US midterms outcome could sway policies

Analysts are weighing in on how much sway the outcome of the 2026 midterms could have on the future direction of US trade, the economy, artificial intelligence and the conflict in Iran after the Democratic Party took control of the House of Representatives and Senate from Republicans.

Democrats immediately vowed to use their congressional majorities to provide greater oversight, posing a potential threat to parts of the president's domestic and foreign policy agenda. But the president is still commander-in-chief, and retains substantial executive authority, including the power to sign or veto legislation. Congress can override a veto with two-thirds majorities in both chambers, though Democrats appear to have fallen short of the needed supermajorities.

Voters were spurred by worries over how the conflict with Iran and tariffs had driven up energy prices and the cost of living. But the White House has enacted economic and foreign policies using executive orders, limiting the scope of what Democrats can actually do once they get back into Congress, Mark Zandi, chief economist at Moody's Analytics, told CNBC.

Democrats will take control of both chambers when the new Congress convenes in January.

"You will have a Congress that recognizes that we don't work for the president," Representative Hakeem Jeffries, a New York Democrat, who is in line to become the first black Speaker of the House, said on Wednesday, signaling a new way of doing business.

On election night, US President Donald Trump said he was "willing to work with the Democrats" but also posted a picture on Truth Social of a red hat emblazoned with the word "veto". He later told Politico, "I don't want to be just sitting there for two years vetoing everything."

Senate Minority Leader Chuck Schumer, a New York Democrat, said on Wednesday, "We are going to work hard for Americans to drive costs down, with or without the president."

Little will change the national debt, currently at $40.5 trillion, with net interest totaling $1.05 trillion in fiscal year 2026, or the budget deficit, which will end the year near $2 trillion, or 6.1 percent of GDP.

Consumer prices rose 3.7 percent in the 12 months to September, up from 2.3 percent in April 2025, when the administration announced its "reciprocal" tariff plan.

"Inflation can become self-fulfilling," Todd A. Knoop, David Joyce professor of Economics and Business at Cornell College in Iowa, told China Daily.

"If people think inflation is going to be higher, they demand higher wage increases, and that pushes up the prices of goods in anticipation of future inflation. That's a very worrisome thing that probably is also contributing to the higher inflation."

The CPI was 2.4 percent when the US and Israel launched the conflict with Iran in February.

Trump admitted that it was "largely true" that the conflict with Iran was to blame for the midterms.

But he added it was "worth it" and he would "do it again" if it was needed to prevent Tehran from getting a nuclear weapon. US Vice-President JD Vance also blamed the conflict, writing on social media platform X that "everyone knows why we lost".

Hot topic

AI was another hot topic for voters. At least six in 10 voters polled by The Associated Press said that AI will do more to hurt society.

Representative Ted Lieu, a California Democrat and co-chair of a House Democratic commission on AI, said on Wednesday, "On AI, we need to put in some reasonable, sensible guardrails."

US stocks plunged on Thursday as another sell-off in stocks tied to the AI data center buildout weighed heavily on Wall Street.

New York's Nasdaq plunged 5.5 percent in its worst day — percentage-wise — since April last year when Trump unveiled his wide-ranging global tariffs.

The S&P 500 tanked more than four percent and the Dow more than three percent.

Investors worried that Democratic victories in the midterm elections could bring government-ordered pauses on new data centers and tighter scrutiny of the AI buildout, even as big technology companies borrow heavily to fund the expansion.

"A shakeout among the most speculative parts of the theme is underway," said research firm MRB Partners in a Thursday note. "The US midterm election results will add to headwinds for big tech and the data center buildout."

Xinhua, agencies and Mingmei Li in California contributed to this story.