US midterm outcomes could shape global markets and India's trade outlook

The November 2026 US midterm elections will determine whether President Donald Trump retains a supportive Congress or faces a legislature that could limit his agenda. Analysts note that the balance of power in Washington could influence fiscal policy, trade rules and regulatory frameworks, which in turn may affect global capital flows, commodity prices and technology supply chains.

Sohom Banerjee, a senior economic and AI expert, told NDTV that the elections will impact the predictability of trade policy, the credibility of fiscal commitments and the allocation of international capital. He added that a divided government could constrain Washington without necessarily making economic conduct more predictable.

If Republicans control both chambers, the Trump administration could have greater latitude to pursue tax, spending and regulatory changes. Conversely, a Democratic majority in either chamber could increase oversight and complicate budget negotiations, though the President would still retain executive powers such as the veto.

Tariff policy is also likely to remain a point of uncertainty. Although a Supreme Court ruling in February limited the use of emergency powers for certain tariffs, other statutory authorities remain available. Banerjee said that any shift in import restrictions could alter sourcing decisions without fundamentally changing the United States' overall trade deficit, which is driven by the gap between national savings and investment.

The Congressional Budget Office estimates the federal deficit at about $2 trillion for fiscal 2026. Additional borrowing could boost US consumption and demand for imports, potentially benefiting exporters in Asia and Europe, but it could also push Treasury yields higher, raising financing costs for countries and companies that rely on dollar-denominated debt.

The dollar, which held 56.7 percent of global foreign-exchange reserves in the second quarter of 2026, remains central to the international financial system. While Congress does not set monetary policy, fiscal decisions influence the environment in which the Federal Reserve sets rates. Higher US yields may attract capital to American assets, putting pressure on emerging-market currencies and increasing the cost of dollar-denominated borrowing.

Technology and AI supply chains could also feel the impact of the elections. The World Trade Organization reported that AI-enabling goods accounted for 47 percent of the increase in merchandise trade value in the first half of 2026. Policy choices on semiconductors, research funding and corporate tax incentives could shape where companies locate factories and data centres, affecting countries that are integrated into these supply chains.

For India, which exported roughly $92.3 billion of goods to the United States in calendar 2025—about 20.75 percent of its total goods exports—the election outcome is particularly relevant. Banerjee advised that India should focus on securing reliable market access, diversifying supply chains and improving infrastructure such as power, ports and customs procedures. A weaker rupee could aid some exporters, but higher energy costs, imported inputs and foreign-currency liabilities may offset those gains.

Overall, the midterms could either reduce or deepen uncertainty for global markets, depending on how the new political balance influences fiscal and trade decisions.