Taxes, inflation, energy. The future after the mid-term elections is a puzzle.

Following the US mid-term elections, which resulted in a change of majority in both houses of Congress, what will change for the US and global economies? The answer is not straightforward, as it concerns not only the exercise of the powers held by the President and Congress but also the outlook for the presidential elections due to be held in November 2028. At this stage, one can only put forward hypotheses, given the uncertainties not only regarding President Trump’s next moves during the remainder of his term, but also regarding the opposition strategy that the Democratic Party will adopt in Parliament.

If there is one thing we can be certain of, it is that the current president will do everything in his power to influence the outcome of the election in two years’ time, to ensure that his successor is a friend – and not just politically. At stake is not only his political legacy but also his protection from future legal action. According to analysts, amongst the factors that prompted Democratic voters to turn out in greater numbers than usual – whilst, conversely, many Republicans stayed at home – there are three main concerns, namely: the erosion of purchasing power; immigration control measures deemed too harsh, which have provoked a negative reaction amongst the population of South American origin; and, finally, the political and financial entanglement between the government and the big tech companies.

It is therefore necessary to understand to what extent the president will be willing to acknowledge that some of his past political decisions were at the root of the electoral defeat, and how far he will be prepared to change course. As regards the last two factors – immigration and corruption – the initial signals coming from the White House seem to suggest that no major changes are on the cards over the next two years. The appointment of Stephen Miller – known for his extremist views on issues such as immigration – as Chief of Staff is unlikely to foster reconciliation with ethnic minorities. As for the financial ties between the Administration and large corporations, this will depend primarily on the latter’s choices and their decision as to whether or not to switch allegiances at the next general election.

Turning to economic issues, there is no doubt that the rise in energy prices triggered by the war in Iran has been one of the main causes of inflation. Until last February, inflation stood at just under 2.5 per cent, and rose to over 4 per cent following the outbreak of the conflict. Vice-President Vance has acknowledged that the war in Iran, and its impact on Americans’ purchasing power, was the main cause of the electoral defeat. It is not clear, however, whether this interpretation is shared by the President or whether it might lead to a change in foreign policy. Moreover, the end of the conflict does not depend solely on the United States but, above all, on the willingness of the Iranian government. The most likely scenario appears to be a tacit truce, allowing crude oil exports to return to pre-conflict levels. The fall in prices to around $90 recorded in recent days seems to confirm this scenario, but market volatility remains high.

Another factor affecting consumer prices is the tariffs imposed last year on imports. It is possible that in the coming months attempts will be made to reach a cross-party agreement on a reduction, particularly with regard to imports from Canada, which have affected neighbouring US states.

Finally, US inflation has been fuelled by the high public deficit, a consequence of the Big Beautiful Bill passed in July last year, which pushed the public deficit to around 8 per cent of GDP. In this case, the change in the majority in Congress is unlikely to improve the situation. The Democrats are certainly not going to champion measures to cut public spending or raise taxes in the run-up to an election.

A clash between the President and Congress could arise from the need to raise the public debt ceiling, which was set in July 2025 at 41 trillion dollars (equivalent to approximately 127 per cent of GDP), and is expected to be reached in February 2027, some six months ahead of schedule. In the past, reaching an agreement between the White House and Congress has required lengthy negotiations, often following a partial shutdown of certain public services, which has ultimately led to a further increase in spending.

Overall, the combined effect of the oil price rises recorded in recent months and the high public deficit will continue to keep US inflation above the 2 per cent target. This leaves the central bank with no choice but to raise monetary policy rates further, starting at its next meeting in December. Long-term interest rates in the United States and other advanced economies will be affected. And, sooner or later, economic growth will be affected too.