Democrats took majorities in the House and Senate in this week's midterm elections, and analysts say that raises risks around Taiwan and hardens tech competition with China. Trump and Xi are still expected to keep their fragile truce through two meetings before the new members take office.
Democrats swept this week's midterm elections, taking majorities in the House and Senate, and analysts say the shift raises risks for U.S.-China tensions around Taiwan. Most of the new winners, however, won't begin their terms until January.
Before then, Trump and Xi Jinping will likely meet twice, in Shenzhen this month and in Miami, Florida, next month, to maintain their fragile truce. According to Gabriel Wildau, managing director at Teneo, "Trump may resist increased pressure for confrontation with China" and continue his pursuit of strategic stability.
Democrats weigh tariffs and a tougher China policy
Removing Trump's tariffs is high on the Democrats' agenda, as part of a broader focus on addressing domestic inflation, CNBC has learned.
Scott Kennedy of the Center for Strategic and International Studies said the Democrats may nudge U.S. China policy in a more hawkish direction through hearings and legislation, particularly on economic security and Taiwan. But he said any efforts will be constrained by the executive branch's wide latitude and China's growing power and leverage.
Taiwan is the most dangerous issue, analyst says
George Chen of The Asia Group called Taiwan the most dangerous issue in U.S.-China relations and the area where a Democratic Congress is most likely to challenge Beijing. He added that Trump's balancing act will likely become more difficult.
Stability over Taiwan matters more in the artificial intelligence race because the island is home to TSMC, which manufactures many of Nvidia's chips. Over the last several years, the U.S. government has tightened restrictions on Chinese companies buying advanced chips from Nvidia, which spurred Beijing's efforts to develop its own version of the technology.
Tech friction and stock moves
Chen pointed to an emergence of a broader consensus in Washington that America's technological lead should not strengthen China's military or strategic capabilities. As a result, he said, Beijing may find technology becomes a growing source of friction even if Trump and Xi keep up cordial summit diplomacy.
U.S. stocks surged Wednesday after Trump accepted the Democrats' election wins, and Chinese tech stocks climbed Thursday, extending a recent rebound from a sharp sell-off last month. WisdomTree's Liqian Ren said Chinese tech performance is ultimately tied more to global investor sentiment on AI.
Source: CNBC
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