Asia-Pacific Markets Brace for Little Change After US Midterms

Asian governments and businesses expect little relief from the United States following Tuesday's midterm elections, despite Democrats securing the House of Representatives and potentially the Senate. The region is currently grappling with the economic fallout of the eight-month war between the US and Israel against Iran, a conflict that has disrupted global energy flows.

The Asia-Pacific region absorbed the bulk of the shock from the war, which began in January. Before the conflict, the area imported most of the Gulf oil and gas passing through the Strait of Hormuz. When Iran closed that chokepoint in response to strikes, the region faced immediate shortages.

The Philippines has been under a national energy emergency since March due to its reliance on the Gulf for over 90 percent of its crude oil imports. According to the Institute of Southeast Asian Studies, soaring fuel costs have drained foreign exchange reserves in Cambodia, Laos, Myanmar, and East Timor. Neighboring Indonesia, Malaysia, Thailand, and Vietnam have also spent heavily on fuel subsidies to protect their consumers.

Steven Okun, chief executive of Singapore-based APAC Advisors, told Al Jazeera that while everyone is watching the results, he does not expect a Democratic-controlled Congress to force President Donald Trump to end the war. He noted that the main outcome would be oversight hearings and investigations, but the overall impact of the conflict would remain unchanged.

The US Constitution grants Congress the power to declare war, but Trump has cited self-defense to bypass that authority. He has ignored previous congressional resolutions demanding a withdrawal of forces. If a new Congress passes legislation to restrict military operations or cut funding, Trump can veto it. Overriding that veto requires a two-thirds majority in both chambers, a threshold Democrats are unlikely to reach.

Trade policy presents a similar hurdle for the region. Last year, Trump imposed reciprocal tariffs ranging from 10 percent to 50 percent on 90 countries. Asia bore the heaviest burden, with Cambodia facing a 49 percent tariff and Laos 48 percent. Vietnam and Myanmar faced tariffs of 46 percent and 45 percent, respectively.

After the Supreme Court struck down those initial tariffs in February, the administration shifted tactics. In July, it imposed tariffs of 10 percent and 12.5 percent on 60 trading partners, citing forced labor imports. The list includes China, Japan, South Korea, and seven Southeast Asian nations. Okun stated that Congress cannot easily alter these policies, meaning tariffs and the war will likely persist regardless of the election outcome.

Some analysts see a narrow opening for change. Stephen Olson of the ISEAS-Yusof Ishak Institute suggested that a strong electoral rebuke of Trump could embolden pro-free-trade Republicans. He argued that a Democratic Congress might push for carve-outs that would provide some relief to regional exporters, though deeper shifts will wait for the 2028 presidential election.

Joshua Kurlantzick of the Council on Foreign Relations noted that Asian nations also seek greater security stability. They want clearer US presence in the South China Sea and the Taiwan Strait. Businesses are watching to see if a divided government leads to Republicans standing up to Trump on issues like arms sales and economic unpredictability.

One area of expected change involves Chinese technology. Okun said the new Congress will pass tougher restrictions on China, including the Remote Access Security Act and the Chip Security Act. Both parties agree on these measures, which aim to prevent advanced AI chips and technology from reaching foreign adversaries. Trump has held off approving a $14 billion arms sale to Taiwan to preserve a fragile trade truce with China, a move analysts say may change as his term winds down.