15th November 2026
The American political landscape has changed following the November 2026 midterm elections. The Democrats have won control of both the House of Representatives and the Senate, delivering a major setback to President Donald Trump and giving the opposition party an opportunity to challenge his policies during the final two years of his presidency.
However, winning control of Congress and being able to reverse the economic consequences of a president's decisions are two very different things.
The Democrats are inheriting an economy facing concerns about the cost of living, trade uncertainty, government borrowing, immigration and the future direction of American business. Their challenge is not simply to oppose Trump but to demonstrate that they can offer practical solutions to the problems facing ordinary Americans.
The question is whether they have sufficient power to do so.
The cost of Trump's tariffs
One of the most controversial elements of Trump's economic programme has been his extensive use of tariffs on imported goods.
His argument has been that making foreign products more expensive will encourage companies to manufacture in America, protect domestic industries and create employment. Tariffs also generate revenue for the government.
However, there is another side to the calculation.
American manufacturers often depend on imported components, raw materials and machinery. When tariffs increase the cost of those imports, businesses face higher production costs. They must either absorb the additional expense, reducing profits, or pass it on to customers.
The Congressional Budget Office has warned that higher tariffs increase consumer prices, reduce purchasing power and discourage investment. Its analysis also identifies the uncertainty created by frequent changes in trade policy as a factor affecting business investment.
The Tax Foundation estimates that Trump's tariffs increased taxes by an average of $820 per American household in 2026, although the precise impact varies considerably between households.
The Democrats have promised to challenge the tariff programme and restore greater congressional oversight of trade policy. However, tariffs are not all controlled directly by Congress. Presidents have considerable powers under existing trade legislation, meaning that a new Democratic majority cannot simply abolish every tariff by passing a resolution.
Even if tariffs were reduced, businesses would not necessarily lower their prices immediately. Supply chains have changed, contracts have been signed and companies have made investment decisions based on the existing arrangements.
The economic consequences could therefore continue long after the policies themselves have been changed.
Immigration and the American workforce
Immigration is another area where Trump's policies have economic consequences.
His crackdown has been justified by the administration on border security and immigration enforcement grounds. However, the American economy has become dependent on immigrant workers across a number of important industries.
Agriculture, construction, hospitality, food processing and care services all employ substantial numbers of immigrant workers.
Reducing the available workforce can create recruitment difficulties and increase operating costs. Construction projects may take longer, agricultural businesses may struggle to find seasonal workers and hospitality businesses may face higher staffing costs.
There is, however, a more complicated economic picture than simply assuming fewer immigrant workers automatically mean higher prices. Reduced immigration can also reduce demand for housing, goods and services. The overall effect depends on the balance between labour supply and demand.
The Democrats may seek to change enforcement priorities and introduce more predictable immigration arrangements. But they cannot simply reverse every deportation or ignore existing immigration legislation.
Nor is there agreement within American politics about how much immigration the country should accept.
The challenge will be finding an approach that addresses border security while recognising the economic importance of a reliable workforce.
The cost of living remains the biggest political issue
Perhaps the most important reason for the Democrats' election success was voter frustration about affordability.
Housing, food, healthcare, electricity and transport costs have become major concerns for American households.
It is important to distinguish between inflation and the actual cost of living. A reduction in inflation means prices are increasing more slowly. It does not mean that prices return to where they were several years ago.
This creates a difficult political problem for the Democrats.
They can promise to reduce inflation, but they cannot guarantee that supermarkets will lower their prices or that landlords will reduce rents.
They will also have to contend with the cost of healthcare. Democratic congressional leaders have identified restoring Affordable Care Act premium subsidies and reversing Medicaid spending cuts as priorities.
These are significant commitments, but they require legislation and funding. President Trump retains the power to veto legislation passed by Congress.
The Democrats therefore need to decide which proposals can attract sufficient support and which are likely to become political battles rather than practical achievements.
The problem of government debt
There is another economic difficulty that cannot be ignored.
The United States already carries a substantial national debt, and the cost of servicing that debt places pressure on government finances.
The Democrats will face demands to restore healthcare support, protect public services and help households with living costs. At the same time, they will be expected to explain how additional spending will be financed.
Higher interest rates make this more difficult because the government must pay more to refinance borrowing and issue new debt.
There is little room for either party to make expensive promises without considering their longer-term financial consequences.
The Democrats may also find themselves arguing with the White House over government spending and the debt ceiling. These disputes could create further uncertainty for financial markets and businesses.
A divided government
The biggest obstacle facing the Democrats is that Trump remains President.
The new Congress will take office in January 2027, giving Democrats control of both chambers, but the President retains considerable executive powers.
He can veto legislation, continue using presidential authority over trade and immigration, and appoint officials subject to the relevant confirmation procedures.
The Democrats will have greater control over congressional committees, government investigations, spending legislation and the confirmation of senior appointments.
This gives them considerable influence, but not unlimited power.
They can investigate the administration, demand explanations and introduce legislation. However, they will need sufficient support to overcome presidential vetoes, and Senate procedures can also make passing legislation difficult.
The election has therefore produced a divided political system in which neither side can easily impose its entire programme.
America's trading partners are watching
The consequences extend well beyond the United States.
Canada, Mexico, Britain and European countries have all had to consider how to respond to Trump's approach to international trade.
Companies cannot continually reorganise their supply chains every time American trade policy changes.
A European manufacturer deciding where to build a factory or source components needs confidence that access to the American market will remain reasonably predictable.
The uncertainty surrounding tariffs has encouraged countries to look for alternative trading relationships. Canada, for example, has been exploring opportunities to strengthen commercial links with Europe.
Even if a future American administration offers a more cooperative approach, some of those relationships may not return to their previous position.
Trust in international trade arrangements takes years to establish but can be damaged much more quickly.
For Britain, this matters because the United States remains an important trading and investment partner. Scottish businesses involved in energy, manufacturing, food, drink and technology are also affected by changes in international trade conditions.
A more predictable American trade policy would be welcome to many British exporters, although it would not automatically resolve the other economic challenges facing the UK.
Can the Democrats deliver?
The Democrats now have an opportunity to demonstrate that they can govern rather than simply oppose Trump.
Their recent election victory has exposed differences within the party. Progressive politicians want more ambitious measures on healthcare, taxation, wages and public spending, while more centrist Democrats argue that the party must concentrate on practical improvements to household finances.
Both groups recognise that voters will expect results.
There is a danger that the party spends too much time investigating the Trump administration and too little time developing policies that can make a measurable difference to ordinary Americans.
Equally, ignoring the administration's decisions would waste much of the power that comes with controlling Congress.
The Democrats have to balance scrutiny with economic policy.
The damage may outlast the presidency
Perhaps the most important lesson is that economic policies can be changed much faster than their consequences can be repaired.
Tariffs can be reduced, but businesses may not immediately restore previous prices. Immigration rules can be amended, but workers who have left the country will not necessarily return. International trading relationships can be rebuilt, but confidence takes time.
There is also the possibility that Trump will continue pursuing policies through presidential powers even when Congress is controlled by the Democrats.
The next two years could therefore be characterised by political confrontation, budget disputes and attempts to establish a different economic direction.
For Britain and Europe, the outcome matters. A more predictable United States could provide greater certainty for international trade and investment. However, businesses and governments may increasingly decide that relying too heavily on any single American administration carries risks.
The Democrats have won an important political victory, but they have inherited a complicated economic situation.
Winning control of Congress gives them the opportunity to change America's direction. Whether they can repair the economic consequences of the past two years is a much bigger challenge.