[Edaily SOYEON KIM Reporters Kim Hyung-wook and Kim Ki-deok] As the U.S. Democratic Party regained the Senate majority and gained the upper hand in the House of Representatives in the midterm elections, South Korea’s business community is keeping a close watch on potential changes in U.S. industrial and trade policies. While congressional checks on President Donald Trump’s tariff and investment pressures are expected to strengthen, the broader framework of protecting domestic industries and containing China is not expected to change significantly. There is also a possibility that the Trump administration will use its executive authority—such as tariffs and export controls—to intensify external pressure.

According to industry sources and foreign media reports on the 4th, following the Democrats’ landslide victory in the U.S. midterm elections, major domestic industries—including semiconductors, batteries, automobiles, shipbuilding, steel, and machinery—are closely monitoring potential policy shifts. Since fostering U.S. manufacturing and securing supply chains for high-tech industries are common policy goals for both the Democratic and Republican parties, analysts suggest that while the overall policy direction will likely remain unchanged, there could be shifts in the methods and intensity of policy implementation.

◇ Will Pressure for U.S. Investment Increase Through Tariff Leverage?

It is highly likely that U.S. support for the semiconductor industry will continue. This is because bipartisan support has been demonstrated not only in the CHIPS Act, spearheaded by the Democratic Biden administration, but also in last year’s Republican-led Tax Cuts and Jobs Act (OBBBA), which raised the tax credit rate for investments in semiconductor manufacturing facilities from 25% to 35%.

An official in the semiconductor industry stated, “Regardless of whether it’s the Republicans or the Democrats, leadership in artificial intelligence (AI) will receive bipartisan policy support at the national industrial level.” Kim Hyuk-joong, a senior researcher at the Korea Institute for International Economic Policy, predicted, “Although the House of Representatives has introduced bills related to semiconductor support in the past, they have not been put to a vote; a new incentive bill could emerge as part of a package with other legislation.”

Within the semiconductor industry, U.S. export controls on semiconductor equipment to China and U.S. tariff policies on semiconductors are cited as key variables. SamsungElectronics and SK hynix received annual permits this year to import U.S.-made semiconductor equipment into their Chinese factories, but it remains unclear whether such permits will be granted next year. Following the imposition of a 25% tariff on certain advanced AI semiconductors last January, the Trump administration is now considering expanding the scope of these tariffs. Kim, a senior research fellow, said, “Investment pressure accompanied by tariffs—which had been dormant before the midterm elections—could intensify,” adding, “There is a possibility that tariffs will be used as leverage to demand additional investment from Korean semiconductor companies.”

In the battery industry, attention is focused on the tax credits under the Inflation Reduction Act (IRA) and regulations on Chinese-made materials. Although the Trump administration ended the tax credit for electric vehicle purchases last year, it maintained the Advanced Manufacturing Production Tax Credit (45X), which supports battery production in the U.S. The “Big Three” battery companies—LG Energy Solution, SAMSUNG SDI CO.,LTD., and SK On—are restructuring their supply chains to meet the requirements related to Prohibited Foreign Entities (PFE) while maintaining their tax credit benefits. The policy trend of reducing dependence on Chinese materials is expected to continue. An industry insider noted, “As the push for eco-friendly policies intensifies, a structure favorable to battery companies could emerge in the medium to long term.”

◇ Reviving EV Subsidies Unlikely

The automotive industry is closely watching whether tariff reductions will be granted.Since the 15% tariff applied to South Korean passenger cars falls under the President’s authority under Section 232 of the Trade Expansion Act, the likelihood of a reduction is limited even with the Democratic Party controlling Congress.

However, there is a possibility of tariff reductions through local investment in the U.S. According to Reuters, while negotiating a $4 billion investment in a U.S. plant, Audi requested that the tariff rate on vehicles from the EU be lowered from 15% to 7.5%. The U.S. side is expected to accept a rate of around 10%. If existing investments are also recognized as eligible for reductions, HyundaiMotor Group’s $2.7 billion investment to expand its Georgia plant could benefit.

Whether the tax credit for electric vehicle purchases will be reinstated is another variable. Democratic Representative Greg Lansman introduced a bill to revive the tax credit—which expired on the 22nd of last month—and raise the limit to $15,000. However, if President Trump exercises his veto, the bill would require the support of at least two-thirds of both the House and Senate, making it unlikely to become law in the short term.

◇ Shipbuilding Cooperation Expected to Continue… Steel Tariff Reduction Remains Uncertain

Traditional heavy industries such as shipbuilding, steel, and machinery are also closely monitoring policy changes amid a tense atmosphere. The shipbuilding industry is focusing on the continuity of MASGA, a U.S.-Korea shipbuilding cooperation project. Analysts suggest that since rebuilding the U.S. shipbuilding industry and countering China’s maritime hegemony are bipartisan priorities, the cooperative framework is unlikely to falter.

However, there are observations that the construction of U.S. Navy vessels at South Korean shipyards could face setbacks. In August, President Trump issued a National Security Presidential Memorandum paving the way for foreign companies to build up to two U.S. naval vessels at their own shipyards. However, if Congress restricts the use of related budgets, the project could face delays.

The steel industry is closely watching for potential congressional action to counter the 50% tariff imposed by the Trump administration. However, since the Democratic Party also prioritizes protecting the domestic steel industry, it is unlikely that tariff barriers will be lowered in the short term. The power equipment and wire industries are hopeful that the Democrats’ gains could have a positive impact. This is because the Democrats are proactive in investing in clean energy and power infrastructure, which could lead to expanded support in these areas. Attention is also focused on the business conditions for companies like LS Cable, which decided to invest in a subsea cable factory in Virginia during the Biden administration.