US midterms: What Trump's defeat means for Europe and global markets

Donald Trump has suffered one of the worst defeats of his political career, after Republicans lost control of both chambers of Congress to the Democrats in a vote that turned into a verdict on his presidency. By 07:40 CET, Democrats had gained 25 seats in the House of Representatives, taking them to 220, two more than the 218 needed for a majority. In the Senate, they took seven seats from the Republicans, including in Texas, Ohio, Kansas and Maine.

High prices weighed heavily on voters. About two-thirds said in an election-day survey that Trump's tariffs had hurt the economy. The president said he would accept the results, but added: "I don't view it as a hit on me.

"He also made clear he would use his veto to block the Democrats' agenda, posting a picture of a red cap with the word "VETO" stitched on it. But how much can a Democratic Congress really change for Europe and for markets? Will a Democratic Congress end the tariff threat to Europe?

Probably not, because Trump's tariffs no longer depend on Congress. After the Supreme Court struck down his emergency tariffs in February, the administration moved them under Section 301 of US trade law. That route lets the president act without a vote by lawmakers.

Democrats can hold hearings and slow down his nominees, but they cannot easily take that power away. James Smith, developed markets economist at Dutch bank ING, believes a divided Washington could even push the president to rely on it more. "Like foreign policy, trade is another power the president can wield unilaterally without Congress," Smith said in a note before the vote.

He did not rule out new tariffs aimed at Europe, which he said would matter a lot for US inflation and for the Federal Reserve. What happens to US support for Ukraine? Democrats will chair the Senate committees and decide which of Trump's nominees get confirmed when the new Congress takes office in January.

Many of them also want to approve new money for Ukraine. The harder part is getting that money spent. Over the past two years, the White House has cancelled funds already approved by Congress by holding them back until the end of the fiscal year, when they expire.

"In practice, this means that a Democratic Congress could write money for Ukraine or development aid into law and the president might not spend it," Nevada Joan Lee, policy fellow at the European Council on Foreign Relations, said in a commentary last month. Her advice to European governments is to count only on money that actually arrives. "Europeans should treat earmarked funds as intent, not commitment," Lee said.