In a stunning rebuke of President Donald Trump’s policies and his Republican Party, US voters voted overwhelmingly for opposing Democrats who captured majorities in both the Senate and House of Representatives earlier this week.
The results are viewed as a massive thumbs down from voters for Mr Trump’s policies, especially tariffs and the war with Iran, which are blamed for persistent inflation and higher living costs.
“We know they (US voters) are tired of paying for Trump’s needless war with Iran and price-hiking tariffs every time they visit the checkout counter or the gas pump. It’s time for us to roll up our sleeves and advance policies that will rein in costs, fix our health care system, shore up the programs Americans rely on, and put an end to Trump’s enrichment off the backs of workers and families,” Democratic Representative Richard Neal reportedly said.
However, the rebuke from voters is not expected to deter Mr Trump from pursuing new tariffs under open trade investigations. An example is the Section 301 unfair trade practices probe into excess industrial capacity, which could lead to new duties on goods from China, India, Vietnam and other major trading partners.
Nonetheless, as Congress expectedly becomes a more effective check on Mr Trump, market watchers believe countries may delay investment pledges they had made to avoid tariff threats.
Japan and South Korea had promised US$550 million (S$702 million) and US$350 million respectively in investments in the US under deals with Mr Trump last year.
The US President is due to meet with Southeast Asian leaders in the Philippines and then join the Asia-Pacific Economic Cooperation forum in Shenzhen, China, later this month.
What to watch for Singapore investors
The reaction from Singapore stocks was muted as investors waited for firmer signals on how US policy may evolve after Democrats took control of Congress. The benchmark Straits Times Index inched down 0.01 per cent, or 0.66 point, to 5,268.63 at the close of trading on Wednesday.
Ahead of the elections, DBS Group Research strategist Philip Wee noted on Nov 2 that the midterms, falling oil prices and the US employment report on Nov 6 could prompt investors to reassess the Federal Reserve’s tightening outlook.
Amid rising inflation, the US Fed was earlier expected to hike interest rates in December. However, a de-escalation of the US conflict with Iran may reduce inflation as energy cost is a major component.
Meanwhile, DBS Group Research believes that November presents an opportunity for investors to buy on market weakness, with Singapore real estate investment trusts (REITS), property developers and aviation-related companies among the potential beneficiaries of a Democratic win.
In a note published on Nov 3, ahead of the election results, DBS identified CapitaLand Integrated Commercial Trust, CapitaLand Ascendas REIT, City Developments Limited, UOL and SATS as stocks that could benefit under this scenario.
India May Wait For More Clarity
For India, still negotiating trade deals with the United States, the midterm results could provide an incentive to adopt a wait-and-see approach.
India’s trade minister Piyush Goyal 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.
In February, India and the US agreed on a framework that reduced the tariff on most Indian goods to 18 per cent from 50 per cent, which had been imposed in August last year after an earlier round of talks collapsed.
Beyond the tariffs imposed, Mr Trump’s pushback on H-1B visas has been another sore point. The move to impose hefty additional fees restricted Indian professionals’ (mostly IT) ability to move to the US for employment.
Mr Trump questioned whether the H-1B visa was being used for its original purpose — allowing companies to fill specialised jobs for which sufficiently skilled American workers are unavailable — or as a route to access cheaper foreign labour.
US voters of South Asian descent also reportedly believe that anti-Indian and anti-South Asian hostility has increased under the current administration, which may prompt them to vote for the Democrats.
Recent incidents include an attempted mass shooting at a Hindu temple in Illinois, a Sikh truck driver in Wyoming being beaten and stabbed at a rest stop, while a Montana man faces a felony charge for allegedly telling a person of South Asian descent to “go back to his country.
