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Why are politics in the US so completely dominated by the Republicans and the Democrats, even at the municipal level? In Canada, for the most part, provincial legislatures have their own political parties that have nothing to do with the federal parties, and municipal councils usually don't have parties at all, with the only exception to this that I'm aware of being Montreal. But the municipal parties in Montreal are completely different than the provincial and federal parties.
The fact that everyone has to be either a Democrat or a Republican in the US creates this absurd situation in places like New York City, where the Democratic primary basically determines who will be the mayor.
The traditional argument is that US voting systems are mostly first-past-the-post (aka FPTP, single winners on plurality), and this naturally creates a two-party system due to fears about third parties just being spoilers/wasted votes (see Duverger's Law for the poli-sci theorizing). However, there is a counter-argument in that some other countries did not turn out this way despite similar voting systems, like Canada or India (for now). The traditional answer to that is that the US selects a president directly, while the PM can be chosen via some more indirect process. This is on purpose! Historically, although Parliament was kinda-sorta democratic, there was this weird interplay with the King. Baby America vehemently hated kings, and was trying to challenge the whole idea altogether! A directly-elected president is the ultimate rejection of a king-model. The modern reality of directly elected presidents being more powerful than confidence-of-Parliament heads of state was a bit unforeseen.
However, I want to make a different appeal, beyond structure: it might just be the way history shakes out! Remember the US is inventing representative democracy almost from scratch! Now-common ideas like political parties weren't even concepts yet, much less actual practice. The specifics of history have had very strong impacts on how the vote has gone. The first two pseudo-parties formed pretty early on over a mix of national vs state power, with a dash of foreign policy disagreement, pretty natural. One collapses and you get a brief mega-party period. Then Jackson shows up and is Trump-level controversial, setting up Democrats vs Whigs, partly stylistic but economics plays a big role here, and this starts to create more noticeable party-level mechanics as well (beyond voting blocs, you start getting them more involved in vote-getting, persuasion, and financing). Worth noting that at this point voting also starts to expand to non-property owners. Slavery eventually guts the Whigs a bit more than the Democrats, and you almost get a three-party scenario developing, or even a four-party one. It was probably the most likely electoral outcome for a while!
...and then a literal Civil War happens instead of waiting to let elections resolve things. At the end of which, you get two parties again, and surprise surprise for a while these line up neatly with the boundaries of the two actual contenders of the war. And yes, one of the two (the winner) is more powerful for a while. Also, every time an international war happens, you tend to get dominance by a party in the nationalist afterglow (sometimes backlash), and the US has had semi-regular wars. Since then, many of the issues have been packaged in such a binary way that arguably the "need" for a third party wasn't super strong. There's an interesting scenario where the Civil War doesn't happen and you do get some more regional powers competing, maybe even forming individual parties. However, circling back to one part of the "structure" argument: only one person can win the Presidency outright, otherwise the decision goes to the House. This happened, but was messy and unpredictable, so no one really wanted that to happen again. And remember, the president is increasingly powerful, and drives the big issues in politics, rather than reflects it! So there's motivation for regions to group together if only for convenience.
Since the US was first, many other democracies formed since then sometimes deliberately structure their democracies to be multi-party, such as via proportional representation or so such. Historically, though, again the US was first, so not only was our system the only one in town, but parties had to be "invented"! It took like 40 years for them to start to take shape, and the issues that became big deals in the US were also often of a very specific flavor: how to use the national apparatus to help specific local regions. Thus state-level and national politics are very intertwined. Also, due to the historical structure of state government, as well as state loyalty and identity, municipal power would very rarely be competitive with state power, so those elections were often done in tandem. And national issues almost historically have very often driven voting enthusiasm more than municipal issues (!!), so splinters in local approaches within one party almost never lead to local-only splinter parties. Furthermore, state and national candidates have to come from somewhere! If you have ambitions to be a bigger fish, why would you join a smaller party? I buried a lede for voting expansion in the earlier paragraph. It's my (weak) understanding that some important "third-party" groups in Canada formed in the aftermath of increasing suffrage. In the US, these new constituencies were often rapidly absorbed.
India is the other major counter-example of the FPTP theory. Duverger notes that FPTP works on a district-level, and this is low-key the case in India. However, India has also had extreme local social, religious, and economic stratification! This pairs with fewer major wars and international crises (we are in the post-WWII era exclusively, remember), which also means that there are fewer overpowering national questions. To some extent, there is economic motivation to create more national party-coalition blocs, but local identity politics is very strong to this date. While in the recent decade the BJP is showing early signs of a dominant party, it is yet to be seen if and how that might trickle down to state and municipal contests. Finally, India has a president, but they are also chosen indirectly, and are mostly ceremonial, but it's still worth pointing out how they are chosen: members of parliament (!) combined with locally elected leaders (!) use a secret ballot (!) of RCV-IRV ranked voting (!). The president in turn works basically like the Crown does for the UK, where the PM is chosen, again indirectly, via a confidence-based coalition approach (and can lose said confidence), and then basically appoints all the top level executive branch themselves.
So in short: I'd argue history mostly, which has heavily involved the president. A typical political scientist might say it's structurally all FPTP, with the constitutional role of President being relevant as a tiebreaker. Furthermore many modern democracies deliberately construct themselves to be different than the US in some way, despite the obvious influences, so it's not really a fair comparison in the statistical-causal sense.
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