War, tariffs and China: What the US midterms mean for the Asia-Pacific

Kuala Lumpur, Malaysia – Throughout the Asia-Pacific region, governments and businesses reeling from the energy shock of the United States and Israel's war on Iran are watching Tuesday's US midterm elections closely.

Key points

• Joshua Kurlantzick, a senior fellow for Southeast Asia and South Asia at the Council on Foreign Relations, remarked the region's wish list goes beyond trade to security.
• 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.
• It additionally includes the Multilateral Alignment of Technology Controls on Hardware Act, known as the MATCH Act.
• Outside the Middle East, no region has been hit harder by the war on Iran than the Asia-Pacific.
• 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.

Plenty of want to see "enormous changes" during the rest of President Donald Trump's term, analysts say, 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.

"Of course, everybody is watching, " remarked Steven Okun, a trade specialist and the chief executive of APAC Advisors, a Singapore-based consulting firm. "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 start of the conflict 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 Israel's strikes, much of the region was left facing shortages.

Notably, 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 Institute of Southeast Asian Studies (ISEAS)-Yusof Ishak Institute in Singapore. Indonesia, Malaysia, Thailand and Vietnam have additionally spent heavily on fuel subsidies to shield consumers, it stated.

Public opinion in the Asia-Pacific region remains firmly resisted to the war, but Okun stated a Democratic-controlled US Congress was unlikely to force Trump to end the eight-month conflict.

"With Iran, I don't see having much change at all, other than the fact that the war will be investigated and there will be oversight hearings, " Okun informed Al Jazeera. "We might even see an impeachment of the secretary of defence, but it doesn't change the overall impact of the war."

Under the US Constitution, Congress holds the power to formally declare war, but Trump has asserted 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 funding for them, Trump can veto it. Overriding a veto requires a two-thirds majority in both chambers. It democrats are almost certain to fall short of.

On trade and tariffs, too, analysts see little room for Congress to rein in Trump.

For context, the US president rattled global markets last year when he imposed "reciprocal" tariffs of 10 percent to 50 percent on some 90 countries, with the aim of shrinking the US trade deficit. Asia was again hit harder than most. Cambodia faced a 49 percent tariff and Laos 48 percent. Vietnam was slapped with 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 created 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.

"In some ways, the new Congress is not going to matter to the Asia Pacific because it's not going to affect trade policy, " Okun remarked. "Congress cannot change that. Tariffs don't change. The war doesn't change." Still, some analysts see a narrow opening.

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".

That, Olson wrote, offers "a glimmer of hope" for Southeast Asian countries that depend on the US market. A Democratic-controlled Congress, he remarked, could additionally push for carve-outs and exceptions that would offer the region's exporters "a modicum of relief". But any deeper shift in US trade policy, he continued, will have to wait for the 2028 presidential election.

"I think nearly all of Asia would like to see enormous changes, across many domains, during the rest of Trump's term, " he informed Al Jazeera. "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 remarked. They would additionally like a "more clear, obvious US presence" in the South China Sea, where China's claims overlap with those of five Southeast Asian nations, and in the Taiwan Strait. It separates China from Taiwan, the self-governed island Beijing claims as its territory.

Businesses will additionally be watching whether a major Republican loss leads to "greater GOP willingness in Congress to stand up to Trump, along with Democrats, on issues important to companies in Asia, " Kurlantzick stated, including tariffs, trade policy, arms sales and "overall economic unpredictability".

One area where analysts do expect some change is US policy on Chinese technology.

Meanwhile, the new Congress, whichever party controls it, will pass tougher restrictions on China, remarked Okun at APAC Advisors.

These include the Remote Access Security Act. It would extend export controls to remote access of US goods, software or technology and the Chip Security Act, which would require firms to verify that advanced artificial intelligence (AI) chips remain in authorised locations, to prevent diversion to foreign adversaries. It additionally includes the Multilateral Alignment of Technology Controls on Hardware Act, known as the MATCH Act. It would press allies to bring their controls on chipmaking equipment in line with Washington's, to keep advanced chipmaking technology out of China's hands.

"The next Congress is going to pass them regardless of midterms because both parties agree on them, " Okun remarked. "The person who is least restrictive now on China is the US president, " he continued, referring to Trump's courting of China's President Xi Jinping.

Meanwhile, 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 additionally held off approving a $14bn package of arms sales to Taiwan. It 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, " remarked 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, " Guild remarked. "We will have to wait and see if they rise to the moment this time."

In short, war, tariffs and China: What the US midterms mean for the Asia is the central thread here, and readers can expect follow-up reporting as the picture becomes clearer.