US midterm “Blue Tsunami” crests: Healthcare, tariffs, energy loom large on agenda

By Erin Caddell, Anchor Advisors, in partnership with GK Strategy 

The electoral blue wave that Republicans feared and Democrats worried might be a mirage crashed with massive force on Tuesday 3 November, with Democrats seizing control of both the House of Representatives and the Senate from the GOP in a nationwide repudiation of the policies of President Trump and his party during the first two years of his second term. 

As of 7 am ET on Wednesday (12 pm GMT), all major US news networks (yes, even Fox News, the favorite network of Trump and the Republican Party) were projecting that Democrats will take control of the House by what appears to be a comfortable margin above the minimum 218 seats, flipping at least 33 Republican-held House seats. Critically, Democrats will also win control of the Senate with at least 54 seats (several races have yet to be called). Democrats flipped Senate seats in at least six states that Trump won in the 2024 presidential race: Iowa, Kansas, North Carolina, Ohio, South Carolina, and Texas, while flipping a seventh – Maine – held by a Republican, and holding on to a Michigan Senate seat where the incumbent retired. Democrats also won several high-profile state governor’s races in states which previously held GOP governors and where Trump won in 2024 including Iowa, Georgia, Nevada, Texas and Ohio. In one of many stunning facts emerging from the evening, Kansas elected Democrat Adam Hamilton by a 5-point margin two years after voting for Trump by 16 points in the 2024 presidential race – the first time since 1932 that the state has elected a Democrat to the Senate.  

What do the results mean for US-focussed investors and corporates? We offer the following few initial thoughts as the dust starts to settle from these stunning results: 

First, with control of both houses of Congress, Democrats will gain key blocking votes over the federal budget and material meaningful domestic policy change even before the 2028 presidential election. While Democrats will not gain a veto-proof 6o-vote Senate majority, as of this writing winning 54 seats is an amazing result that even optimistic Democrats hesitated to consider heading into Tuesday. With the ability to lose up to three votes within its own party on given ballots, and perhaps to pick up six Republican votes to achieve a filibuster-proof majority, Democrats will use the substantial leverage it gained through its big election wins to push the agenda items that dominated its candidates’ winning campaigns: healthcare, tariffs and energy key among them. Energy may become an issue even before the new Congress is seated: a bipartisan bill that has been negotiated in Congress for months to speed permitting reform for energy and other infrastructure projects, one way to address the high gasoline and diesel prices that proved to be one of the key voter criticisms of Trump’s policies, could get a boost from Tuesday’s results and gain traction in the “lame-duck” session when Congress returns to DC later this year. Heading into 2027, the Democratic-led Congress is likely to open new legislative fronts on energy and climate policy including renewable energy; the Trump Administration’s environmental regulatory policies; and data centers (and the energy used to power them), public opposition to which drove multiple key Senate races. 

With regards to healthcare, incoming Speaker of the House Hakeem Jeffries (D-NY) already spoke on election night about moving to reverse or slow portions of the cuts to the Medicaid health insurance program for the poor included in the One Big Beautiful Bill (OBBB) passed by Trump and the GOP Congress last year. We could envision a deal to walk back some of the Medicaid cuts and tighter eligibility requirements under the OBBB gaining support from Democrats and some Republicans in 2027, with Trump reluctantly going along – a model for the kind of legislation that could pass in the new Congress. 

Second, Republicans in Congress as well as those who decide to run for the Republican nomination for president in 2028 will be quicker to distance themselves from Trump given the scale of the midterms’ blue wave. Winning Republican candidates returning to Washington will be more likely to disavow the most controversial elements of the Trump 2.0 agenda, including the harsh immigration enforcement policies of US Immigration and Customs Enforcement (ICE); the sharp cuts to domestic spending programs imposed by the OBBB and other Trump Administration actions; and the tariffs imposed on foreign goods by Trump in his first two years.  

With regards to trade, we found it notable that Mike Rogers, the Republican candidate for U.S. Senate from Michigan, broke with Trump in the late stages of his campaign to criticize the tariffs imposed by the U.S. on Canada in recent months, which have had an outsized impact on Michigan given the substantial cross-border trade with its northern neighbor (Rogers’ race was called in favor of his Democratic opponent Abdul El-Sayed overnight). Tariffs also played a role in the US Senate race in the Canadian border state of Maine, where Republican incumbent Susan Collins was unseated by Democrat Troy Jackson. We understand from one of our contacts that one of the first bills House Democrats plan to table once gaining the majority in the chamber in January 2027 is legislation to condemn the Canadian tariffs imposed recently by Trump. Will Republicans, chastened by the big Democratic win and positioning themselves to run for House or Senate (or the presidency) less fearful of the inevitable critical Trump tweet, cross the aisle to vote for such a bill? This is the new calculus members of Congress and their advisors will weigh as they contemplate the post-midterms landscape. 

Third, the turnover in Administration staff that often occurs after U.S. midterm elections will likely be higher than normal given the scale of the Blue Wave. White House staffers and other Administration officials will not want to be subpoenaed and dragged before Congress month after month to explain the second Trump Administration’s many scandals, a tactic Democrats have already said they will employ given the majority. Many senior and even junior administration staffers will literally face the choice of whether to pay to retain their own lawyers just to remain in their jobs for the next two years.  

Fourth and finally, federal agencies will face much more scrutiny from a hostile House and Senate in the final two years of Trump’s presidency. Trump Administration officials will be asked to testify regularly before Democrat-led House and Senate committees. While one might think the pugilistic Trump Administration will welcome such confrontations, these hearings, and the process of responding to the numerous data requests that accompany them, occupies agency time and resources that would otherwise be spend on additional regulatory actions. We have seen this occur with both Democratic and Republican lame-duck presidencies in the past where agencies largely move to defend in court and on the Hill the rules they promulgated in the first two years of the Administration, rather than attempting to finalize new ones in a more hostile political environment. 

As an old saying goes, elections have consequences. Democrats will be emboldened and Republicans will move quickly to contemplate the post-Trump era following the emphatic message delivered by American voters in last night’s midterm elections.