Democrats take Congress, raising stakes on China and Taiwan
New lawmakers plan to tighten trade rules and press Beijing on the island, while Trump and Xi meet twice before the new terms begin.
By Jabari Long ·
The transfer of power in Washington will change how the United States manages its relationship with Beijing, with Congress expected to push for a firmer line on trade and security.
Democrats won majorities in the House and Senate this week. They also captured governorships in Texas, Nevada, and Iowa. Most of these officials will not take office until January. President Donald Trump and Chinese President Xi Jinping plan to meet in Shenzhen this month and in Miami next month. Trump is likely to maintain his current approach during this period. Gabriel Wildau, managing director at Teneo, said in an email that Trump may resist increased pressure for confrontation as he focuses on his personal legacy.
The new Democratic leadership intends to remove tariffs imposed by the previous administration. This move is part of a wider effort to lower domestic inflation. Scott Kennedy, a senior advisor at the Center for Strategic and International Studies, said the Democrats may push for a more hawkish policy on economic security and Taiwan. He noted that the executive branch still holds significant power to shape foreign policy. China’s control over rare earths also gives Beijing an advantage in trade negotiations with the U.S. and the European Union.
Taiwan is the area where a Democratic Congress is most likely to challenge Beijing. George Chen, a partner at The Asia Group, wrote that Congress has a history of pursuing Taiwan initiatives even when the White House is cautious. Nancy Pelosi visited Taiwan in 2022 while she was Speaker, which angered China. Hakeem Jeffries, who is expected to become the first Black Speaker of the House, met with then-Taiwan president Tsai Ing-wen in 2023. Xi warned in May that mishandling the issue would put relations in great jeopardy.
The island is critical to the artificial intelligence race because it is home to TSMC. This company manufactures many of the chips used by Nvidia. The U.S. government has restricted Chinese companies from buying advanced Nvidia chips in recent years. These limits have pushed Beijing to develop its own technology. Chen said a broader consensus in Washington favors using America’s tech lead to limit China’s military capabilities. This may create friction even if the presidents maintain cordial diplomatic ties.
Market reactions have been mixed. U.S. stocks rose on Wednesday after Trump acknowledged the election results. Oil prices dropped on signs that the U.S. would act to end the Iran war. Apple and other major tech stocks gained ground, while Nvidia fell. Chinese tech stocks climbed on Thursday, continuing a recovery from a recent drop. Liqian Ren of WisdomTree said the performance of these stocks depends largely on global investor sentiment regarding the potential of AI.
The outcome of these policies will depend on how much value AI generates for both nations. There is uncertainty about the long-term returns of this technology.
