US midterms 2026: what is the impact for international businesses?

The US midterm elections on 3 November have delivered a significant political shift, with Democrats securing control of both chambers of Congress. The economic implications will depend largely on how the two branches of government work together, introducing stronger political checks and balances, although significant policy changes will require negotiation and agreement between the two sides.

Despite relatively resilient US economic growth, higher fuel prices have placed visible pressure on households. The change in congressional control could also reduce the scope for further fiscal stimulus, which may moderate economic growth but could also help contain government borrowing and provide reassurance over the longer-term fiscal outlook.

Financial markets have so far shown resilience. US stock futures recovered from initial declines and moved higher on 4 November, while several international equity markets also advanced. Although investors are assessing the prospect of greater regulatory scrutiny and reduced fiscal stimulus, the early reaction suggests that the election result has not fundamentally altered expectations for corporate performance.

Disagreements over federal spending and the debt ceiling may intensify in 2027. Further government shutdowns remain a possibility, although a US default is considered unlikely.

How the election could influence US trade policy and international expansion

Trade policy remains one of the most immediate considerations for internationally active businesses.  Congress has constitutional authority over international trade, but successive administrations have exercised powers delegated to the President, including the ability to introduce tariffs under existing legislation. The new congressional majority may seek closer scrutiny or changes to trade policy, although reversing existing measures would require legislative agreement or action by the administration.

Continued uncertainty over import duties and trade relationships could affect supply-chain arrangements, pricing strategies and decisions about where businesses manufacture, source and invest. Companies with significant exposure to the US market may need to reassess the resilience of their international operations, particularly where costs cannot easily be passed on to customers.

Financing conditions remain central to private equity and M&A

 A divided government may limit the scope for major fiscal and tax reforms, potentially providing greater continuity in some areas of economic policy. Investment decisions will nevertheless remain sensitive to financing conditions, particularly movements in US Treasury bond yields, alongside corporate performance and regulatory developments. Private equity investors will also be monitoring developments in sectors where regulatory intervention can materially affect business models and valuations, including healthcare, financial services and technology.

Although the election itself is unlikely to determine transaction activity, developments in fiscal policy and sector regulation will form part of the wider assessment of deal timing, financing arrangements and exit strategies. The ability to demonstrate sustainable growth and operational value creation will remain central to investment decisions.

AI regulation and data centre investment under greater scrutiny

Artificial intelligence has become an increasingly prominent economic and political issue, with debate extending beyond innovation to the scale of investment, energy consumption and corporate accountability.

The new Congress could bring greater scrutiny of major technology companies, particularly concerning AI governance and the development of data-centre infrastructure. State governors could also influence data-centre development through decisions on planning, energy infrastructure and investment incentives. While greater regulatory scrutiny may affect investment decisions, clearer governance expectations could also support business confidence and responsible AI adoption.

Businesses investing in or that have already invested in AI will need to consider how changing regulatory expectations could impact their strategies. Demonstrating measurable returns, maintaining effective governance and managing the operational risks associated with large-scale adoption are likely to remain important priorities.

How the political shift could shape financial services regulation

Banks, asset managers and other financial institutions could see closer congressional examination of regulatory priorities, particularly in areas where the two parties have different approaches.

Democrats may now seek greater scrutiny of financial stability, consumer protection and digital assets, while the administration can continue pursuing its regulatory priorities through federal agencies. The extent of any change will depend on whether congressional proposals lead to new legislation or whether existing regulatory frameworks remain in place.

The distinction between legislative proposals and changes introduced through regulatory authorities will be particularly important. Financial institutions operating internationally must also consider how differing regulatory approaches between the US and other major markets affect compliance requirements and strategic decisions.

Energy security and shifting priorities for infrastructure investment

Energy security remains a major concern amid continuing geopolitical tensions and the countries in conflict. Higher energy costs can have consequences far beyond the sector itself, influencing manufacturing, transport, supply chains and investment returns.

The election could reshape congressional debate around renewable energy, infrastructure funding and the future of US energy policy. Significant legislative changes will nevertheless require agreement between Congress and the President.

Businesses planning major capital investment will need to consider both the immediate consequences of energy price volatility and the longer-term implications of changing government priorities.

Preparing for what’s next

The midterm elections have altered the political landscape, but the direction of US economic policy will depend on how the administration and Congress navigate their competing priorities. Although areas of political disagreement may slow some legislative proposals, opportunities for agreement remain, and the administration will continue to exercise its executive powers. The early response from financial markets also suggests that investors are distinguishing political developments from the underlying strength of the US economy.

The immediate priority for internationally active businesses is to understand which developments could materially affect their operations and investment plans, rather than responding to political uncertainty alone.