Why the Midterm Elections Won’t Bring Back Free Trade

Around the world, businesses, policymakers, and pundits interested in trade issues are eagerly awaiting the results of the US midterm elections. Many hope that the Democrats will gain control of Congress and reassert authority over trade policy, bringing the Trump administration’s continuous weaponization of tariffs to a stop and restoring access to US markets. Council polling suggests a large number of American do as well.

But can a Democratic-controlled Congress bring back the “good old days” of free trade?

Regardless of which party wins the majority, US President Donald Trump is unlikely to abandon tariffs as his preferred trade policy instrument. He has, after all, advocated in favor of tariffs for decades. And since returning to the White House, he has employed every possible legal path to impose tariffs on other countries and gain trade and investment concessions. The use of Section 338 of the Tariff Act of 1930 to enact additional US duties on Canadian goods is just the latest example.

United States Trade Representative Jamieson Greer also personally believes in the value of a protectionist agenda to bring back “good” manufacturing jobs to the United States and achieve fairness in international trade. In his view, economic models that support free trade neglect the economic realities of American workers and fail to consider policies adopted by other countries that led to the United States’ trade deficit. Greer argues that “tariffs that directly target the primary sources of the deficit are the simpler, and more flexible, solution.”

For the Trump administration to change course, Congress would have to change or repeal the legal statutes the administration is using to execute its tariff policies and bilateral trade agreements. But given the president’s veto authority and the improbability of a supermajority for the Democrats in both houses after the midterms, the legislative route will be difficult, if not impossible.

The alternative is to turn to the judicial process. But, as we saw when the Supreme Court ruled against Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs, the administration will simply look for other legal avenues. And the game of cat and mouse will continue.

Further, given that the private sector has been the primary challenger of the legality of the Trump administration’s tariff policies, including the IEEPA and Section 338 tariffs, a Democratic-controlled Congress would bring little additional value to the judicial process, other than in providing moral and political support.

Then there is the nonnegligible issue of tariff revenue. This year, tariffs have added $260 billion to the US treasury. Facing a deficit of $2 trillion and increasingly worrying levels of interest rates on government bonds, it is unlikely that Congress will wish to eliminate a source of revenue—let alone replace it with higher income taxes or a federal consumption tax. And, again, the president would likely veto any budget that contains new taxes to cover the loss of tariff revenues as it would undo part, if not all, of his fiscal achievements under the One Big Beautiful Bill Act.

What does this mean for businesses?

Some Canadian firms that export goods to the United States may look to move production to the United States to avoid tariffs and remain competitive, just as Trump and Greer want them to. Others might decide to refocus their operations toward serving the Canadian market, as well as markets in countries and groups with which Canada has functioning free trade agreements, such as the European Union, Japan, Korea, and the United Kingdom. Businesses that depend on imported American goods are also likely to look for alternative suppliers.

US firms that depend on exporting goods internationally are likely to look at moving their export operations to Canada or Mexico—going against Trump and Greer’s plans in this case. Doing so would allow them to benefit from both countries’ free trade agreements with Indo-Pacific, European, and Latin American countries, while avoiding the United States’ unpredictable trade policies.

Still, many businesses around the world—especially in Canada—have waited to see what would happen in the midterm elections, hoping that the results will lead to lower, if not removed, tariffs and more stable trade relations between the United States and its main economic partners. But with presidential vetoes, an “America First” US trade representative, and limited congressional incentive to pursue legal action, such an outcome is unlikely.

Moving forward, business leaders around the world will need to overhaul their export and import strategies. This means finding new suppliers and customers; investing in market development, innovation, and production facilities; and hiring and firing workers as operations are restructured. This is why tariffs are so costly. Not only do they immediately raise prices, but they necessitate spending in other areas as businesses adjust.

Waiting to act, however, could prove even costlier in the long run. Firms that fail to respond to the moment could find their competitiveness inside and outside US markets declining relative to businesses that decided to adapt to the new US trading environment. And even if the next US administration and Congress reverse Trump’s tariffs and other protectionist policies, the firms that have adapted their strategies and operations will be stronger, resilient, and more competitive. Meanwhile, those that continued to wait and see will lag behind—assuming that they are still in business.