Democratic Control of Congress Adds Regulatory Risks for Korean Exporters
Democrats secured majorities in both the Senate and the House of Representatives in the U.S. midterm elections. The results are expected to add to the burden on South Korean exporters, as the Trump administration’s high-tariff policy is likely to remain in place while the possibility of tighter regu
In the wake of the U.S. midterm elections, Democrats now hold control over both the Senate and the House of Representatives. This shift in power is anticipated to pose challenges for South Korean exporters as they navigate a potentially more regulated business environment. The Democratic majority, with 54 seats in the Senate and 254 in the House, is expected to wield its legislative and budgetary authority to scrutinize and restrict the administration's industrial policies.
While the administration's tariff policies, particularly against steel and aluminum imports, are likely to persist, non-tariff regulations on labor, environmental, and artificial intelligence (AI) standards may become more stringent under a Democrat-led Congress.
The semiconductor industry faces the most significant uncertainty, with Goldman Sachs estimating that 45% of planned data center capacity in the United States could be suspended due to uncertainty over electricity costs and permitting procedures. This uncertainty could delay or halt construction projects, slowing demand for high-bandwidth memory (HBM) products from Samsung Electronics and SK hynix.
However, Democrats' commitment to overseeing CHIPS Act subsidy disbursements and extending tax credits could provide some relief for South Korean companies investing in the U.S.
The automotive and steel industries are also likely to face increased pressure from both tariffs and non-tariff barriers. South Korean automakers, already facing a 15% tariff, may encounter further regulation around labor, environmental standards, and rules of origin under the USMCA. Similarly, South Korean steel producers may see reduced competitiveness due to existing tariffs and potential restrictions based on carbon emissions.
In contrast, the battery and power equipment sectors could benefit from increased investment in power grid expansion and energy storage systems (ESS), driven by Democratic support for these initiatives. Enhanced certainty around the Advanced Manufacturing Production Credit (AMPC), which supports battery manufacturers, could also favor the sector, alongside growing demand for transformers and other power equipment.
The shipbuilding industry is expected to maintain collaboration in maintenance, repair, and overhaul (MRO) services for naval vessels and commercial shipbuilding, although efforts to restrict the construction of U.S. Navy combat vessels overseas could limit South Korean shipbuilders' direct participation. In light of these challenges, the Hyundai Research Institute recommends that South Korea expand its cooperation with Congress to proactively address non-tariff barriers.
Companies should also restructure their operations assuming long-term tariff persistence and diversify their product portfolios and customer bases to adapt to potential fluctuations in AI demand. Additionally, the institute stresses the importance of carefully assessing the profitability of projects and their broader impact on South Korea's industrial landscape, given the anticipated $350 billion investment in the U.S.
Written by urgent.news from BusinessKorea's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
