US Midterm Election Results to Grant More Leverage to Trading Partners Including India

In the US midterm elections held on 3 November, the Democratic Party has secured a majority in both the Senate and the House. According to a report by Straits Times, US voters have dealt a severe blow to Donald Trump's policies, particularly regarding tariffs and the Iran war. These results are considered a major setback for Donald Trump's Republican Party, which may encourage his trading partners to raise their voices against Trump's combative policies. However, countries may need to exercise caution to avoid provoking Trump during his final two years in power.

The results of these elections could allow economic rivals like China to strengthen their position in ongoing negotiations. Asian allies may slow down investment commitments worth hundreds of billions of dollars, while Europe could gain more clarity on unresolved trade issues. Nevertheless, some partners are still seeing difficulties, as Trump has not shown signs of accepting the voters' verdict on his tariff policies.

Bernd Lange, Chairman of the European Parliament's Trade Committee, stated, "US protectionism will not disappear easily." He further added that a weakened Trump could become more aggressive and unpredictable, and a 'lame duck' could quickly turn into an 'angry duck'. Rajiv Bhatia, Distinguished Fellow at Gateway House Think-Tank and former Indian diplomat, said, "A Democratic victory does not necessarily mean Trump will become more humble towards any country."

Close Asian allies hope that the situation will now become easier. Japan and South Korea had pledged investments of $550 billion and $350 billion respectively to appease Trump. According to Professor Heo Yun Choon of Sogang University, Democrats believe these investment commitments were imposed on allied nations, so countries may now feel less pressure to fulfill these promises. However, Professor Kazuhiro Maeshima of Sophia University believes that allies cannot easily back down, as a slow response from Japan could trigger demands for additional tariffs.

South Korea has become a target of Trump's ire, as Trump believes some countries have not fulfilled their investment promises. Recently, Seoul rejected Trump's claim that he had agreed to fund the Alaska LNG (Liquefied Natural Gas pipeline project). Professor Ban Kil-joo of International Relations at Korea National Diplomatic Academy stated that scrutiny of such projects by Congress could give Seoul more time to review them. South Korea's Ministry of Foreign Affairs has stated that whether or not the composition of Congress changes, they will continue discussions on economic and trade issues with the US administration, Congress, and states.

In Europe, transatlantic trade tensions have been eased through series of agreements, limiting the impact of Trump's tariff attacks. However, it remains to be seen whether Trump will retaliate against European countries imposing digital services taxes on US tech giants, and whether controversy may arise over the €3 billion public loan granted to Airbus.

For India, which is still negotiating trade agreements with the United States, the midterm results may provide an incentive to adopt a 'wait-and-see' approach. In early November, India's Trade Minister stated that the first phase of the India-US trade agreement is in the final stages of drafting, but reiterated that New Delhi would only proceed if it gains advantages over competing exporters.

China, which is in a trade truce with Trump ending in January, may attempt to use Trump's political weakness to strengthen its position. However, with Congress keeping a close eye on Trump, it may become more difficult for China to persuade them.