What the Midterms Mean for U.S.-South Korea Trade and Investment
The election brought a dramatic shift in power from Republicans to Democrats in states that host Korea’s largest U.S. investments.
By Scott Snyder
The U.S. midterm elections will have several impacts on the U.S.-South Korea relationship that go beyond the power dynamic between U.S. President Donald Trump and Congress and will play out over a longer time frame. The key questions relate to how Korea should respond to state-level power shifts in Georgia and Texas, where Korea’s largest U.S. investments are concentrated; how U.S. public opposition to data centers could affect Korean energy investments; and how to adjust to the Trump administration’s shortened political time frame for U.S.-Korea projects and agreements that inevitably will extend beyond 2028.
The immediate impacts on the bilateral relationship have already been widely discussed: likely opposition from a Democratic Party-led Congress to Trump’s tariffs, legislative curbs on potential drawdowns for U.S. Forces Korea, and a potential shift in presidential emphasis to foreign policy, where he can act more freely from impediments imposed by the U.S. legislative branch.
However, there are several broader implications worth examining. First, the midterm election brought a dramatic shift in power from Republicans to Democrats at the state level, including in Georgia and Texas, which are home to Korea’s largest U.S. investments—as well as Ohio, Iowa, and Nevada. While state-level political transitions have not historically had a major impact on local favorability toward foreign investment, shifts in regulatory, labor, and tax policy could affect Korean investors in these states. Additionally, these political shifts might influence the White House’s thinking on where to announce prospective U.S.-Korea investment projects, such as selecting states that might host new civilian nuclear power plants under phase two of the agreement.
Second, the midterm election revealed extensive American political opposition to data center projects across the United States, with voters siding against data centers in forty out of forty-one local ballot measures in ten states, including Ohio, Kansas, Maine, and Wisconsin. But major projects contained in the U.S.-Korea investment agreement are premised on a data center-driven increase in energy demand, including the phase-one selection of a natural gas combined-cycle power plant in Encinal, Texas, intended to power chip plants and data centers. Texas Governor Greg Abbott had already paused approvals of new data center projects in the state during the midterm election campaign, and Governor-elect Gina Hinojosa, who unseated him, has vowed to issue a moratorium on any new data centers. NBC News exit polling showed that 76 percent of voters surveyed said they opposed the construction of data centers in their communities. Such local political opposition may influence projections of commercial feasibility for Korean-invested energy projects, potentially including the Texas power plant project.
Third, the scale of the Democratic Party’s midterm victory has shortened the Trump administration’s political timeline for implementing projects, raising questions regarding the long-term future of both the U.S.-Korea investment agreement and U.S. commitments under the November 2025 Joint Fact Sheet to support Korean enrichment and reprocessing of nuclear materials and provide fuel for a Korean nuclear-powered submarine. All these projects would have taken over a decade to play out, far exceeding the Trump administration’s term. But with a shorter window to act on its own, the administration will leave more of those commitments to its successor, raising questions about the viability of commitments made between the two governments.
Korea may consider responding to this shorter political timeline by either dragging its feet or doubling down on implementing existing agreements. As part of this evaluation, one possibility is for Korea to pursue both acceleration and redirection of some investment commitments. For instance, phase two of the U.S.-Korea investment framework envisions the construction of eight nuclear reactors, two of which are Korean model reactors. The construction of civilian nuclear energy plants, a natural candidate for acceleration, is a sector that uniquely requires governmental political and financial support while opening the United States for the first time as a market for construction of Korean nuclear plants. Meanwhile, Korea has an interest in procuring American liquefied natural gas, but near-term investments in that sector might be redirected to Louisiana rather than Alaska.
Likewise, implementation of the Joint Fact Sheet’s provisions on enrichment and reprocessing and fuel supply will play out long after the Trump administration leaves office. But the completion of civilian nuclear reactors in the United States and Korea’s construction of a nuclear-powered attack submarine will carry their own momentum over the next decade, likely creating a more favorable environment for negotiations as these projects move forward.
The impact of the midterm elections on the U.S.-Korea relationship may be more far-reaching than the power dynamic between Trump and Congress over the next two years. Both sides should build mutual long-term political and economic commitments that can carry over to the next U.S. administration.
Scott Snyder is President and CEO of the Korea Economic Institute of America and author of The United States-South Korea Alliance: Why It May Fail and Why It Must Not. The opinions expressed here are his own and do not reflect those of KEI
This material is distributed by KEI on behalf of the Korea Institute for International Economic Policy. Additional information is available at the Department of Justice, Washington, DC.