The recent U.S. midterm elections have shifted the landscape for a $350 billion investment in the United States, as the Democratic Party has secured a majority in both the House and Senate. With movements to repeal tariffs underway, there is speculation about the potential for adjusting the pace of existing investment commitments. However, as agreements between the two countries become more concrete and investments materialize, the government's flexibility may be limited.
According to reports, the Democratic Party gained a majority in both chambers of Congress during the midterm elections held on November 3. Voter dissatisfaction over high inflation and the war in Iran contributed to the Republican Party's electoral defeat, which is expected to hinder President Donald Trump's governance.
Hakim Jeffries, the likely next Speaker of the House and current Democratic House Minority Leader, has stated that tariffs should be lifted, citing concerns that the Trump administration's tariff policies are exacerbating inflation in the U.S.
This development raises the possibility of changes to the large-scale investment commitments secured by the Trump administration from key trading partners in exchange for tariff reductions. Reuters analyzed that the Republican Party's midterm losses could provide U.S. trading partners with more leverage to resist Trump's trade pressures.
In particular, South Korea and Japan may slow the pace of their promised investments in the U.S. to avoid tariffs, allowing for a reevaluation of their business plans. Last year, South Korea pledged $350 billion and Japan $550 billion in investments contingent on tariff reductions.
South Korea is already in the process of fulfilling its investment commitments. The government signed a memorandum of understanding (MOU) with the U.S. regarding strategic investments last November and has since enacted a special law for U.S. investments and initiated the selection process for investment projects.
In September, South Korea decided to proceed with a $22.3 billion investment in the construction of a gas-fired power plant in Texas as its first investment project. Other potential follow-up investments include nuclear power plant construction and liquefied natural gas (LNG) development in Alaska.
However, despite the changing political landscape in the U.S., it is challenging to unilaterally withdraw from existing investment commitments. According to the MOU signed between the two countries, the U.S. president must select investment projects through a consultation process, and South Korea is required to contribute funds according to established procedures. The MOU also stipulates that if South Korea fails to meet its funding obligations, the U.S. may impose interest on unpaid investment amounts or increase tariffs.
Even with the Democratic Party holding a majority in Congress, President Trump's trade authority remains intact. In fact, following the midterm election losses, there is a possibility that Trump may pressure for the early implementation of existing investment commitments to highlight achievements in trade.
Ultimately, the focus of future U.S. investments may shift from reevaluating agreements to verifying the economic viability of individual projects and managing the pace of investments. The MOU between South Korea and the U.S. includes safeguards related to commercial rationality. Strategic industry investments are capped at an annual contribution limit of $20 billion, and adjustments to the timing and scale of contributions can be requested in the event of foreign exchange market instability.
Large-scale energy projects, such as Alaska LNG, continue to face ongoing debates regarding the recoverability of investment funds and project viability. Analysts suggest that if congressional oversight of investment projects is strengthened, South Korea may gain the time needed to thoroughly assess the economic feasibility of these projects.
However, it remains uncertain whether congressional oversight will lead to actual changes in investment conditions or adjustments to funding schedules. The government has reaffirmed its commitment to continue pursuing strategic investments in the U.S. based on existing agreements, regardless of the midterm election results.
Kang Yoo-jung, Chief Spokesperson for the Blue House, stated during a briefing, "We will continue to pursue strategic investments in the U.S. based on the agreements between South Korea and the U.S., and we will review individual matters in accordance with the principle of prioritizing national interests and commercial rationality."
* This article has been translated by AI.
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