Democrats’ gains in the U.S. midterm elections could increase pressure on China over Taiwan and technology, analysts say, while making it harder for President Donald Trump to maintain a fragile détente with Chinese President Xi Jinping. The new members of Congress are not due to take office until January, leaving Trump and Xi time to pursue two planned meetings before then: one in Shenzhen this month and another in Miami next month.
Trump may resist calls for confrontation as he focuses increasingly on his legacy, according to Gabriel Wildau, managing director at Teneo. He said the president could continue seeking “strategic stability” with Beijing. Democrats, meanwhile, have made removing Trump’s tariffs a priority as part of their broader effort to address inflation, CNBC reported.
The election results could still move U.S. policy in a more hawkish direction through congressional hearings and legislation, particularly on economic security and Taiwan, said Scott Kennedy of the Center for Strategic and International Studies. However, he noted that Congress would face limits from the executive branch’s latitude and China’s growing influence.
Taiwan remains a major potential flashpoint. George Chen, a partner at The Asia Group, said a Democratic Congress could challenge Beijing most directly on the issue, pointing to Congress’s willingness to pursue Taiwan-related initiatives even when the administration is more cautious. China considers Taiwan part of its territory, while the United States maintains unofficial relations with the island under its “One China” policy.
Technology could become another source of friction. U.S. restrictions have limited Chinese companies’ access to advanced Nvidia chips, prompting Beijing to develop its own technology. Chen said a broader Washington consensus is emerging that U.S. technological advantages should not strengthen China’s military or strategic capabilities. That could lead to tougher congressional action even if Trump and Xi keep their summit diplomacy cordial.
The technology outlook also depends on uncertainty over artificial intelligence. Chinese technology stocks extended a recent recovery, but WisdomTree’s Liqian Ren said their performance is closely tied to global investor sentiment about AI and how much the technology can deliver in both the United States and China.
Sources: CNBC Markets.