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The Government Circuit: Fewer Hammers, More Scalpels—What Divided Government Means for U.S. Trade Policy

I came to trade policy as a congressional staffer during the Clinton and Bush administrations. Back then, the partisan lines on trade were clear: Republicans generally supported free trade agreements (FTAs), and most Democrats opposed them, even when a Democratic president had negotiated them. Enacting an FTA into law usually meant winning over just enough New Democrats and Blue Dogs.

President Trump has scrambled those politics. His populism and stalwart support for tariffs align with union groups that traditionally vote Democrats, have pulled Republicans toward protectionism, and left Democrats struggling for a unified message on trade. For two years, a Republican Congress largely deferred to the President on trade, leaving the courts as the only real check on his use of executive authorities. That check worked in February, when the Supreme Court struck down his “Liberation Day” tariffs, which were implemented under the International Emergency Economic Powers Act (IEEPA).

But tariffs didn't disappear. They expanded under other executive authorities: Section 232 of the Trade Expansion Act of 1962 and Section 301 of the Trade Act of 1974, two long-standing tariff provisions that have withstood previous judicial challenges.

And now another twist. In the midterm elections last week, a blue wave has flipped Congress, returning Democratic control of the House and Senate and begging the question:  What will a divided government mean for trade? Forecasting is risky, but there is reason for cautious optimism, even as the underlying uncertainty remains. Here are six points I'm sharing with our industry.

1. Uncertainty is here to stay.

The President likes big moves that drive the news and increase his leverage in negotiations with foreign partners. Losing IEEPA as a mechanism to impose tariffs took away a tool, not his instincts. With the election over, expect regulatory actions that stalled during the campaign to resume.

Expect continued hardball with Mexico and Canada, too. At the July 1 joint review, the U.S. declined to renew USMCA in its current form. The President wants bilateral issues settled first. Talks with Mexico are underway, and talks with Canada are slowed, perhaps, not stalled. USMCA remains in effect for 10 years, but renewal would give business more certainty in the near-term; until then, long-term investment in North American manufacturing may be harder to justify.

2. The administration will continue its new inclination of favoring precision over blunt force.

The broad tools haven't gone away. When temporary tariffs imposed under Section 122 of the 1974 Trade Act expired in July, they were replaced with Section 301 duties of 10–12.5% on 60 economies following an investigation under that statute; more may follow from the excess-capacity investigation that remains pending. But semiconductors point to an increasingly targeted approach.

Sectoral tariffs imposed in January 2026 put a 25% duty on a narrow set of advanced AI chips and exempted imports for U.S. data centers, R&D, and domestic manufacturing. Phase 2 has been promised but remains pending. The U.S. Department of Commerce's data center chip report is nearly four months overdue, and the delay could reflect a more surgical approach to an extremely dynamic area of the economy.

Economics may be driving part of this shift. Tariffs on components raise costs for the U.S. manufacturers they're meant to protect. America's share of global PCB production has fallen from about 30% in 2000 to roughly 4%. Our industry's research found that broad duties raised electronics production costs by 8–12%. A tariff on boards or chips doesn't bring that capacity back. Tariffs risk burdening American assemblers, defense suppliers, and data center builders, as well as pushing final assembly offshore.

3. Politics may reinforce a shift in priorities.

Voters made affordability their top economic concern, and tariffs may end up facing some of that blame. In a late-September AP-NORC poll, 64% said the president's tariffs had gone too far, up from 58% in January. Republicans in competitive races, including Mike Rogers in Michigan, broke with the White House on tariffs. With 2028 approaching, every new tariff fight could be perceived by voters as adding to their daily costs. That gives the administration another strong reason to focus tariffs rather than spread them broadly.

4. Congress may get louder.

A Democratic Congress brings committee gavels and oversight authority. Democrats may not all agree on trade policy, but many agree that broad, unpredictable tariffs are raising costs for manufacturers and consumers. Hearings could dig into the President’s broader trade strategy, how tariff targets and exemptions are chosen, and how tariffs have affected U.S. manufacturing.

Legislation revising or rolling back the President’s tariff authorities would be harder to advance given the President’s veto authority. Congress's real leverage is oversight, appropriations, and must-pass bills, which can raise the political cost of abrupt tariff actions.

The pushback is bipartisan. In February, six House Republicans helped pass a resolution to end the Canada tariffs, 219 to 211, despite the president's threats of primary challenges. Lawmakers from manufacturing districts know their factories depend on imported components and stable North American supply chains. Support for tariffs that are targeted, predictable, and time-limited crosses party lines.

5. Our trading partners are adapting.

Allies have learned that tariff threats are often opening bids, and they are building alternatives. Canada is the clearest example. It wants USMCA renewed, but Prime Minister Carney also aims to double Canada's non-U.S. exports within a decade. He is pursuing deals with India, the EU, and ASEAN, and in January he cut tariffs with China. New U.S. restrictions on Canadian goods under Section 338, which took effect Sept. 29, have accelerated that effort. Canada still sends about 72% of its exports to the United States, but its bargaining position has changed. When partners expect threats and have other options, threats yield less. They also pull allied supply chains, which U.S. manufacturers depend on, toward other markets.

6. Expect a deal with China, even as tensions persist.

U.S. leverage is limited by one fact: China controls roughly 85–90% of rare-earth processing and about 90% of magnet production, both inputs essential to electronics and defense. Even with heavy investment, the U.S. is expected to import nearly a quarter of its rare-earth needs in five years.

September’s Trump-Xi summit extended the Busan truce to Jan. 10, 2027. Under the truce, China suspends sweeping rare-earth export controls and the U.S. holds off on new tariffs. The summit also launched a Board of Trade to negotiate reciprocal tariff cuts on about $30 billion in goods each way. Given these constraints and the president's appetite for a signature agreement, expect the truce to be extended and possibly broadened. Chip export controls and technology competition will remain unresolved, though. A deal would bring relief, not certainty, so diversifying supply chains among allies must continue.

What the Global Electronics Association will push for:

• Distinguish inputs from finished goods, so manufacturers aren't penalized for components they can't yet source domestically.
• Tie offsets to domestic investment, rewarding companies that build here.
• Separate allies from adversaries, using rigorous evidence that reflects how capital-intensive and cyclical electronics manufacturing is.
• Set predictable timelines with phase-ins, because factories are planned over years, not news cycles.

Tariffs alone can't rebuild domestic electronics capacity. Investment, workforce development, and trusted partnerships with allies can. The administration has shown it can be targeted. Now it needs to make that the rule.

Chris Mitchell is vice president of global government relations for the Global Electronics Association.