A backlash against Trump's Republican Party in the midterm elections could embolden countries to resist his trade policies, according to Reuters. Analysts say partners may slow-walk investment pledges, while China may look to exploit Trump's political weakness. Others caution that he could press allies harder.
Democrats captured majorities in both the Senate and House on Tuesday, as US voters delivered a stinging rebuke for Trump's policies, specifically tariffs and the Iran war, which they blame for persistent inflation. That could give countries more reason to slow-walk investment pledges made to stave off tariffs, political analysts and economists said.
Allies may feel less pressure on investment pledges
Japan and South Korea promised $550 billion and $350 billion respectively in US investments last year under deals with Trump. Heo Yoon, an economics professor at Sogang University in Seoul, said countries might now feel less pressure to fulfill such commitments.
But others cautioned that Trump, criticised at home, could squeeze allies harder abroad, pushing them to deliver pledged investments to show his policies are working. Kazuhiro Maeshima, a professor of US politics at Sophia University in Tokyo, said calls for additional tariffs could resurface if Japan's response is slow.
India weighs a wait-and-see approach
For countries like India, still negotiating trade deals with the United States, the results could provide an incentive to wait and see, analysts said. India's trade minister said earlier this month that the first phase of a trade deal was in the final stages of drafting, but that New Delhi would proceed only if it secures an advantage over competing exporters.
Tommy Xie, head of Asia macro research at OCBC Bank, said the White House may face greater pressure to avoid a return to trade wars that could further raise costs for American consumers.
China looks for leverage, with limits
China has struck a fragile trade truce with the United States that expires in January, and analysts said Beijing will be thinking of ways to use Trump's political fragility to strengthen its hand in talks.
Not everyone sees an advantage for Beijing, however. According to Natixis chief Asia-Pacific economist Alicia Garcia-Herrero, "Democrats are unlikely to give Trump free rein on deals with Beijing". She added that a Democratic Congress is more likely to support tighter tech export controls.
Trump's next major international outing is a trip to Asia later this month, including the Asia-Pacific Economic Cooperation forum in Shenzhen, China.
Source: Reuters via Investing.com
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