Asia-Pacific Watches US Midterms Closely, but Analysts See Little Change on Tariffs or the Iran War

Governments and businesses across the Asia-Pacific, battered by the energy shock of the United States and Israel's war on Iran and by President Donald Trump's tariffs, are watching Tuesday's US midterm elections closely. Analysts say countries in the region want 'enormous changes' during the rest of Trump's term, from the war on Iran to his policies on trade and tariffs, but few expect that to happen, even with the Democrats poised to take the House of Representatives, and potentially the Senate, from Trump's Republican Party.

Steven Okun, a trade specialist and the chief executive of APAC Advisors, a Singapore-based consulting firm, said: 'Of course, everybody is watching. It's great political theatre.'

Outside the Middle East, no region has been hit harder by the war on Iran than the Asia-Pacific. Before the conflict began in January, the region took in most of the Gulf oil and gas that passed through the Strait of Hormuz. When Iran closed the chokepoint in response to the US and Israeli strikes, much of the region was left facing shortages.

The Philippines, which relies on the Gulf for more than 90 percent of its crude oil imports, has been under a national energy emergency since March. Soaring fuel costs have drained the foreign exchange reserves of the region's poorest economies — Cambodia, Laos, Myanmar and East Timor — according to the ISEAS-Yusof Ishak Institute in Singapore, while Indonesia, Malaysia, Thailand and Vietnam have also spent heavily on fuel subsidies to shield consumers.

Public opinion in the Asia-Pacific remains firmly opposed to the war, but Okun said a Democratic-controlled US Congress was unlikely to force Trump to end the eight-month conflict. On Iran, he said, a Democrat-controlled Congress would change little: the war would be investigated and oversight hearings held, and the secretary of defence might even face impeachment, but the overall impact of the war would not change.

Under the US Constitution, Congress holds the power to formally declare war, but Trump has claimed the attacks on Iran were in self-defence and has so far ignored congressional resolutions directing him to withdraw US forces from hostilities. If a Democrat-controlled Congress passes legislation restricting military operations or cutting their funding, Trump can veto it, and overriding a veto requires a two-thirds majority in both chambers, which Democrats are almost certain to fall short of.

On trade and tariffs, too, analysts see little room for Congress to rein in Trump. The US president rattled global markets last year when he imposed 'reciprocal' tariffs of 10 percent to 50 percent on some 90 countries, aiming to shrink the US trade deficit. Asia was hit harder than most: Cambodia faced a 49 percent tariff, Laos 48 percent, Vietnam 46 percent and Myanmar 45 percent.

After the Supreme Court struck down those tariffs in February, the Trump administration turned to other tools. In July, it imposed tariffs of 10 percent and 12.5 percent on goods from 60 trading partners, accusing them of failing to stop imports made with forced labour. In Asia, the list includes China, Japan, South Korea and seven Southeast Asian nations — Cambodia, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

Okun said: 'In some ways, the new Congress is not going to matter to the Asia Pacific because it's not going to affect trade policy. Congress cannot change that… Tariffs don't change. The war doesn't change.'

Stephen Olson, a visiting fellow at the ISEAS-Yusof Ishak Institute, argued in a recent essay that a 'strong rebuke of Trumpism' at the polls could embolden a pro-free-trade wing of the Republican Party that has been intimidated into standing down during the Trump presidency. A Democratic-controlled Congress, he wrote, could also push for carve-outs and exceptions that would give the region's exporters 'a modicum of relief', but any deeper shift in US trade policy will have to wait for the 2028 presidential election.

Joshua Kurlantzick, a senior fellow for Southeast Asia and South Asia at the Council on Foreign Relations, said the region's wish list goes beyond trade to security. 'I think nearly all of Asia would like to see enormous changes, across many domains, during the rest of Trump's term,' he said. 'But I think much of the region believes this will not happen.' Besides more stability in trade and tariff policy, Asia-Pacific countries would like to feel more stable in security guarantees from the US, he said, and to see a more clear, obvious US presence in the South China Sea and in the Taiwan Strait. Businesses will also be watching whether a major Republican loss leads to greater Republican willingness in Congress to stand up to Trump, alongside Democrats, on issues important to companies in Asia, including tariffs, trade policy, arms sales and overall economic unpredictability.

One area where analysts do expect change is US policy on Chinese technology. The new Congress, whichever party controls it, will pass tougher restrictions on China, Okun said, because both parties agree on them. These include the Remote Access Security Act, which would extend export controls to remote access of US goods, software or technology; the Chip Security Act, which would require companies to verify that advanced artificial intelligence chips remain in authorised locations; and the Multilateral Alignment of Technology Controls on Hardware Act, known as the MATCH Act, which would press allies to bring their controls on chipmaking equipment in line with Washington's. 'The person who is least restrictive now on China is the US president,' Okun said, referring to Trump's courting of China's President Xi Jinping.

The two men have met twice this year as ties have warmed after a bitter and costly trade war last year. To preserve the fragile trade truce, Trump has also held off approving a $14 billion package of arms sales to Taiwan, which would be the largest ever for Taipei. Some analysts meanwhile worry that a lame-duck Trump, hemmed in at home by a Democratic Congress, could turn more forcefully to foreign policy. 'We should not be surprised by continued erratic foreign policy,' said James Guild, an assistant professor at the Indonesian International Islamic University. 'The Democrats have a poor record of effectively opposing and holding Trump accountable using conventional tools of congressional oversight. We will have to wait and see if they rise to the moment this time.'