The United States after the Midterms – The Future of U.S. Trade Policy

The Democratic Party has won the majority back in the House of Representatives. A Democratic upheaval, the so-called “blue wave“, did, however, not materialize. The Republicans were even able to build on their majority within the Senate. A change of course by U.S. President Trump is not in the cards. The United States will thus remain a difficult partner, in particular in trade.

Around 200 million registered American voters had the opportunity to cast their votes and make their voices heard in the midterm elections. In this election, all 435 seats of the House of Representatives and 35 seats in the Senate, as well as 36 posts for state governors, were up for vote. Once the last polling places were closed, it was clear that the Democrats had retaken the majority in the House of Representatives with currently 233 seats – the Republicans have consequently lost 38 seats. Two seats are at this time still too close to call. The Democrats have additionally won governorships in seven states. The Senate, however, remains in the control of the Republicans, who were able to increase their majority from 51 to a total of 53 seats.

The new 116th Congress will come together for the first time in early January 2019. In the meantime, both parties will hold their own leadership elections.

The unprecedentedly high turnout in the midterm elections demonstrates that this election served also as an assessment regarding President Trump and his controversial policy choices: particularly the immigration reform, the wall at the US-Mexico border, and the attempted repeal of President Obama‘s health care reform, the Affordable Care Act. In traditional swing states such as Florida and Virginia, the voter turnout has not been this high since the late 1990s.

More Headwinds from the Democrats Expected

With the newly acquired blue majority in the House, the White House is likely to be more closely monitored and held accountable in the near future. The Democrats will, without doubt, complicate the implementation of the Trump agenda and block controversial legislative initiatives, such as the border wall or the repeal of Obamacare. At the same time, the Democrats cannot afford to be perceived as a blocking party. They also need their own legislative successes. Are bipartisan initiatives, such as in the field of infrastructure, likely to succeed in the next two years? This remains to be seen. The fact that the Democrats do not wish to assist President Trump with any legislative successes before the next presidential election in 2020 certainly does not help such prospects.

No Change of Course in Sight for U.S. Trade Policy

Despite the election results, a foreseeable change in the general trajectory of U.S. foreign trade policy under President Trump is unlikely. The most relevant trade topics for the next few months will be the ratification of the US-Mexico-Canada Agreement (USMCA); the planned free trade agreements with Japan, the United Kingdom, and the European Union; the current trade dispute with China; and Trump’s dedication to tariff in the name of national security.

The composition of committees to be led by Democrats in the House is certainly decisive for the course of the next two years. The chairmanships of the “Ways and Means Committee” and “Foreign Affairs Committee” are of particular importance, considering their focus on trade and international relations. One consideration for leadership of the “Ways and Means Committee” is the trade-moderate Democrat Richard E. Neal (D-MA). In the Senate, the most relevant Committees are the “Finance Committee” and the “Committee on Foreign Relations”. It is expected that the Republicans Orrin Hatch (R-UT) and Bob Corker (R-TN) will be replaced by Chuck Grassley (R-IA) and Jim Risch (R-ID), respectively. Grassley voiced concerns earlier in the year regarding the escalating trade conflict between the United States and China and, in particular, its impact on agriculture in Iowa. Risch has, on the other hand, altered his own position – once very critical of the course of U.S. President Trump, he now generally demonstrates approval of his agenda.