How will the midterm election results affect supply chains?

A divided Washington could change the debate over tariffs and trade. For supply chain leaders, the question is whether policy becomes predictable enough to greenlight delayed investments.

The stunning results of the midterm elections are likely to have an effect on global supply chain operations. With Democrats now holding comfortable majorities in both houses of Congress and Trump still in the White House, it could lead to gridlock in Washington. Trump has already said he would become ”Mr. Veto,” meaning he would block any legislation the Democrats advance. But the House and Senate majorities could also lead to a softening in Trump’s draconian trade policies and restrictions on funding for the Iran war.

Here is what we should consider as we determine the path ahead for our global supply chains.

A more stable economy

A research study conducted by the Reshoring Institute in early 2025 indicated that manufacturers across America were holding back on making capital investments and hiring due to the instability in the economy and volatility in tariffs.  The one thing that manufacturers hate is unpredictability. Not being able to make assumptions about the future makes supply chain and manufacturing planning very difficult. Companies were reacting to this instability by doing nothing or very little investing, building, hiring, or reshoring.

We know from our research that a magnitude of capital investment dollars have been sitting on the sidelines until tariffs, trade issues, and the war in Iran stabilize or have a pathway for resolution. A somewhat more stable and predictable economy is likely ahead with the new Congress, even if this brings stalemates between Congress and the White House. At the very least, stalemates are somewhat predictable.

Capital investment

It appears that there is a lot of pent-up demand for manufacturing expansion and reshoring simply because there has been so little investment over the past two years. Hiring in the manufacturing sector has been flat according to the U.S. Bureau of Labor Statistics since the beginning of 2025. A more stable economy, even if the tariffs continue, will likely free up the waiting investment capital, which should result in new manufacturing facilities and more jobs created.

Tariffs and trade

Over the past two years, President Trump has imposed various tariffs through the use of emergency powers and signing Executive Orders. To date, most of these tariffs have been declared illegal by the courts and duties collected are now being refunded to importers. The authority for imposing tariffs and taxes rests with Congress under the Constitution, and it is likely that the new House of Representatives will fight to take back that responsibility. Tariffs have been very unpopular with the American public because they increase prices for consumers, and while additional tariffs are possible under new Executive Orders by Trump, there will likely be less focus in this area.

Trade and foreign policy remain the responsibility of the Executive Branch. Because supply chains are global in nature, and trade is reliant on good trade relationships, this too is an area likely to change. Congressional delegations are likely to be very active in traveling to U.S. trading partner countries to rebuild bonds and improve relations. This is good news for reducing friction in global trade.

Taiwan

Trade with Taiwan, where most of our advanced semiconductors are fabricated, remains in question. U.S. support for the Taiwanese government is a problem for our relationship with China, with the White House appearing to favor China. The size, strength, and U.S.-China market integration must also be considered. The White House policy on China is unclear, while  Congress, over the past few years, has favored Taiwan. This is a wait-and-see topic.

USMCA

The USMCA agreement was supposed to have been updated in July, but the Trump administration refused to sign the continuing proposal, preferring instead to conduct bilateral negotiations individually with Canada and Mexico. Lobbying by the automotive industry with Trump and Congress will likely result in favorable terms for trade with Mexico, where the automotive industry is heavily invested.

Canada is a different story. Trump’s feud with Canada will likely be affected by the U.S.-Canadian border states of Michigan, Minnesota, Ohio, Maine, and New York, where newly elected Democratic representatives and senators are likely to put pressure on Trump to back off on the Executive Order tariffs and make peace with Canada.

Data centers and AI development

This issue lands more on the states than Congress. Beginning in 2027, the U.S. will have 29 elected Democratic governors. Many of the newly elected governors have promised to slow or stop the construction of data centers until reasonable solutions are found and agreements can be made regarding electricity, water, and noise pollution. Electricity and water are also used in abundance by manufacturing sites. Pauses to new data center construction and new solutions for energy and water may bring beneficial changes for everyone. Look for innovative energy generation, water recycling, and improvements in infrastructure to support both data centers and manufacturing.

Iran war

Gas and diesel prices were at the forefront of most of the election campaigning, with the war on Iran blamed for increases. According to the U.S. Global Leadership Coalition, a staggering 74% of voters called the Iran war a major issue in their vote. The election results will most likely bring a speedier end to the war through funding cuts and pressure on the White House, and a resumption of the oil trade in the Middle East.

A reduction in gas and diesel would bring relief to consumers and bring down transportation costs. It will likely be a while, though—maybe a year or more—before we see the effects.

Change ahead

Change is on the horizon and on the agenda for most companies. Supply chains are likely to benefit from the road ahead through innovative solutions and improved international relations.