If Republicans Lose Congress,
Will Trump’s Trade Policy Change?
The Trade Environment After the 2026 U.S. Midterm Elections
and Strategic Responses for Korean Companies

How a Divided Congress Could Reshape the Trade Landscape

As of mid-September, Democrats are leading Republicans by around 5 to 7%p in national polls asking voters which party they would support in the upcoming congressional elections. The Democrats' chances of regaining the House have improved further over the past month. In the Senate, Republicans hold a 53-47 majority. As the Senate battleground has expanded beyond North Carolina to include Texas, Ohio, and Alaska, uncertainty surrounding the Senate elections has also increased significantly. A divided Congress, with Democrats controlling the House and Republicans the Senate, remains the most likely scenario, but the possibility of Democrats taking the Senate as well can no longer be ruled out.
More important than predicting the election results is understanding how tariffs, export controls, and industrial policy will change depending on who controls Congress. Thus, this election will have repercussions across multiple areas of trade policy.

Only the Market Changes Trump’s Calculations

When President Trump announced reciprocal tariffs in April 2025, the world asked, “Who can stop Trump?” Possible candidates were Congress, the courts, other countries, and the market. My bet was on the market.
When the reciprocal tariffs were announced, U.S. stock and Treasury markets were shaken. A week later, when Trump suspended the additional tariffs on most countries except China for 90 days, the S&P 500 surged 9.5% and the Nasdaq rose by more than 12%. We cannot say for certain that market pressure alone prompted the policy shift, but it was clear that while Congress shed light on political costs and the courts on legal limits, the market reacted by reflecting real time economic costs through pricing.

The Evolution of Tariffs: From Universal Tariffs to a “Combination of Laws”

In February this year, the Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not grant the president the authority to impose tariffs. This removed the legal foundation for Trump’s IEEPA-based universal tariffs, but it did not end his tariff policy. The administration turned to other statutory powers already delegated to the president by Congress, including those granted under Sections 232 and 301. This reflects a shift in the legal basis for tariffs, not a rollback of tariff policy.
More notable is the scale of these measures. A prominent example is the Section 301 action on forced labor. After conducting separate investigations into 60 economies, including Korea, the USTR determined that each economy was harming U.S. commerce by failing to prohibit the import of goods made with forced labor or to effectively enforce such prohibitions. This was followed by actual tariffs in July. Except for certain product exemptions, additional duties brought the combined rate of existing most-favored-nation (MFN) and new Section 301 duties to 12.5% for Korea, Japan, and Switzerland, and 10% for the EU and Taiwan.
Formally, the 60 investigations are individual Section 301 investigations. However, the covered economies account for 99.4% of total U.S. imports. This means that since the Supreme Court removed the legal basis for universal tariffs, the Trump administration is rebuilding a similarly broad tariff regime through a combination of tariff powers granted under different statutes.
The function of Section 301 is also changing. It had once been aimed at issues such as China’s intellectual property rights violations and forced technology transfers, but now, it is being used to impose tariffs based on other countries' labor systems and how effectively their rules are enforced. Tariffs imposed at the border are evolving into a tool for changing other countries' domestic systems and policies.
Citing structural overcapacity, the USTR is also conducting yet more Section 301 investigations into 16 economies, including Korea. These investigations cover a broad range of Korea’s key industries, including automobiles, batteries, semiconductors, steel, shipbuilding, solar power, and robotics.
In the tariff war with Canada, even Section 338 of the Tariff Act of 1930, which had never previously been used to impose actual tariffs, was invoked. In August, an additional 50% tariff took effect on certain goods from Canada, a longstanding U.S. ally and USMCA partner. When the courts block tariffs under one law, the administration turns to another. Allies are granted no exceptions.

A Reversal of Congressional Intent in the Trade Powers Delegated to the President

The significance of these midterm elections lies in the fact that the U.S. Constitution grants Congress authority over tariffs and foreign trade. However, beginning with the Reciprocal Trade Agreements Act of 1934, Congress has periodically delegated trade negotiating authority to the president. In the postwar trade order, it was clear that this authority was delegated to the president so that they may negotiate reductions in trading partners’ tariffs and nontariff barriers in exchange for lower U.S. tariffs. The Trade Promotion Authority (TPA) represented the culmination of this system. Under TPA, Congress set negotiating objectives and procedures, the president conducted negotiations, and Congress voted on qualifying implementing legislation under expedited procedures. Reciprocal market opening was the reason for this delegation of authority.
Trump reversed the intended use of these delegated powers. Congress had granted powers under Sections 232 and 301 to the president to address national security concerns and unfair trade practices, but Trump has actively used these to raise tariffs and turn the threat of tariffs into a tool for securing concessions from other countries.
The old formula was tariff reductions → opening of foreign markets, but the new formula is tariff increases and threats → concessions from other countries.
More telling still, the most recent TPA authorization expired in July 2021 and has yet to be renewed. In the past, the prevailing question in Washington was “How much more trade negotiating authority will Congress delegate to the president?” Now, the opposite question is being discussed: “How much of the tariff authority delegated to the president will Congress take back?”
In fact, U.S. lawmakers are pursuing legislation that would require congressional approval for new tariffs and place new limits on the tariff authority delegated to the president. A bill introduced by Senator Ron Wyden in July would require congressional approval for new tariffs and strengthen congressional oversight of the USTR. These midterm elections will test more than Trump’s political strength. They will also indicate whether the balance of power in U.S. trade policy, which has shifted toward the president, will shift back toward Congress.

Congress as a Brake, Accelerator, and Co-pilot

That said, it would be too simplistic to view Congress simply as a check on Trump. On tariffs, Congress can act as a brake on Trump. On export controls, Congress can function as an accelerator that demands tougher controls on China. On industrial policy, Congress can effectively be a co-pilot that determines subsidies, tax credits, and government procurement.

What Factors Matter for the Market and Pricing In

The market looks at more than simply which party has won or by what margin. It prices in what the election result means for the president’s discretion over trade policy and, in turn, for growth, inflation, and corporate earnings.
A Democratic takeover of the House would not mean that tariffs would just disappear. Rather, the market would focus on how predictably the president exercised his delegated powers, including those granted under Sections 301 and 232. If congressional oversight pushed the administration’s tariff policy toward clearer procedures and more targeted measures, policy uncertainty for businesses could decline. Conversely, if Republicans retained both chambers, the market could price in the possibility that Trump would interpret the result as political approval of his tariff policy.
The market is more averse to unpredictable tariffs than to high tariffs. Businesses can factor in high costs if they know how high those costs will be. However, constantly changing rules will result in postponements to investment. High costs may influence a company’s calculations, but uncertainty will bring them to a halt.

A New U.S. Strategy for Korean Companies

For Korean companies, accurately predicting which party will win is less important than understanding which institutions hold which powers and how to engage with the relevant decision-makers.
First, Korean companies should not expect a Republican defeat to soften Trump’s protectionism. The disappearance of IEEPA-based universal tariffs would not necessarily mean the end of U.S. protectionism; rather, the legal bases and methods for imposing tariffs may simply change. There is considerable bipartisan consensus around goals such as countering China, revitalizing manufacturing, maintaining an edge in advanced technologies, and strengthening supply chain security.
Second, Korean companies should use the value they offer the United States as a negotiating asset, rather than rely on Korea’s status as an ally. Trump’s tariffs do not distinguish between allies and non-allies. In dealing with the administration, rather than arguing that “Korea is an ally and therefore should be exempt,” Korean companies need to demonstrate the value that their investments in the United States, local employment, and production capacity in shipbuilding, semiconductors, and batteries provide to the U.S. industrial base and to the development of supply chains that are not dependent on China.
The strategy toward Congress, however, needs to be different. Korean companies need to identify the investment, employment, and local procurement effects of their operations by state and congressional district, and link their business interests to the economic interests of each lawmaker’s constituency. The strategy has two tracks: “National Value” for the administration and “District Value” for Congress.
Third, Korean companies need to shift from “Rule Takers” to “Rule Shapers”—participating while U.S. rules are made, rather than reacting after they are set. As the Section 301 action on forced labor shows, U.S. market access increasingly depends on meeting requirements concerning labor, subsidies, rules of origin, Chinese inputs, and supply chain policies. It is therefore not enough to respond by requesting exemptions after tariffs have been determined. From an early stage, companies should track congressional bills and hearings, USTR investigations and calls for public comment, as well as the administration’s implementation of regulations. They should seek to have their interests reflected while investigations and rulemaking are still underway.
In the forced labor Section 301 action, for example, the USTR held two rounds of public hearings and reviewed thousands of comments, ultimately granting exemptions for products for which tariffs could cause supply shortages in the United States or disruption across the economy. Participating as rules are made is an entirely different game from responding after they are announced.
One of the most effective strategies here is to enlist U.S. companies as advocates for Korean businesses. Rather than having Korean companies ask for tariffs not to be imposed on their products, it is much more powerful to have their U.S. customers, suppliers, and end users say, “This measure will also come at a cost to U.S. production and jobs.”
Managing tariffs is not enough. Companies must also engage with the politics and institutions that shape tariff policy.