To characterize the 2026 midterm election in the United States as a “blue wave” would be a gross understatement. Tsunami is the more appropriate word. At this point, even though not all votes have been accounted yet in a few states and congressional districts, the Democratic Party has already flipped control of both chambers of Congress from the Republicans. In the House of Representatives, Democrats secured a substantial majority.
In the Senate, Democrats successfully flipped at least seven seats to claim the majority, rising to 54 seats while Republicans fell to 44 seats. In the remaining two states, Alaska and Mississippi, the race is razor close, with the Democrat candidates in both cases leading by about 1000 votes. This victory was driven by surprising pickups in traditional Republican strongholds, including Texas, Ohio, Iowa, Kansas, and both Carolinas. And I bet Democrats will take the remaining two Republican strongholds as well. Who would have ever imagined that the deep South, the deep red state of Mississippi would send a Democrat to the U.S. Senate?
This stunning outcome delivers a resounding repudiation of President Trump’s second term tenure. Several theories have been proposed to explain America’s change of sentiment towards the President. For example, President Trump’s broken promise of never getting into forever wars overseas is often quoted as one reason. Suspected corruption is another. Backlash of excessive ICE anti-immigrant actions that have resulted in 2 innocent citizens killed and a powerful Springsteen song about “federal thugs in Minnesota” taking the country by storm is apparently another reason why the Latino voters have turned on President Trump this time.
Yet in my view, the most resounding message from the American electorate in this election is that affordability stands at the front and central of modern politics. No matter how politicians, left and right, spin ideological debates over socialism, AI oligarchs, the Epstein class or whatever, at the end of the day voters consistently prioritize their personal financial reality over other concerns. And in today’s America, people’s financial reality is dismal to say the least. The dramatic shifting of both the House and the Senate into Democratic control stands as a direct, pragmatic response to prolonged inflationary pressures and the rising cost of everyday living under the current administration. The relentless rise in prices for core necessities including housing, healthcare, groceries, and energy has eroded the purchasing power of the average household. The American dream for many has descended to the level of just keeping the flood flowing on the table and barely making ends meet. In this environment of economic strain, it is inevitable that the electorate used their ballots as a mechanism to demand immediate relief from an economy that many feel has left working- and middle-class families behind. In short, I would argue that the kitchen-table economics of affordability is the most important reason why President Trump’s party has lost this election.
American people are clear-eyed to blame the profound affordability crisis squarely on President Trump’s protectionist tariff war. While the Administration’s apologists argue that import duties shield domestic industries, hard empirical data proves that these measures, particularly against cheap Chinese imports, function as a direct, regressive tax on American households, systematically elevating the baseline cost of living. This is because demand for these goods is quite inelastic in that an increase in tariff directly translates into an increase in end-user price, as opposed to reducing demand for imports.
The most compelling evidence comes from a landmark Federal Reserve Bank of New York study in September 2026, which concluded that Trump’s 2025 tariffs contributed a massive 2.9 percentage points to goods price inflation by early 2026. A separate study by the Budget Lab at Yale showed something similar: without these aggressive tariffs, consumer goods prices would have actually declined. Instead, a near-total pass-through of import costs forced retail prices to spike, costing the average American family an extra $1,100 annually.
This artificial price inflation stretches far beyond foreign imports purchased directly by consumers. Under the tariff structure, domestic manufacturers face significantly higher input costs for imported parts and raw materials. Compounding this, reduced foreign competition allows domestic companies to raise their own prices symmetrically. Ultimately, by entrenching an annual inflation rate near 3.7% while making the Federal Reserve nervous about cutting interest rates, the tariff war has fundamentally broken America’s kitchen-table budgets, making everyday life unaffordable to many struggling working-class families.
The lesson cannot be clearer from America’s 2026 midterm election: tariff means inflation, and inflation bears consequences at the ballot box!
This is a remarkable lesson that politicians in European capitals had better pay close attention to. Inflation in Europe so far is even worse than in America, partly due to the chronic economic stagnation and partly due to the war in Ukraine and in Iran to some extent. The recent violent demonstrations in Paris, in Rome, and cities in a few other countries are clearly motivated by these affordability related issues. And yet, even amidst a sea of economic and political challenges, the European Union is locked in a high-stakes standoff with China, aggressively expanding trade measures to counter the so-called China Shock 2.0 in general, and so-called China’s industrial overcapacity in particular. The European Union claims its trade deficit has reached nearly €360 billion, or roughly €1 billion per day. Brussels is re-engineering its trade policies to shield European industries from an inflow of low-cost Chinese goods.
The China’s automobile export to Europe is a typical case. The EU imposed tariffs in 2024 of up to 45% on several Chinese electric vehicle brands, with the highest tariff rate targeting SAIC with 10% base import duty and 35.3% countervailing duty. In October 2026, Brussels and Beijing finalized a deal to cap Chinese hybrid vehicle imports at 350,000 units annually starting December 1, 2026. While this temporary truce averts a wider trade war, EU officials view the automobile quota as a baseline strategy, with plans to replicate the import cap model across other sectors like chemicals, machinery, and robotics.
To institutionalize these restrictions, France and Germany have backed the concept of a “kill switch” mechanism, which would grant the European Commission unprecedented authority to restrict or completely block China’s market access to the EU market. Additionally, the EU implemented a flat €3 customs fee on low-value parcels, in combination with other questionable regulatory or antitrust punitive measures targeting China’s major e-commerce platforms.
To those trade officials in Brussels contemplating a trade war with China, I say, take a hard and long look at America’s midterm election. Again, I repeat its lesson here: Tariff means inflation, and inflation bears consequences at the ballot box!
Europe’s gradual loss of competitiveness is not caused by so-called China Shock 2.0. The European Union’s over burdensome regulation, erosion of member states’ economic sovereignty, its radical political agenda that bears economic consequences, among other things, are the major reasons why the continent’s corporate world is lagging behind in innovation and competitiveness, and why its consumers are abandoning the overly-hyped and overly-priced European products in droves and instead embracing more economical substitutes from China. The UK automobile market is a perfect example. In September this year, the best-selling car in UK is a Chinese car, of which its counterpart in China sells for a fraction of its British price.
In short, import from China is not the problem; it is the solution to the problem! It affords European consumers a better choice, a better price, averts inflation and instills a bit of competitive drive in European industries. So far Beijing has strongly condemned Brussels’ blatant protectionist measures. Chinese officials have made clear that continued discriminatory European restrictions will trigger major trade retaliation. EU officials should take a page from the history book of China’s dealing with Washington’s trade wars, respectively under the two Trump’s Administrations.
There are better ways of alleviating the trade deficit. There are better approaches towards a more balanced bilateral trade structure. For example, increasing exports to China and increasing China’s FDR in Europe would be better ways that serve both sides’ interests. Europe already has an affordability problem. Trade war further aggravates that. But the affordability problem faced by officials in Brussels is of another kind however – whether they dare go down that path to let voters determine their fate.
