Democrats Win Congress With Inflation at 3.7%, but Trump Keeps Control of Tariff Policy

Voters gave Democrats control of Congress on Tuesday, Nov. 3. The party now owns the affordability problem it campaigned on.

Consumer prices rose 3.7% over the year through September and 0.6% from August, according to the latest inflation report. Prices have been above the Federal Reserve's 2% target for nearly six years.

What the price data shows

A New York Federal Reserve study found Trump's tariffs added about 2.9 percentage points to prices across the consumer goods researchers examined. Roughly one-third of that increase came from U.S.-made products, because domestic manufacturers paid more for imported materials and components.

Scott Lincicome, vice president of general economics at the Cato Institute, linked that experience to the Republican losses. "When you campaign on lowering prices, and then you actually actively increase prices, it's probably gonna hurt when voters go back to the polls and are mad about prices still being too high," he told Fox News Digital.

The Iran war Trump launched in February is the other pressure point. Trump has said oil, gasoline and diesel costs will plummet once it ends. He has not said when or how that happens.

Trump's position

Trump says the economy is booming. Friday's jobs report gave him material: employers added 165,000 jobs and unemployment slipped to 4.1%.

He has also said he is open to working with the new majority. "I'll get along, probably, with the Democrats, unless they want to be destructive," he told reporters last week.

Then came his text message to supporters after the jobs report: "Democrats may control Congress, but I will NEVER stop fighting for you, and I will VETO anything that hurts America."

Why tariffs may not move

A Democratic Congress can hold hearings, demand documents and force votes. Rolling back tariffs is harder.

Pierre Yared, a Council on Foreign Relations senior fellow and former acting chairman of Trump's Council of Economic Advisers, wrote Wednesday that tariffs rest on authorities Congress already delegated to the president. "Changes in the control of Congress are unlikely on their own to change the administration's tariff policy," he said.

Overriding a veto of a bill repealing or limiting those authorities takes two-thirds of both chambers, Yared said. Democrats won both chambers but fell short of that threshold.

One commentary on the administration's approach, by Darin Gaub in The Epoch Times, defends tariffs as leverage to win better terms. Even that defense asks what concession is being sought and under what conditions a tariff would change, and says an open-ended pressure campaign without answers loses its purpose.

The Fed gets breathing room

Divided government changes the central bank's position. Douglas Holtz-Eakin, president of the center-right American Action Forum, called the Fed "one of the surprise winners" of the election.

A Democratic Senate could block Trump from filling open seats on the Fed board. That would remove Trump's "incentives to meddle with the Fed," Holtz-Eakin said, and clear a path for Fed Chair Kevin Warsh "to follow his instincts and aggressively reduce inflation."

Trump has tried to push the Fed to cut its benchmark rate, a move that could have worsened inflation.

Who is expected to hold the gavels

Committee assignments are not final, but the likely lineup points to a heavy oversight agenda. Sen. Elizabeth Warren (D-MA) is expected to chair Senate Banking, and Sen. Bernie Sanders (I-VT) is expected to lead the Health, Education, Labor and Pensions Committee.

In the House, Rep. Jamie Raskin (D-MD) is the likely Judiciary chairman. Rep. Robert Garcia (D-CA) is expected to take Oversight, and Rep. Maxine Waters (D-CA) is the front-runner for Financial Services. Rep. Bennie Thompson (D-MS) is seeking the Homeland Security gavel, and Rep. Pramila Jayapal (D-WA) is positioned to chair the Judiciary subcommittee overseeing immigration enforcement.

Warren has called private-equity takeovers "legal looting" and is expected to revive her Stop Wall Street Looting Act. She has also pledged to examine insider-trading allegations in prediction markets and consumer protections in crypto.

Former Sen. Pat Toomey (R-PA), a past ranking member of the Banking Committee, said of her expected chairmanship: "It's hard to imagine it's good news for these industries." Warren has said she intends to work with Republicans in some areas.

The fights ahead

Democrats are preparing for early fights over government spending. Chronic deficits are also on the table, along with artificial intelligence and a Social Security system that could run short of money in as little as six years.

Marc Goldwein, senior vice president at the Committee for a Responsible Federal Budget, put the political risk for both parties plainly: "Until inflation and interest rates are under control, the likelihood of change elections is going to be high on an ongoing basis."

The new Congress is seated in January. The first test is whether the spending fights produce any change in tariff policy, which Trump can protect with a veto Democrats lack the votes to override.