US midterm elections: What a Democratic win could mean for India's trade

The US is preparing for its November 3 midterm elections, but the results will be closely watched in India too, particularly for their possible impact on trade ties and business conditions. The outcome could bring fresh uncertainty around US trade policies, with tariffs, government spending and the risk of a government shutdown among the key issues. For India, a change in the political balance in Washington could mean greater scrutiny of President Donald Trump's policies, but businesses may not get an immediate relief from the existing tariff framework. A major shift in Trump's policy direction remains unlikely, according to a report by ICICI Bank. The report estimates that Democrats have a 63 per cent probability of gaining control of both chambers of Congress. Their chances of winning the House of Representatives stand at 90.9 per cent, while the probability of securing the Senate is 64 per cent. A Democratic sweep could bring the Trump administration's policies on tariffs, immigration and government spending under greater scrutiny. However, a change in congressional control may not necessarily lead to an immediate change in the policies currently in place. Tariff uncertainty to continue - Here’s why A change in congressional control may bring more debate around US trade policies, but businesses should not expect the current tariff framework to disappear overnight. "The more immediate effects of Democratic control would likely be increased oversight, legislative disputes and greater uncertainty for businesses, rather than an automatic dismantling of the current tariff framework," the report said. Democrats could push for a review of certain tariffs or attempt to restrict the President's powers to impose them. However, any significant change could face hurdles, as the US President retains the power to veto legislation and has certain independent powers to impose tariffs. For India, this means that uncertainty around the US trade and tariff approach could remain even if Democrats make gains in Congress. A change in the political balance alone may not bring an immediate shift in the administration's policy direction. AI, data centres unlikely to face a major investment shift The report does not expect the midterm election results to significantly alter investments in artificial intelligence (AI) and data centres in the US. “The toss-up states where Republicans can lose in the midterm collectively account for only ~15% of total data center capacity in the US”, the report said. This limits the extent to which a change in political control could affect the sector's investment landscape. However, data centres could face greater scrutiny over their resource consumption and environmental impact. Democrats have raised concerns about the high electricity and water requirements of these facilities. An average data centre with a capacity of 100 megawatts consumes around 2 million litres of water daily and uses more electricity than 75,000 homes, according to the report. The sector could also face closer examination over its environmental impact and effect on employment. The report has also flagged the possibility of a fresh dispute over the US debt ceiling in mid-2027. The debt ceiling is the legal limit on how much the federal government can borrow. US government debt stood at around $40 trillion in late 2026, against a borrowing limit of $41.1 trillion.