WASHINGTON/TOKYO – US President Joe Biden blocked Nippon Steel's proposed $14.9 billion purchase of U.S. Steel on Friday, citing national security concerns, dealing a potentially fatal blow to the contentious plan after a year of review.

The deal was announced in December 2023 and almost immediately ran into opposition across the political spectrum ahead of the Nov 5 US presidential election. Both then-candidate Donald Trump and Biden vowed to block the purchase of the storied American company, the first to be valued at more than $1 billion.

U.S. Steel once controlled most of the country's steel output but is now the third-largest US steelmaker and 24th biggest worldwide.

"A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains," Biden said. "Without domestic steel production and domestic steel workers, our nation is less strong and less secure."

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Nippon, the world's fourth-largest steelmaker, paid a hefty premium to clinch the deal and made several concessions, including a last-ditch gambit to give the US government veto power over changes to output, but to no avail.

In a statement, Nippon and U.S. Steel blasted Biden's decision, calling it a "clear violation of due process" and a political move, and saying they would "take all appropriate action" to protect their legal rights.

Pittsburgh-based U.S. Steel had warned that thousands of jobs would be at risk without the deal.

U.S. Steel CEO David Burritt said late on Friday the company planned to fight Biden's decision, which he termed "shameful and corrupt." He added that the president had insulted Japan and also refused to meet with the US company to learn its point of view.

The United Steelworkers union, which opposed the merger from the outset, praised Biden's decision, with USW President David McCall saying the union has "no doubt that it's the right move for our members and our national security."

White House spokesperson John Kirby defended the decision.

"This isn't about Japan. This is about US steelmaking and keeping one of the largest steel producers in the United States an American-owned company," Kirby said, rejecting suggestions the decision could raise questions about the reliability of the US as a partner.

Nippon Steel has previously threatened legal action if the deal was blocked. Lawyers have said Nippon Steel's vow to mount a legal challenge against the US government would be tough.

The Committee on Foreign Investment in the US spent months reviewing the deal for national security risks but referred the decision to Biden in December, after failing to reach consensus.

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It is unclear whether another buyer will emerge. U.S. Steel has reported nine consecutive quarters of falling profits amid a global downturn in the steel industry. US-based Cleveland-Cliffs, which previously bid for the company, has seen its share price fall to the point where its market value is lower than that of U.S. Steel.

Shares of U.S. Steel closed down 6.5 percent at $30.47 on the New York Stock Exchange.

A spokesperson for President-elect Trump, who also vowed to block the deal, did not immediately comment on Friday.

Japanese industry and trade minister Yoji Muto expressed disappointment over Biden's decision, saying it was both difficult to understand and regrettable.

"There are strong concerns from the economic circles of both Japan and the US, and especially from Japanese industry regarding future investments between Japan and the US, and the Japanese government has no choice but to take this matter seriously," he said in a statement.

U.S. Steel and Nippon Steel had sought to assuage concerns over the merger. Nippon Steel offered to move its US headquarters to Pittsburgh and promised to honor all agreements in place between U.S. Steel and the USW.

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A source familiar with the matter said this week that Nippon Steel had also proposed giving the US government veto power over any potential cuts to U.S. Steel's production capacity, as part of its efforts to secure Biden's approval.

Nippon Steel faces a $565 million penalty payment to U.S. Steel following the deal's collapse, which is set to prompt a major rethink of the Japanese company's overseas-focused growth strategy.

With the acquisition of U.S. Steel, Nippon Steel aimed to raise its global output capacity to 85 million metric tons a year from the current 65 million, nearing its long-term goal of taking capacity to 100 million tons.

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Democrats in Congress praised Biden's decision. Senator Sherrod Brown said the deal "represented a clear threat to America's national and economic security and our ability to enforce our trade laws."

Jason Furman, who was an economic adviser to President Barack Obama, said Biden's claim that Japan's investment in an American steel company was a threat to national security was "a pathetic and craven cave to special interests that will make America less prosperous and safe. I'm sorry to see him betraying our allies while abusing the law."