Post midterm elections, Asia faces a more constrained but not less unpredictable Trump

COLUMBIA, SOUTH CAROLINA - If there’s a trillion dollar question hanging like haze in the skies over the United States and Asia, it’s probably related to President Donald Trump’s post-midterm avatar.Will he just focus on his golf courses and the White House ballroom remodelling projects since he is now officially a lame duck?Or will he march down the legacy road, take even more aggressive actions to carve out his name in history?And, just as likely, get buried under a barrage of Democratic-initiated investigations and lawsuits?Or will it just be business as usual? The answers will come soon enough.Trump will convene a meeting of the world’s largest economies, by virtue of the US hosting the G20 leaders’ summit, on Dec 14-15.Before this, he is scheduled to visit Manila, November 16 to 18, for the annual Asean summit. Immediately afterwards is the two-day Asia Pacific Economic Cooperation meeting in Shenzhen when he meets Chinese President Xi Jinping for their third meeting this year, the second in China. Which Trump will show up? A president more willing to strike deals or more keen to establish that he remains in charge?After the Nov 3 midterm elections which ended the rule of the unified Republican government, the Democrats are taking control of both the Houses of Representatives and the Senate when the new Congress convenes in January. The newly empowered opposition is expected to challenge the administration’s priorities, obstruct legislation and launch investigations of the Trump administration on various fronts, from the legality and justification of military strikes in Iran to the Trump family’s foreign business dealings.Joseph Chinyong Liow, the dean and professor in East Asian Affairs at the Lee Kuan Yew School of Public Policy, expects a long spell of unpredictability.“I would be very surprised if President Trump takes a reconciliatory turn in his politics,” Liow said. “More likely he will double down to assert his presidential authority over both chambers,” he added.For Asia’s export-driven economies, the central concern circles around Trump’s sweeping, volatile tariff regime enacted within months of his inauguration even as the US threatens even more tariffs under some ongoing investigations.The midterm defeat will not give way to a rollback of Trump’s signature economic policy although some Democratic leaders had vowed to repeal tariffs on goods from Canada, among US’ largest trade partners. But the president could simply veto any bid to restrict or repeal his tariff powers. Overriding the veto would require two-thirds support in both chambers, in other words, substantial Republican backing.Democratic lawmakers can also be expected to bear down on Trump’s handling of the eight-month-old Iran war, in part to address the higher petrol and diesel prices that riled up the voters.Heavily reliant on Middle Eastern energy imports, Asia is closely watching for signals on post-midterm oil prices. Bob McNally, president of the Rapidan Energy Group, a leading energy market and geopolitical risk research firm, said he was not expecting a decline in oil prices in the short run.“The elections themselves should not have a big impact on oil prices, which will be driven mainly by perceived and actual interplay of diplomacy and military escalation between the US and Iran,” he said.Oil had slumped before the election in hopes of a diplomatic deal. But McNally said he had not revised the odds favouring military escalation in the coming weeks. Over a longer timeframe, oil prices could go higher if the Democrats dismantle policies under Trump’s energy dominance agenda, said an oil industry source. Those efforts opened access to vast federal lands, accelerated drilling approvals and removed environmental oversight. Also scrutinised will be the windfall gains, in excess of US$130 billion (S$166.15 billion), which oil majors made after the Iran war.New restrictions are also likely on the growth of data centres to address voter backlash against rising utility costs, noise pollution and distrust of the rapid expansion of artificial intelligence (AI).These will impact production at Asian tech companies, mainly in Japan, South Korea and Taiwan, that supply the critical hardware that powers America’s AI buildout.Greater oversight of AI, likely in the form of new probes from congressional committees against AI giants, will add compliance hurdles for Asian developers. But it could also stimulate Asia’s own sovereign AI push.Analysts also expect the heat to turn up on pharmaceutical companies, including in Asia, that have made drug-pricing deals with the Trump administration. China or Asia did not show up as a major issue in the exit polls of voters, said US economist Stephen Roach, the former chairman of Morgan Stanley Asia.But he expected the Democratic leadership in the US Congress to take a firm stance on China.“I would look to the China policy of the Biden administration as a template - creating a source of tension with Trump’s endorsement of “constructive strategic stability.” The phrase, adopted in May to describe the new framing of the US-China relationship to manage their rivalry, could come under attack.The Biden administration enacted some of the most restrictive conditions on exports of advanced semiconductors and chipmaking equipment to China while also raising tariffs on strategic industries like China-made electric vehicles. But the fundamentals of the US-China relationship will remain largely on the current trajectory, argued Han Shen Lin, the Shanghai-based China Managing Director for The Asia Group, a strategic advisory.“The Republican setback tempers Trump’s negotiating leverage and constrains his room for manoeuvre but Washington’s strategic concerns over China are firmly bipartisan,” Lin said.“Policy recalibrations: Yes. Fundamental change: No.”Tariffs may become more negotiable but technology restrictions - particularly around semiconductors and AI - are too rooted in national security and unlikely to ease significantly, he said.Still, the next two years in the US-Asia interactions will hit different. Beijing may see some political opportunity, said Lin, but it won’t mistake electoral turbulence for American decline.While Xi can approach Shenzhen from a position of even greater confidence, he’ll likely seek greater predictability and leverage rather than a grand bargain,” he said.“At the G20, I expect China to project stability and portray Washington as increasingly unpredictable,” he added.Frederick Kempe, the president of the Atlantic Council, said things could also take a dangerous turn. Xi might wager there is “no better time than the next two years to seize regional opportunities,” he said.“Xi may increase his military probes around Taiwan, responding to a president who has shown a willingness to provide compromises,” Kempe said in an analysis, referring to Trump’s decision to delay weapons deliveries to Taiwan. Asia will also plan for the post-Trump scenario.“China and South-east Asia will still deal with the president as president and not underestimate him,” Liow said.“But one eye must surely be on what might unfold after two years.”