US midterm election: a split Congress

As widely expected, the Democrats took control of the House of Representatives, while the Republicans increased their lead in the Senate. Democrats benefitted from a higher turnout in an election that was framed as a referendum on Trump, successfully mobilizing younger voters and minorities.

Highlights:

  • The midterm election delivered a split Congress, with the Democrats getting the control of the House of Representatives and the Senate remaining in Republicans’ hands.
  • Such a scenario implies virtually no scope for big legislative action on the fiscal front. A split Congress increases the probability of a shutdown: the first such occurrence could be in Q1 2009.
  • Democrats and Trump’s support may increase the likelihood of extra infrastructure spending, but finding a deal in the Congress will be hard. A much more likely outcome is some revision in drug prices.
  • On trade, there should be no significant impact. The new agreement with Mexico and Canada will be passed and the Administration’s attitude toward China will not change.

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US MIDTERM ELECTION: A SPLIT CONGRESS

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