The 2026 midterm elections handed the Democratic Party a historic victory as Democrats split the Trump coalition to regain both the House and the Senate. As of now, Democrats hold more than a 250-seat majority in the House of Representatives, which would be the largest House majority of any party since 2008 (or 1990 if Democrats end up with more than 258 seats).
In short, this is a devastating loss for the Republican Party, particularly in the Senate, where Democrats flipped seats in Maine, Iowa, Kansas, Ohio, North Carolina, South Carolina, and Texas. The 2026 cycle was one of the most favorable electoral maps for Senate Republicans. The significance of this loss makes it likely that the GOP does not regain Senate control until at least 2033.
One Republican member of Congress texted us just before polls closed last night saying that it is the “craziest election season [she has] ever seen.”
The election was a referendum on President Trump’s inability to control price levels and the Iran conflict. President Trump’s war in Iran was one of the first major US military engagements that did not have majority American support at the beginning. A Pew Research Center survey conducted 16 to 22 March 2026, weeks after the February 28 strikes, found that 61% disapproved of Trump’s handling of the conflict and 37% approved.
Support fell further as the conflict began to raise prices for key consumer and energy goods in the US, building on existing Democratic lines of attack that the President’s broad economic agenda was causing additional inflation.
Candidate quality hurt, but the wave knocked out mainstream candidates too. President Trump intervened in several Republican primaries, elevating candidates with significant political vulnerabilities. In Texas, President Trump endorsed Ken Paxton over incumbent Senator John Cornyn. On Tuesday, Paxton was defeated by James Talarico, who will be the first Democrat to represent Texas in the Senate since 1993. One-term Senator Roger Marshall was defeated in Kansas, and South Carolina elected their first Democratic Senator since 1988. At the same time, Governor Greg Abbott, a mainstream and well-liked governor in Texas, lost his race for his fourth term, demonstrating that the wave was significant enough to reach deep into GOP strongholds.
President Trump has been focusing on the wrong things. President Trump’s closing arguments failed to connect with voters. On Monday, many Republican strategists were frustrated that the President gave a speech touting his efforts to refurbish monuments in Washington, D.C. Exit polls suggested that Republican voters were turned off by the President’s ballroom and the time he has spent on similar efforts. Democratic messages related to corruption inside the Administration also landed well with voters.
Impact on the Administration’s Policymaking
President Trump told The New York Times he is “absolutely willing to accept [the] results” and prepared to work with Democrats. However, we expect him to continue the aggressive use of executive authorities, including trade, immigration, and other foreign powers. In general, Democrats will use the legislative process to position themselves against unpopular elements of the President’s agenda, including the war in Iran, corruption, tariffs, immigration, and other areas. They will also use subpoena authorities in the House and the Senate to aggressively investigate all parts of the executive branch, with investigations focusing on these areas of the President’s agenda.
Democrats will now have the pen on critical must-pass legislation, such as the annual government funding process and the Department of War’s authorization. The White House will seek “clean” funding bills that avoid Democratic policy priorities (such as restrictions on the President’s trade or immigration policy). However, Democratic leaders in both chambers will face pressure from their own members to use these leverage points to force policy concessions. There remains a significant risk of prolonged lapses in government funding due to disagreements between the White House and the Democratic Congress about funding priorities and policy riders. The next funding deadline is 11 December, but traditionally the lame duck Congress will push that date into Q1 2027, making it one of the first major deadlines for the new Congress.
The Administration has structured its international trade agenda, and much of its foreign policy generally, on top of the existing US legal regime, meaning that direct congressional approval is not needed. Congress retains significant tariff powers, such as the power to remove authorities or to formally “disapprove” of presidential executive actions. However, both actions are subject to President Trump’s veto, and overturning a veto requires a two-thirds majority in each chamber.
It is likely that over the next two years Congress will override at least one of President Trump’s vetoes. During the President’s first term, he issued 10 vetoes during the period when Democrats controlled the House. Of the 10, Congress overrode his veto on the Fiscal Year 2021 National Defense Authorization Act due to disagreements between the White House and Congress over various policy riders.
With respect to the EU, the US Trade Representative (USTR), the Commerce Department, and the US Mission to the EU will continue aggressively criticizing European regulations that the US views as discriminatory against US businesses. USTR is putting the final touches on its determination in the Section 301 investigation on overcapacity, which we understand is likely to be finalized before the end of the year. That investigation is expected to add an additional 5% tariff on European exports to the US, remaining compliant with the Turnberry agreement, which allowed the U.S. a 15% overall tariff (The US has already applied a 10% tariff under the forced labor Section 301 investigation).
Further, the US is preparing tariff action related to the Commerce Department’s Section 232 investigation on medical devices, despite the legal deadline for that action passing in September. USTR has also prepared an additional Section 301 investigation into European digital services regulations. Conversations suggest that USTR is considering launching this action before the end of the year. Finally, USTR’s comment process related to the potential discriminatory effects of the European Carbon Border Adjustment Mechanism (CBAM) closes on 9 November. While this investigation is not tied directly to a tariff action, it continues the Trump Administration’s aggressive scrutiny of dozens of different European regulatory actions.