White House shake-up risk grows after Republicans' midterm defeat

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White House shake-up risk grows

Highlights

White House considers personnel changes after Republicans' midterm defeat, with Defense Secretary Pete Hegseth and chief of staff Susie Wiles under immediate scrutiny.
Economic fallout from unpopular tariffs and persistent inflation weakens Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent despite continued economic growth and strong equity markets.
Stephen Miller's mass deportation strategy sparks voter backlash, especially among Latino voters, contributing to Republican losses and casting doubt on future immigration policy direction.

Officials facing the sharpest immediate pressure

As reported by the Financial Times, the administration is weighing possible personnel changes after the midterm setback, although it remains unclear which officials may be removed, which could leave voluntarily and which are likely to stay.

Defense Secretary Pete Hegseth is among the most exposed figures because he has become the public face of the deeply unpopular Iran war, a central issue in the Republicans' defeat. Trump says on Thursday that he has "every intention" of keeping Hegseth, even as he acknowledges receiving calls urging a replacement, while Hegseth defends his record on social media and calls the conflict a "courageous and historic effort."

White House chief of staff Susie Wiles is also under scrutiny after being widely credited with Trump's 2024 political comeback but appearing unable this year to impose discipline on the administration's messaging, congressional outreach and response to inflation concerns. Additional attention has fallen on Wiles after scrutiny of her daughter's lobbying work, while former Trump aide Caroline Sunshine says this week that she should resign.

Vice-president JD Vance is facing doubts over his standing as Trump's presumed political successor after his campaign efforts fail to help Republicans and he publicly distances himself from the president over the war. Secretary of State Marco Rubio, by contrast, is dismissing speculation that he may step down to prepare a 2028 presidential run, with the state department calling such rumors "baseless fake news" and Rubio saying remaining until the end of the term has always been his plan.

Economic and policy fallout broadens the political risk

Commerce Secretary Howard Lutnick is vulnerable on two fronts, pressure tied to his alleged links to Jeffrey Epstein, which he denies, and his support for tariffs that prove unpopular on the campaign trail and are blamed for stoking inflation. A person close to Lutnick says he is renovating his Washington home and has no plans to leave the administration.

Treasury Secretary Scott Bessent is not expected to depart, but the election result underscores the political weight of persistent affordability concerns. While the economy continues to grow, employment remains relatively solid and equity markets have risen, he has not delivered lower inflation in line with Trump's 2024 campaign promise and has also overseen higher borrowing costs as U.S. government debt sells off and mortgage rates soar.

Stephen Miller's hardline immigration strategy is also becoming a liability after early approval for sealing the southern border gives way to voter backlash against aggressive mass deportation operations. The political damage appears especially notable among Latino voters who backed Republicans in 2024 but swing back to Democrats in this week's vote.

Robert F Kennedy Jr. is another figure whose future role may be questioned as his "Make America Healthy Again" agenda and overhaul of U.S. health policy fail to provide the cross-party appeal Republicans had hoped for in the midterms. Although Kennedy says in May that he does not want to run for president again in 2028, speculation in Washington persists that he could reconsider.

In our earlier article on rising long-term U.S. Treasury yields and widening deficits, we explained how borrowing costs above 5% were filtering through to higher mortgage rates, weaker housing activity, and mounting federal interest expenses as the annual shortfall neared $2 trillion. We also noted that with post-midterm political gridlock, the odds of a near-term fiscal deal to ease the strain looked limited, leaving affordability and debt dynamics as persistent economic and political risks.

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