Trump’s midterm defeat won’t make the US a more predictable trading partner – Fran O’Sullivan

Hardly a great return on investment.

The bigger story, however, is that America has delivered Donald Trump a political body blow.

Democrats have captured both the House of Representatives and the Senate in the November 3 midterms, producing a sweeping repudiation of his presidency.

The scale of the reversal is striking. Democrats gained at least 30 House seats and flipped at least seven Republican-held Senate seats, breaking through in traditionally Republican strongholds including Texas, Iowa, Kansas and South Carolina.

For the first time in Trump’s second term, he will face a Congress controlled by the opposition.

Democrats will have the committee chairs, subpoena powers and investigative machinery to make his final two years considerably more uncomfortable.

There is an irony here even the producers of The Apprentice might appreciate.

Trump made his television reputation looking contestants in the eye and delivering his trademark verdict: “You’re fired.”

Now the electorate has turned the tables. Trump hasn’t been fired from the White House, but voters have stripped him of his congressional boardroom.

The self-styled master dealmaker who promised to run America like a business has discovered that voters are not a roomful of executives waiting for his instructions.

America’s disruptor-in-chief has finally encountered some disruption of his own.

Trump’s political appeal has always rested on his willingness to smash conventions. He has disrupted international trade, America’s relationships with allies, the rules-based international order and the domestic political norms that once provided Washington with a measure of stability.

He sold disruption as strength. But the midterms suggest voters are tiring of the domestic consequences of permanent political chaos.

For New Zealand, though, there is little reason to break out the champagne.

The new Democratic-controlled Congress takes office in January 2027. Until then, Republicans retain control.

And even after the handover, a hostile Congress will make Trump’s presidency more difficult, but it will not automatically make America a more predictable trading partner.

That distinction matters enormously to a small trading nation.

The United States is New Zealand’s third-largest trading partner and a major export market.

New Zealand goods exports to the US reached $17.7 billion in the year ended March 2026, while two-way trade totalled $30.54b.

Our exporters have plenty at stake: meat, dairy, wine, manufactured goods and technology businesses all depend on access to the American market.

The latest Stats NZ merchandise trade figures, for the year ended September 2026, show annual goods exports climbed to $85.8b, up $7.4b on the previous year.

But imports rose by an even larger $11.1b to $92b, leaving an annual merchandise trade deficit of $6.2b.

China remains our biggest export market. Goods exports there reached $19.8b in the year to June 2026, up 4.3%, while two-way trade hit a record $44b.

Trump has made tariffs his favourite negotiating weapon. His Administration has demonstrated that long-standing alliances, diplomatic flattery and security partnerships offer no guarantee of favourable treatment.

New Zealand officials have worked hard in Washington. But we have not secured immunity from the American tariff machine.

Most New Zealand exports to the US now face an additional 12.5% tariff under Trump’s Section 301 regime, on top of normal duties. Important exemptions remain, including beef and kiwifruit, but the wider burden is a serious concern for exporters.

Now our lamb industry is in the firing line.

Washington has launched a global safeguard investigation into lamb imports, including New Zealand lamb, examining whether increased imports are causing serious injury to America’s domestic sheep industry.

The investigation is being conducted under Section 201 of the US Trade Act. Unlike an unfair-trade investigation, this mechanism allows Washington to impose temporary safeguard measures without establishing that exporting countries have done anything wrong.

The US International Trade Commission is due to make its serious-injury determination by November 13, with its report to the President expected by January 11 next year.

If it finds serious injury, Trump will have the power to impose remedies.

New Zealand lamb producers could therefore be punished for structural problems in an American industry they did not create.

So much for the virtues of free trade.

Once the Democrats take control, they will have congressional committees, subpoenas and hearings at their disposal.

They can scrutinise tariff decisions, demand explanations for exemptions and investigate the relationship between government policy and private commercial interests.

But let’s not kid ourselves. Trump retains considerable executive authority over trade and tariffs.

A hostile Congress can make his life miserable, but it cannot simply dismantle the protectionist architecture he has constructed.

There is also substantial bipartisan agreement in Washington that America’s technological, industrial and security interests must be protected from Beijing.

Democrats are not about to abandon strategic competition with China simply because Trump has suffered an electoral setback.

The coming Trump-Xi Jinping encounter at the Apec leaders’ meeting in Shenzhen on November 18-19 will be watched closely.

China’s leadership will be assessing whether a President facing a hostile Congress has the political authority to negotiate deals he can actually deliver.

Trump may be constrained domestically, but that could make him even more inclined to seek spectacular diplomatic victories abroad.

For smaller countries, that is hardly reassuring.

New Zealand’s prosperity model is deeply connected to China, while our security and intelligence relationships remain anchored in the Western alliance.

We cannot afford to be naive about Trump’s transactional approach to international relations. Smaller countries can quickly become collateral damage when Washington decides to use market access as leverage.

Then there is Musk.

His political ambitions have been spectacularly expensive, but his commercial interests are even more deeply entangled with the American state.

SpaceX, Starlink, Tesla and his artificial intelligence (AI) ventures operate in industries where government contracts, regulation, defence procurement and political relationships can determine commercial fortunes.

Democrats are likely to use their new congressional muscle to investigate Musk’s government contracts, his former role in the Department of Government Efficiency (Doge) and his involvement in sensitive national security matters.

Technology regulation, artificial intelligence, data centres, energy investment, defence procurement and global supply chains will all be caught up in the political struggle.

New Zealand has ambitions to attract American investment into energy, infrastructure, technology and defence-related industries. We want to participate in the growth of AI and advanced manufacturing. We want American companies to see this country as a trusted Indo-Pacific partner.

But capital is increasingly geopolitical. Investors are assessing political risk, regulatory certainty, access to markets and the strategic preferences of Governments, not simply commercial returns.

The United States remains indispensable. It has also become a more difficult country with which to do business.

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