Democrats' sweep of both the Senate and the House of Representatives, according to unofficial results from Tuesday's US midterm elections, has altered the course of the country's economic policy, potentially blocking President Donald Trump's agenda and introducing greater federal oversight of the technology sector.

Current vote counts show Democrats securing more seats than Republicans, reflecting nationwide voter frustration over inflationary tariffs, rising energy prices due to the Middle East conflict and growing budget deficits.

Analysts expect the Trump administration may try to push through its remaining initiatives during the transition period, as the outgoing Republican majority will remain in power until newly elected lawmakers are sworn in Jan. 3, 2027.

Democratic candidates campaigned on stronger legislative oversight of taxation, trade and budget policies, winning majorities in both chambers. While Trump previously threatened to veto any legislation if Republicans lost the midterms, he signaled a more conciliatory and cooperative tone on election night.

The incoming Congress will grapple with a $2 trillion budget deficit and the debt ceiling as it prepares to address economic challenges, pursue legislation to dismantle tariffs and seek an end to the war with Iran.

Incoming House Speaker Hakeem Jeffries said at a post-election news conference that Medicaid cuts must be reversed and tax credits under the Affordable Care Act restored. He also called for ending costly overseas wars that drive up gasoline prices and eliminating tariffs that have added to households' annual expenses.

Federal spending, debt ceiling pose major challenges Among the most contentious issues between Republicans and Democrats in the new congressional session will be the federal budget and spending priorities. Lawmakers must negotiate a budget for fiscal year 2027 before a temporary funding measure expires Dec. 11.

The Democratic majority may block the Republican administration's demands for higher defense spending and cuts to social programs if funding negotiations extend into the new year, increasing the risk of a federal government shutdown.

Democrats will seek to allocate more resources to health care and social programs. If partisan disagreements paralyze debt limit negotiations next year, the resulting political gridlock could trigger fluctuations in Treasury bond yields and put significant downward pressure on the US credit rating, analysts warn.

Meanwhile, total US national debt reached $40.5 trillion as of Monday, approaching the statutory debt ceiling of $41.1 trillion. A refusal by either side to compromise could bring debt ceiling negotiations to a halt.

Tariffs, energy costs and Iran war One of the Democrats' priorities is to review existing protectionist trade policies to ease inflationary pressures, as reducing tariffs could improve US trade relations with its allies and ease the financial burden on companies and consumers.

The cost-of-living crisis remains a major concern, particularly since the US and Israel launched attacks on Iran on Feb. 28. The resulting war has kept average gasoline prices above $4 per gallon and diesel prices above $6 per gallon, representing annual increases of 35% and 69%, respectively, according to the American Automobile Association.

The Democratic-controlled Congress is expected to use its budget approval authority to restrict defense spending and seek to limit the president's war powers to ease geopolitical risks to supply chains. However, such efforts may face a presidential veto.

Technology, data centers face greater scrutiny The new Congress is also expected to tighten federal oversight of the digital asset and technology sectors, increase environmental scrutiny, introduce new artificial intelligence (AI) safety standards and investigate the Trump administration's personal ties to the cryptocurrency industry. These expectations could cause short-term volatility in technology stocks.

At least 45 data center projects worth a combined $68 billion faced delays in the second quarter due to local opposition.

Democratic victories in Texas and Georgia, where data center investments are particularly concentrated, could create further volatility. Texas Governor-elect Gina Hinojosa criticized the 20-year tax exemptions granted to technology giants in the state and pledged to impose a moratorium on new data centers until legal safeguards are established.

Concerns over increased oversight and regulation following the Democratic sweep in the midterms have already put pressure on AI and data center stocks.

Democrats may also pursue comprehensive regulations for the cryptocurrency industry, ushering in a new period of uncertainty.

Federal Reserve independence At the same time, a Democratic-controlled Senate could help preserve the Federal Reserve's independence and shield the central bank from political disputes.

The Fed has faced pressure from Trump to cut interest rates, but the new Senate could use its authority to safeguard the central bank's independence and confirm appointments.