How US midterm election impacts rest of the world

The US midterm elections have already made waves in the global arena, with trade partners, strategic allies, and adversaries all taking note of the results. President Donald Trump's loss of control over Congress raises uncertainty about the outcome of the ongoing conflict with Iran. Gulf governments are divided over whether Trump is more inclined to seek a peace deal or if another full-scale assault on Iran is less likely after the midterms.

However, Trump's electoral defeat might embolden Iran, prompting a possible genuine opportunity to end the war, according to Ebtesam al-Ketbi of the Emirates Policy Centre.

For Israel, a Democrat-controlled House and Senate could lead to increased congressional scrutiny of Israel's military operations in Iran, Gaza, and Lebanon. This scrutiny may also threaten the long-standing US support for Israel through military aid and weapons sales. In the United States, Democrats are expected to propose new aid to Ukraine, which is battling a Russian invasion.

This support is crucial as Republicans have criticized Trump for withdrawing financial and military aid to Ukraine and lifting sanctions on Russian diesel and energy. While a new aid package could survive a Trump veto, it may not address Ukraine's most pressing need for US-made Patriot air defence interceptors.

The elections could also impact trade relations, particularly in Asia. Countries in the region may be more cautious about investment pledges made to avoid tariffs, giving China a perceived advantage in ongoing trade talks. However, the overall state of US-China economic relations is expected to remain "fragile stability." For India, the midterm losses could provide a boost to its negotiations for a trade deal with the United States, which has faced delays as New Delhi seeks to protect its farmers.

Democrats' efforts to limit Trump's power to impose arbitrary tariffs might face a presidential veto, but a 100% tariff on countries imposing a digital services tax on American tech giants or a €3 billion loan to Airbus could undermine the transatlantic trade truce since 2025.