Krungsri Research Flash (November 4, 2026)

Blue Congress vs. Red White House: a political stalemate of vetoes and oversight, leaving major policy shifts out of reach while uncertainty grows around AI investment.

Key Event:

US Midterm Election Results 

• Every two years, all 435 seats in the House of Representatives and approximately one-third of the Senate seats are contested, the so-called Midterm Election. Pre-election polls had suggested that Democrats were likely to regain control of the House, while Republicans were expected to retain their Senate majority.

• However, the preliminary results point to a Democratic sweep of both chambers, with Democrats projected to take control of both the House of Representatives and the Senate. In the House, Democrats have secured 229 seats, surpassing the 218-seat threshold required for a majority, compared with 137 seats for Republicans, while several races remain unresolved. In the Senate, Democrats have also secured 54 seats, compared with 44 for Republicans, giving them a comfortable majority, marking a significant setback for the Republican Party.

Why Does It Matter?     

1. The future direction of US policies, particularly trade, tariffs and foreign policy, including approach to ongoing conflicts in the Middle East.

2. Potential shifts in domestic policies, particularly those affecting AI development and data-center investment, as Democrats gain control of several key state governorships.

3. The extent of President Trump's policy flexibility during the remaining two years of his term, given the changing balance of power in Congress.

Setting the Stage: Understanding the U.S. Legislative Process

• The U.S. federal government consists of three branches: 1) the Legislative Branch (Congress), 2) the Executive Branch (President), and 3) the Judicial Branch (Federal Courts).

• Ordinary legislation requires both chambers of Congress. The House and Senate must pass the same bill before it goes to the president for promulgation 

• Congress has delegated significant authority to the executive branch, particularly over trade, national security, sanctions, and foreign affairs. However, Congress retains control over appropriations and new spending.

• The president can veto legislation. Even if Congress passes legislation that Trump opposes, he can veto it. Overriding a presidential veto requires a two-thirds majority in both chambers. 

Policy Implications: What Changes under a Divided Political Landscape?

• Existing tariffs are unlikely to be fully reversed. Trump retains the authority already delegated by Congress under existing trade statutes, including Section 232 (national security) and Section 301 (unfair trade practices). 

• Further tariff escalation could become more difficult. Democratic control of Congress increases the scope for legislative scrutiny and oversight of Trump's trade agenda. 

• Trump retains substantial executive authority over foreign and security policy. As Commander-in-Chief, he can direct military operations and conduct diplomacy without requiring prior congressional approval in many circumstances.

• Congressional oversight could increase, but imposing substantive constraints remains difficult. Although Democrats can use their control of both chambers to intensify oversight, challenge military actions and pursue legislation restricting the use of military force, such measures would still face a potential presidential veto. 

• Partisan legislation (e.g. tax cuts, immigration, healthcare, federal spending and statutory deregulation): Democratic control of both chambers would make it substantially harder for Trump to advance major policy initiatives requiring congressional approval.

• Bipartisan legislation (e.g. military and defense): Progress would increasingly depend on cross-party support. Routine and must-pass legislation, such as defense authorization, could still advance, but major new initiatives would face greater hurdles.

• Government funding and shutdown risks: The administration would need Democratic support to secure appropriations and avoid funding lapses. Contentious budget negotiations could therefore increase the risk of government shutdowns in 2027–28.

• Debt ceiling and fiscal pressures: Further debt-limit increases or suspensions would also require congressional negotiations, potentially giving Democrats greater bargaining leverage over fiscal priorities and increasing the risk of political standoffs.

• Federal policy constraints: While major federal restrictions would remain difficult to enact given Trump's veto power, policy uncertainty and political opposition could delay regulatory clarity and investment decisions.

• State-level regulatory risks: Democratic gains in key gubernatorial races, particularly in Texas, could create additional hurdles for data-center investment. Texas Governor-elect Gina Hinojosa, a Democrat, has advocated a temporary moratorium on new data-center permits. This may affect the pace and location of AI-related investment, given Texas's importance as a data-center hub.

• The results were widely viewed as a rebuke of Trump, with Democrats making significant gains in traditionally Republican strongholds such as Texas, South Carolina, and Kansas. These gains suggest growing voter dissatisfaction with the administration and its policy direction.

• Impeachment as a political flashpoint: Democratic control of the House could revive impeachment efforts, but removal remains unlikely as conviction requires a two-thirds Senate majority. 

• Implications for 2028: Notably, Democratic gains in traditionally Republican states such as Texas, which carries 40 Electoral College votes, may signal a changing political landscape, although it remains too early to determine whether these shifts will persist in 2028.

Krungsri Research View:

Summary and Implication for Thailand
 

The result is a political stalemate in which neither side has sufficient power to drive major policy changes. 

Democratic control of both chambers does not mean Democrats can easily reverse Trump's policies or advance their own agenda. While they can block legislation, intensify oversight and push for policy changes, Trump's veto power means most major legislative agendas opposed by him are unlikely to pass. Democrats are also unlikely to secure the two-thirds majority needed to override a presidential veto, limiting their ability to translate congressional control into meaningful policy changes.

Conversely, Trump will face greater difficulty advancing his domestic agenda without congressional support, especially in must-pass legislation such as appropriation bills and raising the statutory limit on debt ceiling, making him a lame-duck president in legislative terms. However, he retains considerable executive authority, particularly over trade and foreign policy. The result is a political stalemate in which neither side has sufficient power to drive major policy initiatives. 

For Thailand, a Democratic-controlled Congress would likely reduce the risk of further tariff escalation. However, existing tariffs and trade frictions are likely to persist, given the President's retained executive authority over trade policy.

The implications for AI are more mixed. Slower U.S. AI investment could weigh on technology exports and global investment demand, while supply-chain diversification and the expansion of digital infrastructure may create opportunities for Thailand to attract AI-related investment. The net impact will depend on whether these new investment opportunities can offset weaker external demand and geopolitical uncertainty.