk as a pretext. Even in cases where there are legitimate national security concerns, controls can often be put in place to protect U.S. national security equities — exactly the kind of safeguards that could have been negotiated in the U.S. Steel transaction.

This approach is not new but could play an increasingly central role in U.S. foreign policy. President Richard Nixon pursued an opening with China through a mix of diplomacy and economic incentives meant to counterbalance Soviet influence in Asia. Presidents Ronald Reagan and George H.W. Bush used economic diplomacy to advance U.S. goals during the latter part of the Cold War and the fall of the Soviet Union to contain Soviet power through economic means.

These examples demonstrate the value of economic leverage to advance broader strategic goals. Trump could revive this approach as a central component of his foreign policy, aligning with his focus on deprioritizing military entanglements and leveraging dealmaking. Doing so would mark a welcome departure from the blunder of the U.S. Steel decision, reaffirming the strategic value of foreign investment.

Economic diplomacy of this sort would likewise provide a counterforce to overreliance on military force, emphasizing the strength of U.S. technological and economic influence to advance foreign policy goals and promote global stability.

The U.S. economic network is vast and dominant on the world stage. With leverage through deal-making, it can motivate global actors to conduct their domestic and international affairs in ways that support our interests, from democratic norms to cybersecurity and fairness in global economic practices, from strengthening the resilience of global supply chains for critical technologies to promoting peace.

On the economic side, U.S. investment in foreign technology and innovation will help turbocharge these technologies, with the potential that they then become part of the broader U.S. technological arsenal to compete and lead in the 21st century.

Conversely, foreign investments in U.S. businesses would give an economic boost to domestic innovation and production while opening new global pathways for U.S. industry to compete in foreign markets — opportunities that risk being foreclosed if we view foreign investment primarily as a threat rather than a strategic asset.

Ultimately, this strategy is about rethinking international investment deals not as an end to themselves, but as a means to propel U.S. industry and technology, benefit from foreign innovation and provide a new and powerful tool of foreign diplomacy. It gives foreign partners and adversaries clear opportunities and even clearer expectations.

If Trump follows this model, he will set his second term on a path to enhancing our standing and influence in the world while preserving our leading role in the ever-competitive race for geopolitical dominance.

It would solidify U.S. leadership while helping secure the economic future of the nation in this rapidly changing, technologically dependent, and interconnected landscape — an approach that recognizes the strategic value of economic integration rather than reflexively rejecting it.

Daniel J. Rosenthal is a fellow with the National Security Institute at the Antonin Scalia Law School at George Mason University. He previously served as director for counterterrorism at the National Security Council in the Obama White House and as senior counsel to the assistant attorney general for national security at the Department of Justice.

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From U.S. Steel to the ‘Art of the Deal’ — Trump’s opportunity for economic statecraft

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