Democrats should be doing exceptionally well, but the state of the US citizen is one of privilege that is being forced to deal with a series of catastrophes that requires unity. Conservatives recognize their disinformation works, and takes advantage of Democrats still trying to play politics from an honorable and ethical approach.
I don't really believe US Democrats are extraordinarily "ethical" or "honorable". I think this is more of a testament to their fundamental difference in terms of how either party is structured.
The way I see it as an outsider to US politics, the US Republican party has become a classic European style right-wing populist/xenophobic party, and as such is primarily oriented around building up enemies that their supporter base can rally against. They may shed or re-gain the support of various communities as time goes on (it will certainly be interesting to see whether they can retain the support of both white supremacist and minority conservative factions) but fundamentally, they can keep going like this so long as they can find and maintain acceptable targets to rage and rally against. Trans people may at this point be the most popular choice because they are a tiny minority with no political clout, and there is of course the tried-and-true topic of anti-immigration, which has been successful among European xenophobes as well.
The one danger they're in which you have rightly pointed out is that this program is inherently divisive, and especially with white supremacist rhetoric an element of growing importance, the US Republicans will remain a party for a minority of the population - a substantial minority, mind you, but a minority nonetheless. Even in Europe, where white supremacy is consistently more popular, right-wing xenophobes have only managed to climb into power via coalitions with more established conservative or centrist parties - and the Republicans have been consistently shedding their more centrist elements since Trump came to power. Which leaves voter suppression as one of the few remaining strategies to ensure a Republican victory in regular non-rigged elections.
The US Democratic party, meanwhile, is probably closer to a European-style coalition that has a variety of factional interests to please and keep in line, and a list of policies it needs to enact in order to please each faction in turn. Liberal-conservatives seem to be the dominant faction at this point, and they have a vested interest in keeping the status quo and maintaining friendly ties with fellow liberal-conservatives across the political aisle.
But there are a lot of other factions nominally aligned with the US Democrats who see nothing of value to gain from this, and would rather the party enact policies more in line with their interests - such as welfare state measures for the Social Democratic wing of the party, LGBTQ-friendly measures, more support for minorities etc. - all of these have to be reconciled with what the liberal-conservative establishment wants, and are often in opposition to that.
Which is why the US Democratic party seems to often look like it stands in opposition with itself - because it fundamentally is in opposition with itself, as different factions within the party vie for prominence and try to get their agenda pushed to the forefront and turned into policy.
Keep in mind that I'm not American, so my observations may be wildly off base, but these are the conclusions I've come to while observing American politics for over two decades at this point.