The Bank of Korea: "US Prioritizes Domestic Interests Regardless of Midterm Elections... Need to Strengthen Policy Negotiation Capabilities"

Republicans Expected to Hold Majority in Both Senate and House... Continued Check on China

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[Asia Economy Reporter Seo So-jung] As the US midterm elections to be held on the 8th are expected to result in the Republican Party becoming the majority in both the Senate and the House of Representatives, an analysis suggests that regardless of the election outcome, America's America First policy will continue.

On the 6th, the Bank of Korea stated in its Overseas Economic Focus report titled "Review of Key Issues Related to the US Midterm Elections" that "The results of the US midterm elections will act as a factor influencing not only the US but also the global economy going forward."

The US midterm elections are held midway through the president's term to elect new members of the Senate, House of Representatives, and governors. This election mainly targets 35 Senate seats and all 435 House seats. Senators serve six-year terms, with one-third of the 100 seats up for election every even-numbered year, while all 435 House members, who serve two-year terms, are elected anew. Currently, the Democratic Party holds a slim majority in both chambers.

According to recent market forecasts and polls, the Republican Party is almost certain to secure the majority in the House, and the probability of them gaining the majority in the Senate is somewhat high. The US midterm elections are strongly regarded as a midterm evaluation of the president, and the recent economic situation is also seen as unfavorable to the ruling Democratic Party.

The Bank of Korea anticipates that if the Republican Party becomes the majority in both the Senate and the House, the Biden administration's policy momentum will weaken, fiscal spending will be reduced, and active discussions on revising existing laws such as the Inflation Reduction Act will emerge.

Among the Biden administration's "Build Back Better" agenda, further expansion of social sector spending such as free education, childcare, and paid leave may face constraints. Additionally, with the US government debt reaching $31.3 trillion, close to the $31.4 trillion limit, there is an increased likelihood of difficulties in debt ceiling negotiations early next year, which could act as a factor limiting additional fiscal spending.

In particular, although there have been recent statements from the Republican side regarding amendments or repeal of the Inflation Reduction Act (IRA), the practical feasibility is low. Since amending or repealing the already enacted IRA requires approval from both chambers and the president's consent, the possibility of changes to the law due to this election outcome is considered low.

The report emphasized, "Both parties pursue 'America First' centered on a stance of containing China, so regardless of the election results, the restructuring of supply chains centered on the US will accelerate, and a tough stance toward China will continue," adding, "It is necessary to strengthen policy negotiation capabilities in response to US First policies and to enhance government support so that domestic companies can strengthen supply chain investments and technological cooperation with the US."

This content was produced with the assistance of AI translation services.