The Democratic Party achieved a sweeping victory in the U.S. midterm elections, capturing both the House and Senate in what has been termed a 'Blue Tsunami.' Notably, Democratic candidates triumphed even in traditionally Republican strongholds like Texas and Kansas, leading to a significant loss of congressional power for President Donald Trump as he enters the latter half of his second term.
The election results signal more than just a shift in U.S. domestic politics; they foreshadow major disruptions in global supply chains, the Korea-U.S. alliance, and a substantial increase in investments from South Korea. With Trump losing control of both chambers, his influence is expected to diminish rapidly, complicating the calculations for South Korean companies as legislation aimed at containing China accelerates and state-level regulatory barriers emerge.
In an interview with Ajou Economics, Choi Byung-il, a senior advisor at Pacific Law Firm and a leading expert in trade and diplomacy, analyzed the reasons behind the Republican defeat in the midterms and discussed future Korea-U.S. relations, as well as strategies for South Korean businesses and government. Below is a summary of the conversation.
- The Democratic Party's decisive victory in both chambers of Congress has significant implications. What do you see as the key meaning of this election outcome?
"In short, this is a 'Blue Tsunami' that goes beyond a 'Blue Wave' and represents a strong rebuke of the Trump administration by voters. This level of interest from South Korean media and businesses in the U.S. midterms is unprecedented. It underscores how the relationship between Congress and the administration, as well as gubernatorial election outcomes, directly impact our companies' investment activities and the national economy. The Trump administration has pursued trade policies that have even harmed allies, compounded by high inflation, rising fuel prices, ongoing conflicts in the Middle East, and ineffective immigration policies. Historically, this marks the sixth time since the 20th century that the ruling party has lost both chambers in a midterm election. Since World War II, this has occurred five times, including during the Clinton administration in 1994 and the George W. Bush administration in 2006. Particularly shocking was the Democratic takeover of the Senate and governorship in Texas, a state considered a Republican stronghold, and the election of a Democratic senator in Kansas, which defied predictions from betting markets and polling agencies."
- What do you believe are the core reasons behind voters' judgment of the Trump administration?
"The first reason is affordability. Rising costs of groceries and fuel have made life difficult for ordinary citizens. The second is the ongoing issues surrounding the Middle East and Iran, and the third is ineffective immigration policies. Additionally, the issue of AI data centers has also swayed voter sentiment. In many regions, including Texas, Democratic candidates campaigned on promises to delay or halt the construction of AI data centers that consume excessive power and harm local environments, which resonated with the public. Ultimately, ordinary Americans suffering from high prices and frustrated voters turned out in large numbers, dispelling the illusion of the 'shy Trump' phenomenon."
- With the Democrats fully controlling Congress, how will this impact President Trump's governance?
"Trump's governance will now operate through three mechanisms: 'brake,' 'accelerator,' and 'copilot.' First, policies that Trump previously pushed through executive orders will face brakes. Conversely, he will likely accelerate measures aimed at controlling and containing China, which the Democrats will demand more vigorously. Lastly, even if the Democrats agree with the direction of Trump's policies, they will no longer allow him to operate unilaterally, positioning themselves as 'copilots' to steer the course. However, many expect that reversing Trump's tariff policies will not be easy. The legal basis for tariffs under Section 232 and Section 301 of the Trade Expansion Act is delegated to the executive by Congress, but reversing them would require overcoming a Senate filibuster (60 votes) and obtaining a two-thirds majority to override a presidential veto. This is practically impossible, meaning tariffs on automobiles and steel imposed on South Korea and other countries, as well as forced labor tariffs of 10-12.5% affecting 60 countries, are likely to remain in place."
- Following the Democratic sweep, discussions of impeachment against President Trump have emerged. Do you see this as a possibility?
"While political threats and psychological pressure will intensify, the likelihood of impeachment is extremely low. Even if the House passes articles of impeachment with a majority, a two-thirds (67 votes) majority is needed in the Senate for removal. This would require a significant defection from Republican lawmakers, and even if Trump were removed, Vice President JD Vance would assume the presidency rather than a new election. From the Democratic perspective, Vance is a strong contender for the next presidential election, and facilitating his governance would be a politically disastrous move. Therefore, rather than pursuing impeachment, the Democrats will likely leverage their investigative powers in congressional committees to rigorously probe allegations of corruption involving Trump’s family and associates, thereby tightening the pressure on him."
- It seems that South Korean companies will need to significantly adjust their investment strategies in the U.S. What risks do they face in sectors like semiconductors, batteries, and green energy?
"Over the past decade, South Korean companies have shifted investments from China to the U.S. due to the THAAD retaliation and technological competition. As of 2023, South Korea has made the most new investments in the U.S. However, the challenge is that these investments have primarily concentrated in the southern U.S. (Texas, Georgia, etc.), and the political landscape of state governments has now changed due to this election. While companies previously focused on direct dealings with the federal government (Washington, D.C.) and President Trump, they will now need to engage directly with state governments and local councils that hold permitting and environmental review powers. For instance, obtaining permits for high-voltage equipment, nuclear power, or AI data centers may become significantly more challenging in states like Texas, where the Democratic Party has taken control or regulations have tightened. Additionally, Trump's strict immigration policies have exacerbated difficulties in securing skilled labor necessary for factory construction and operations. This creates a new reality where companies must navigate 'four doors': the White House, federal Congress, state governments, and the judiciary."
- If U.S. efforts to contain China intensify, how will this complicate the calculations for South Korean companies?
"Indeed. With the Democrats controlling Congress, export controls on China, particularly regarding semiconductors and AI-related advanced technologies, will become more stringent. The most concerning aspect is the criteria for 'Foreign Entity of Concern' (FEOC) that the U.S. regulates. Joint ventures involving South Korean companies with more than a 25% stake from China will be excluded from U.S. tax credits. Domestic chemical and material companies are already in crisis mode, seeking third-party investors to reduce Chinese stakes. If Chinese companies, facing barriers in the U.S. market, resort to dumping in the South Korean and third-country markets using low prices, our core industries, including batteries, electric vehicles, and petrochemicals, could be severely threatened."
- In light of the upheaval in U.S. politics, what advice should the South Korean government, political circles, and diplomatic authorities heed?
"The most urgent task is to move beyond reactive diplomacy and establish a bipartisan national strategy for the future. The U.S. will face a larger 'moment of truth' with the presidential election in two years. Regardless of whether the White House is held by the Republican or Democratic Party, the question of whether South Korea is a 'reliable ally' will persist. In a world order led by the Democrats, a firm trust in value alliances (liberal democracy, market economy, rule of law, and human rights) is essential. The government must diversify its communication channels not only with the Trump administration but also with influential politicians in Congress and governors across states. As Japan and Taiwan strive to secure networks within U.S. politics, we too must pursue sophisticated and multifaceted practical diplomacy that encompasses both federal and local politics."
- What direction should South Korea take to overcome the significant headwinds posed by U.S. tariffs, political changes, and China's manufacturing dominance?
"South Korea possesses unique technological capabilities and strengths to implement 'physical AI' and advanced manufacturing globally. Although we find ourselves caught between great powers, we must abandon any submissive or overly cautious attitudes. We need to sharpen our irreplaceable 'choke point' technologies, including semiconductors, to maximize our negotiating power. At the same time, we must firmly protect our core R&D capabilities and industrial ecosystem domestically. Only when both parties cease their partisan squabbles and establish bipartisan principles for trade and security that transcend administrations can South Korea navigate the storm from the U.S. and assert its voice on the global stage."
* This article has been translated by AI.
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