What the 2026 U.S. midterm elections could mean for industrial companies

With the 2026 U.S. midterm elections approaching, RSM is looking at the economic stakes and the key issues for various industries. This article is part of that series.

The outcome of the 2026 U.S. midterm elections will help shape the policy landscape facing U.S. businesses through the remainder of the decade. Changes in congressional control, oversight priorities and state-level policymaking could influence everything from taxes and funding programs to regulation, workforce issues and investment decisions.

Here's a look at the implications for industrials.

The top issue for industrials

Tariffs remain the top election-related issue for middle market industrial companies, particularly manufacturers. Duties imposed under section 232 of the Trade Expansion Act of 1962 on steel, aluminum and copper—now applied to the full customs value of derivative products—are the most significant source of input-cost exposure, and Canada’s retaliatory tariffs on U.S. metals and manufactured goods, which took effect Sept. 8, add an immediate risk for exporters.

Metals, machinery, automotive, aerospace and electrical equipment companies with global supply chains remain the most exposed. In the near term, companies must manage margin pressure, pricing and sourcing; in the longer term, policy will shape whether companies localize production or redesign supply chains.

Implications for future legislation

The balance of power in Congress will influence whether industrial policy advances through legislation or shifts toward oversight, appropriations and agency action, though in this area the stakes are not as high as in past election cycles. The One Big Beautiful Bill Act, enacted in 2025, made bonus depreciation permanent and allowed immediate expensing of domestic research and development costs, so this year’s midterm elections bring a question of policy continuity more than a potential rewrite of manufacturing incentives.

In the event of a divided Congress, we would anticipate executive- and agency-driven trade policy rather than major new tax or spending bills, which generally require bipartisan support. Under a divided government, appropriations, surface transportation and defense authorization could face more barriers, while committees may increase scrutiny of the Environmental Protection Agency, the Department of Energy, the Federal Energy Regulatory Commission, the Office of the U.S. Trade Representative and the Department of Commerce.

Continued unified Republican control would generally favor more continuity in the administration’s regulatory and permitting agenda, though scope would still depend on agencies and courts. States may keep moving faster than Washington on electricity costs, interconnection, artificial intelligence and permitting. Industrial leaders need to manage uncertainty around imported input costs and the timing of federally supported projects.

Should the Democrats win the House and the Senate, the focus of industrial policy debates could shift, particularly around energy, environmental regulation, workforce development and federal investment priorities, although the scope of any resulting policy changes would depend on the administration, federal agencies and the courts.

Other key issues for industrials

• Program funding and infrastructure: Congress extended surface transportation authorizations only into mid-December and let advance highway appropriations lapse, putting competitive grant funding for roads, bridges and transit at risk; fiscal 2027 defense authorization and appropriations remain unfinished, clouding order visibility for aerospace, electronics and precision manufacturers.
• Permitting reform: The Council on Environmental Quality rescinded its government-wide regulations implementing the National Environmental Policy Act in January 2026, shifting reviews to each agency’s own procedures. A House-passed permitting overhaul remains stalled in the Senate amid disputes over data center transmission and siting.
• Energy and electricity: Industrial power prices are rising again, pressured by data center demand, grid constraints and energy market volatility unrelated to tariffs; site-selection and interconnection rules increasingly diverge by state.
• Data center build-out: Projected AI infrastructure investment in the trillions of dollars is a genuine demand opportunity for electrical equipment, steel and construction firms, but also a political flash point, as several states have moved to pause new hyperscale projects.
• Oversight and enforcement: A divided Congress could lead to increased investigations and hearings touching agencies and the businesses they regulate.

One number to know

9 cents per kilowatt-hour: In its September 2026 outlook, the U.S. Energy Information Administration put average industrial retail electricity prices at that level for 2026, up from 8.62 cents per kWh in 2025, and projected a further rise to 9.10 cents in 2027. These figures are a reminder that power costs and site selection decisions are becoming as consequential for industrial competitiveness as trade policy.

Actions middle market industrial businesses should consider now

• Map and model: Map tariff exposure by product, classification, country of origin and supplier, including exposure to Canada’s retaliatory duties, and model the margin and cash-flow effects under alternative tariff and pricing scenarios.
• Stress-test and review: Stress-test capital projects for changes in federal funding, electricity costs and permitting timelines, and review contracts for tariff, price adjustment and supply disruption provisions.
• Document and monitor: Document evidence supporting domestic content and rules-of-origin claims, and monitor agency action and litigation, since near-term policy is more likely to move through courts and agencies than Congress.
• Compare: Compare state-level energy, incentive, permitting and AI requirements, since state policy is increasingly diverging.