What Democrat-controlled US Congress means for AI, trade, immigration, oil

The change of guard following the US midterm election results 2026 could potentially derail some of Trump’s legislative agenda.

All of these could have potential second-order impacts outside of the US, including in India.

Written by: Anil Sasi

7 min read New Delhi Nov 6, 2026 06:44 AM IST

“Lawyer up”: that was the succinct two-word advice Robert Garcia, the American Democratic congressman set to chair of the oversight committee of the US House of Representatives, had for Republicans on Tuesday evening (November 3) after a decisive “blue wave” helped the Democrats wrest back control of both the Senate and the House.

As the House Democrats gear up to take on Donald Trump’s administration, with subpoenas, enquiries and investigations, the change of guard could potentially derail some of Trump’s legislative agenda. This could, in turn, probably make it a bit harder for the US President to hike tariffs, keep the war machine going and cut spending on things such as affordable medical care.

Democrats are generally less receptive than Republicans to overshooting of the federal debt ceiling, which could potentially mean a more range bound US dollar. All of these could have potential second-order impacts outside of the US, including in India.

The S&P 500 index of large American companies surged the morning after and ended the day over 1.5% higher even as the yields on ten-year US Treasury bonds slipped downwards, as did the US dollar. Despite the buoyant markets, there were some clear losers: the share price of CoreWeave, a major data-centre operator, dropped by 10%. Micron, which makes memory chips used by AI servers, ended well over 5% while Nvidia, the storied AI-chipmaker, slipped by around 3%.

Even in India, the markets opened significantly higher on Thursday (November 5): the benchmark index BSE Sensex opened 2.17% higher whereas the NIFTY50 opened 1.74% higher than the previous day’s respective closing figures.

Going forward, the big losers could be companies involved in the buildout of artificial intelligence (AI) data centres across America. That could have potential stock valuation impact, which, in turn could serendipitously help India’s beleaguered stock markets. According to a Mumbai-based emerging equity fund manager, India is generally viewed as an AI loser and the wait for the AI hypercycle to turn for India to start attracting foreign capital again could potentially be on the cards.

There is yet another silver lining for India. The fact that the midterms delivered a vote that is interpreted as a pushback against the affordability crisis for the regular American, could mean a more calibrated approach by the administration against the factors that sparked the affordability crisis, which include the widely unpopular Iran war and the tariffs.

Sectors such as Indian pharma, which have so far escaped additional US tariffs, could see some upside. Trump had announced earlier that he plans to keep generic drugs tariff-free for only two years from August 2026, and intends to slap a 100% tariff on them from August 2028 for a year, hiking it then to 200% duty. If implemented, the plan could squeeze margins in Indian drugmakers’ largest export market. The sharp pushback against the cost of living crisis could mean these plans could be reconsidered. One of the first things on the legislative agenda for the Democrats would be to try to restore the funding that the Republicans cut for Medicaid, the health programme aimed at American lower income groups.

Trade talk upside?

But does all of this accommodation offer an immediate respite on trade talks with India? Unlikely, say experts. “Since Democratic lawmakers also support protective tariffs for local union workers, America’s overall trade posture will remain intact. To act without Congress, the president will continue to rely on existing powers — such as Section 232 and Section 301 - using executive orders, Treasury sanctions, and USTR (United States Trade Representative) rules to apply unilateral trade pressure,” Ajay Srivastava, founder of New Delhi-based think tank Global Trade Research Initiative said.

“The US midterm verdict does not hand Congress immediate authority over tariffs. The Section 301 and Section 232 duties rest on executive authority, and any rollback faces a presidential veto. What changes is the cost of unpredictability. With hearings and oversight likely to sharpen, the administration has less room for abrupt tariff escalation, giving India space to negotiate on substance rather than under deadline pressure,” Rituparna Kaushik, assistant professor of economics at Pune-based FLAME University, told The Indian Express.

“Labour-intensive sectors such as textiles, apparel, leather, and gems and jewellery stand to gain most from greater tariff stability. Steel, aluminium and auto components are unlikely to see quick relief, as Section 232 protection enjoys bipartisan support. Generic pharmaceuticals could find a more receptive Congress focused on drug prices. Hence, India should use this window to lock in a more predictable and balanced tariff schedule, while holding firm on agriculture and dairy, where pressure from the US farm lobby cuts across party lines,” Kaushik added.

But there could be other pitfalls. With foreign policy leverage failing against Russia, China, and Iran, Trump needs a quick win and Srivastava expects heightened pressure on India for a trade deal for the US administration to prove American clout.

Also, immigration remains a problem and the concerns about immigration are now more or less bipartisan outside of states such as New York or California. So, the H-1B visa and that route of immigration is now on its way out. The good thing, though, is that Indian IT companies are slowly weaning away from their dependence on that route and there is the concomitant push for GCCs (global capability centres) in India that is likely to offer a policy counter to neutralise the waning effectiveness of the onshoring tech support model.

Oil markets

On the Russia front, there could be some fresh uncertainty. Trump was broadly much more amenable to accommodating Russia and its President Vladimir Putin, while the Democrats are unlikely to take that line. So, there could be a pushback against the diesel deal that Trump signed with Russia and, in all of this, there lies the possibility that India will remain a very visible scapegoat.

Brokerage Emkay expects the shift in power dynamics in Washington, DC to eventually reduce geopolitical risk premia in crude oil, although near-term policy uncertainty may keep prices volatile. “Broad voter fatigue with the Iran war, a sharp loss of political capital, and the risk of losing swing Republican votes before 2028 could push Trump toward a negotiated resolution with Iran in the coming quarters. Near-term policy swings may persist, keeping Brent volatile before it eases more durably. Brent is already down around 19% from recent Oct-26 highs to ~$95/bbl as the geopolitical risk premium unwinds. This is a clear macro positive for India, where the oil import bill is up ~24% FYTD, with Brent averaging ~$97/bbl”, it said in a note.

According to Gita Gopinath, the Gregory and Ania Coffey Professor of Economics at Harvard University, with Democrats taking control of Congress, there is a possibility that Jay Powell (former US Fed chair) will step out of the Fed as central bank independence will be more secure, the tariff policy will be “less insane” and that fiscal deficits will remain a problem.

All of this could have implications both for global capital and bond markets alike in the months to come, which could transcend American shores to impact most economies, including India.