By Jihoon Lee, Tamiyuki Kihara, Saurabh Sharma and Kevin Yao
SEOUL/TOKYO/NEW DELHI/BEIJING, Nov 4 (Reuters) - A backlash against President Donald Trump's Republican Party over rising living costs in the midterm elections could embolden countries around the world to resist his combative trade policies, which have raised prices for American consumers.
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 they made to stave off tariffs, and hand economic rival China a perceived upper hand in ongoing trade talks, political analysts and economists said.
Trump's next major international outing will be a trip to Asia later this month, where he is due to meet with Southeast Asian leaders in the Philippines and then join the Asia-Pacific Economic Cooperation forum in Shenzhen, China.
Japan and South Korea, America's closest allies in Asia, promised $550 billion and $350 billion respectively in US investments last year under deals with Trump.
"Democrats seem to perceive that the investment commitments were forced on allies," said Heo Yoon, economics professor at Sogang University in Seoul, adding that 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.
“The tariff issue is not over. If Japan’s response is slow, calls for additional tariffs could resurface,” said Kazuhiro Maeshima, a professor of US politics at Sophia University in Tokyo.
South Korea has become a lightning rod for Trump's anger at countries he believes have not lived up to investment pledges made to stave off tariffs he says are needed to rebalance US trade with allies and rivals alike. Most recently, Seoul pushed back on Trump's assertions that it had agreed to fund Alaska LNG, a liquefied natural gas pipeline project.
While Trump can still wield executive power over tariff policy, Ban Kil-joo, international relations professor at Korea National Diplomatic Academy, said scrutiny from Congress over such projects could give Seoul "more valuable time" to review and assess them.
TRUMP TAMED OR UNLEASHED?
For countries like India, still negotiating trade deals with the United States, the midterm results could provide an incentive to adopt a wait-and-see approach, analysts said.
India's trade minister earlier this month said the first phase of an India-US trade deal was in the final stages of drafting, but reiterated that New Delhi would proceed only if it secures an advantage over competing exporters.
New Delhi and Washington agreed in February to a framework that reduced to 18% from 50% a punitive tariff on most Indian goods, imposed in August last year after an earlier round of talks collapsed.
After the midterms, the White House may face greater pressure to avoid a return to trade wars that could further raise costs for American consumers, said Tommy Xie, head of Asia macro research at OCBC Bank.
Others, however, warned against the possibility of Trump becoming more flexible.
"Countries such as India should remain cautious. A Democratic victory will not necessarily make Trump more accommodating towards any country,” said Rajiv Bhatia, a former Indian diplomat and distinguished fellow at Gateway House, a think tank.
Bhatia added that India should undertake greater diplomatic preparation and engage more actively with the US Congress to press its concerns on trade, tariffs and visa-related issues.
NO FREE REIN WITH BEIJING
China, which has struck a fragile trade truce with the United States that expires in January, will be thinking of ways to use Trump's political fragility to strengthen its hand in trade talks, analysts said.
"Xi Jinping will recognize that Trump's authority has been greatly weakened by these results, and will no doubt be thinking about ways of exploiting that," said Saul Eslake, an economist at Corinna Economic Advisory in Australia.
But others said Trump's travails are not necessarily good news for Beijing.
The US president has gone to great lengths to improve relations with Xi — including hosting him for a lavish state visit last month — and a Democratic-controlled Congress may constrain his ability to offer sweeteners for future deals.
"Democrats are unlikely to give Trump free rein on deals with Beijing," said Alicia Garcia-Herrero, chief Asia-Pacific economist at Natixis, adding that they had already criticized Trump's summits with Xi for limited substance on key issues like AI.
A Democratic Congress is more likely to support tighter tech export controls and scrutiny of supply chains for AI and semiconductors, which will give Trump less flexibility on concessions impacting those high-growth segments, she added.
China's foreign ministry spokesperson Mao Ning told reporters on Wednesday that the midterms were an internal matter for the United States and that Beijing would continue to manage differences and expand cooperation with Washington.
(Reporting by Jihoon Lee in Seoul, Jaspreet Singh Kalra in Mumbai, Saurabh Sharma in Delhi, Kevin Yao and Liangping Gao in Beijing, Tamiyuki Kihara in Tokyo and Scott Murdoch in Sydney; Writing by John Geddie; Editing by Peter Graff)
