The US midterm elections have concluded, and the result was a historic rebuke of the Trump administration. The Democratic party has taken control of both the House and the Senate, flipping both seats and gubernatorial positions held by Republicans for decades. It’s a result that has left Republicans reeling, and many people asking: what’s next?
While the dust is yet to fully settle, the next two years will make interesting viewing for businesses around the world. With the Democrats wielding legislative power, how much will they be able to force through to reverse the economic damage caused by Trump - and how much can he actually block through the power of veto?
The blue tsunami
Even the most optimistic Democrats could not have anticipated the size of their comeback against the Republicans. As well as succeeding in ‘swing states’ like Georgia and Michigan (which frequently pivot between the two parties), the blue team also took deep red states that haven’t had Democratic representation in years. This included flipping Texas, with Christian centrist James Talarico winning a race that was the focus of huge media attention.
The result is a catastrophic blow for the Republicans’ legislative ambitions. Midterm elections are rarely won by the ruling party, but few have seen the kind of overhaul that this one has created. The Democrats’ control of both houses threatens to make Trump a ‘lame duck’ president, with every piece of legislation his party wants to put through Congress now being at the whims of the Democratic Party.
This is likely to curtail many of his most controversial and newsworthy policies, should he continue to push them. While Trump has circumvented Congress entirely to make some of his decisions, such as his tariffs and trade embargoes, laws such as the One Big Beautiful Bill Act (which slashed funding in areas such as healthcare and student loans) will require the ruling party to cooperate with the opposition.
Why did the Democrats do so well?
There is little doubt about what caused the scale of the Republican defeat, and the Democratic victory. As cited by Vice President JD Vance, perhaps the biggest reason was the Iran War, and the impact this has had on energy prices in particular. America is hugely reliant on cars to get anywhere, and prices at the pumps have spiked since the war began. This has added to existing inflationary pressures for everyday items, with the CPI up significantly since March.
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However, certain legislative actions have also frustrated parts of the Republicans’ base. The Latino community, which overwhelmingly voted for Trump just two years ago, appears to have left him in droves. This likely follows the actions of ICE (Immigration and Customs Enforcement), which has been involved in the sudden imprisonment and deportation of many people from minority backgrounds.
An unexpected hot-button topic has also been AI (just don’t call it that in front of Trump). The Trump administration has put its weight behind AI expansion, with AI firms now accounting for a sizeable portion of the US economy.
But at a local level, protests have grown over AI data centres, which can consume both large parcels of land and local resources, particularly when it comes to energy expenditure. All of this has combined to form what’s been called a ‘blue tsunami’ - swinging power back in favour of the Democratic Party.
Will the midterms actually change Trump?
The open question is the extent to which this defeat will mollify Trump. The early signs were positive: the President seemed relatively calm in the hours after the loss, and suggested that he would be willing to work with Democrats on future legislation. Since then, however, he has appointed hardline homeland security advisor Stephen Miller as his new White House Chief of Staff, and questioned whether the elections were fair.
There’s also a question over the extent to which the Democrats will be willing to work with him. Impeachment proceedings against Secretary of Defence Pete Hegseth have already been floated, although this is also supported by some Republicans. The common consensus seems to be that Democrats may wait for any civil war inside the Republican Party to play out, and see if they can get the handful of anti-Trump moderates on-side.
There’s also the economic impact of the results to consider. A combination of the election and the scandal surrounding Nvidia CEO Jensen Huang have seen AI and other tech stocks nosedive. Trump painted this as a direct result of voting Democrat, and in a sense, he may be right. The results haven’t been particularly warmly received by the US tech industry or its investors, which had welcomed Trump’s laissez-faire attitude to both AI development and tech regulation. The extent to which AI is currently boosting the US economy makes it unlikely that Trump will pull back on this either, meaning data centres will continue to be an issue.
What the midterms mean for businesses
As far as tech businesses are concerned, nothing is likely to substantially change before the next election. The legislation and investment supporting the US tech industry is likely to continue after the current blip, with the potential rise of Chinese AI being seen as a national security threat.
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Tech businesses elsewhere in the world, and particularly the EU, will continue to compete on an uneven footing, with the lack of US regulation contrasting with EU efforts such as the AI Act. California’s controversial ‘billionaire tax’ also failed to pass, meaning tech companies are likely to remain firmly ensconced in the state.
The picture for businesses in other industries around the world is a bit more positive. Change is likely in three key areas: the Iran War, trade, and economic stability. One may beget the other: an end to the Iran War would benefit countries across the world suffering from disrupted logistics and high energy prices. This was something pointed out by UK Prime Minister Andy Burnham, who highlighted a common need to decrease the cost of living.
If the midterms achieve nothing else other than blocking Trump’s most controversial policies, that may create a more positive environment for businesses across the world. This may include trade, where Trump’s approach has been wild and punitive. Many of his infamous tariffs have already been struck down, and it seems unlikely that he will now be able to reimpose them. This will be a particular benefit to Canada and Mexico, which have suffered the most under those tariffs.
There may also be a more positive environment for certain types of investment. Recent years had seen a slight shift in renewable energy investments in the US, with solar and wind power winning over some traditionally Republican areas by providing cheaper energy. Democrats are reportedly already planning to try and reverse Trump’s climate policies, and to bring back renewable energy grants, which could benefit greentech businesses both inside and outside the US.
Financial services may also come under greater scrutiny. Cryptocurrency exchanges have been an area of rampant growth under the Trump administration, while Trump has also issued executive orders to reduce financial services regulation, advance fintech development, and prevent ‘debanking’ of individuals by banks. All of this could be subject to Democratic investigations, potentially levelling the playing field for Europe in particular.
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Positive changes for businesses may take some time, with the end of the Iran War possibly the likeliest. Trump also remains broadly hostile towards Europe, as he has shown with actions such as laying claim to Greenland, and his criticism of the EU as weak and fragmented. The hope is that any more hostile actions he attempts to take will be thwarted by Democrats in the House and Senate.
What this will look like in practice is likely two more years of bluster, and not a lot of actual action. But a bit of peace and quiet on the legislative front will be music to the ears of most businesses in Europe and elsewhere, if not US tech companies. Trump’s days of dominating the news cycle aren’t over, but the worst of his impact on global commerce might be.
