The Democrats have won control of both chambers of Congress in the 2026 US midterm elections, changing the balance of power in Washington for the remaining two years of Donald Trump's presidency. As of 5 November, the Democratic caucus had secured 54 Senate seats against 44 Republicans, with two races outstanding. In the House, Democrats had secured a majority while counting continued in several districts.
The result drew an enthusiastic response from some international leaders. French Foreign Minister Jean-Noël Barrot described it as "very good news" for American democracy, while Spanish Prime Minister Pedro Sánchez welcomed the outcome as a rejection of the administration's policies. US Treasury bonds also rallied as investors assessed the prospect of greater constraints on federal spending.
For international businesses, the important question is what the new Congress can actually change. Democrats will have more influence over trade policy, but many of the tariffs and restrictions affecting companies today rest on powers Congress has already delegated to the president. The election may change how those powers are challenged and exercised without removing the underlying trade barriers.
Congress will have more influence, but Trump retains substantial trade powers
When the new Congress convenes in January 2027, Democrats will control the legislative agenda, chair committees and gain greater scope to investigate the administration. They can scrutinise tariff decisions, challenge the costs imposed on American businesses and consumers, and use government funding negotiations to seek concessions.
Their power to repeal tariffs is more limited. Trump can veto legislation he opposes, and overriding that veto generally requires a two-thirds majority in each chamber. Senate rules can also make it difficult to advance contested legislation without bipartisan support. Political gridlock could therefore slow parts of the administration's domestic agenda while leaving much of its trade programme in place.
The constitutional position is important here. Congress has the power to regulate foreign commerce and impose duties, but successive laws have delegated extensive trade authority to the executive branch. Professor Kathleen Claussen of Georgetown University has examined this development through her work on the trade administrative state. In a 6 November interview with Sally Sara on ABC Radio National, she discussed the challenge Democrats face in trying to wind back Trump's tariffs. The administration can continue using statutory trade powers even when Congress opposes its decisions.
The courts are testing the limits of executive tariff authority
Legal challenges have already changed the administration's tariff framework. On 20 February 2026, the Supreme Court ruled that the International Emergency Economic Powers Act did not authorise the president to impose tariffs. The White House subsequently introduced temporary duties under Section 122 of the Trade Act of 1974. Those measures expired in July, when the administration introduced new tariffs under Section 301.
Section 301 allows action against certain unfair foreign trade practices after an investigation. Section 232 of the Trade Expansion Act provides a separate basis for restrictions involving national security. The administration has continued using both mechanisms, which carry their own procedures and legal requirements. The Congressional Research Service has documented how the tariff regime evolved following the Supreme Court decision.
The new Congress can seek to amend these laws and investigate how the administration uses them. Businesses and trade associations can also challenge particular measures in court. For companies importing into the United States, the legal authority behind each tariff affects its likely durability, available exemptions and potential remedies. Firms that paid duties under the invalidated IEEPA measures may also have refund claims, subject to the applicable customs and court processes.
A wholesale reversal of protectionism remains unlikely
Democrats may press for relief where tariffs have increased costs for US households and manufacturers. Trump could also reduce certain duties through executive action where the relevant statute permits it. However, tariff reductions would require specific political or administrative decisions; they will not follow automatically from the election.
The broader American trade stance has substantial bipartisan support. The Biden administration retained most of the Chinese tariffs inherited from Trump's first term, and both parties have backed measures intended to protect domestic manufacturing and strengthen strategically important supply chains. Restrictions involving advanced semiconductors, critical minerals and sensitive technologies are likely to remain central to US economic-security policy.
The election may therefore influence the intensity, legal instruments and pace of protectionism more than its overall direction. Trading partners may find new opportunities to challenge individual measures or negotiate exemptions, while facing continuing pressure to address American concerns about industrial capacity, technology and supply-chain dependence. Governments negotiating with Washington will need to assess which positions rest on presidential discretion and which enjoy support across Congress.
What changes for Australian exporters?
For Australian exporters, the immediate question is whether the new Congress will lead to changes in the tariffs they currently face. Since 24 July 2026, the United States has applied a 12.5 per cent Section 301 tariff to many imports from Australia, subject to product exemptions. Separate Section 232 duties apply to certain sectors. According to the Australian Department of Foreign Affairs and Trade, exporters need to establish which measures apply to their specific goods rather than assume a single national tariff rate.
Australian beef benefits from particular exemptions, while other producers face additional duties that affect their competitiveness against US and overseas suppliers. A manufacturer quoting for American customers in 2027 needs to establish the applicable product classification, tariff treatment and responsibilities under its contract. An anticipated political change offers little protection if the existing duty remains payable when the goods cross the border.
Australia also faces indirect effects. US restrictions may encourage producers in other countries to redirect goods towards markets where Australian exporters compete. Changes in supply arrangements can influence input availability, freight costs and investment decisions across multiple countries. Companies heavily exposed to either US or Chinese demand should assess how changes in those markets could affect revenue, margins and supply reliability.
Bond markets rallied, but fiscal uncertainty remains
US Treasury bonds rose after the election. On 4 November, the benchmark ten-year yield fell six basis points to approximately 4.89 per cent as investors considered the possibility that divided government would restrain new spending. A sharp fall in oil prices and expectations about the Federal Reserve also contributed to the move.
That initial reaction does not settle the longer-term outlook. US borrowing requirements remain substantial, and disputes over government funding could increase uncertainty. Global businesses will continue to feel the consequences through financing costs, exchange rates and demand. For Australian companies, energy prices and domestic inflation pressures also deserve attention; the effects of US tariffs on Australian prices will depend on trade diversion, currency movements and supply conditions rather than follow a single predictable path.
What international businesses should do now
Companies with US exposure should review their position product by product and contract by contract. The immediate priorities are to identify tariffs currently payable, understand the legislation underpinning them and establish who bears the cost if duties change. Firms considering new US investment should model the effects of continued tariffs alongside possible exemptions or changes arising from negotiations and litigation.
Management should also revisit assumptions about supply-chain concentration and access to third markets. A less supportive Congress may constrain some White House decisions, but the administration retains considerable discretion over foreign policy, tariffs and export controls. Continued strategic competition with China will shape investment and sourcing decisions well beyond this election cycle.
The Democratic victory will bring closer scrutiny of the administration's trade decisions and may create openings for targeted relief. Its effect on individual businesses will emerge through specific tariff changes, legal rulings and negotiations. For companies planning international expansion, those developments warrant close attention, while existing trade barriers remain part of the commercial calculation.
Dearin & Associates helps international businesses assess geopolitical developments and incorporate them into trade and expansion decisions. Thinking about the US? Let’s spend 15 minutes pressure-testing the opportunity, the risks and your smartest next move. Book your US Growth Check with international strategist, Cynthia Dearin.
