An Eye for an Eh?

Talks between the U.S. and Canada collapsed recently after weeks of intensified negotiations. Both governments issued statements blaming the other for last-minute demands that upended a near-final deal. The breakdown triggered the implementation of 50% tariffs on roughly $20-28 billion in specified Canadian goods. With Canada’s dollar-for-dollar retaliatory tariffs set for September 8 and new U.S. duties on Canadian autos and steel announced for January 2027, the near-term trajectory points toward escalation. Three distinct scenarios warrant monitoring:

• Managed standoff (most likely near term): Both sides let announced measures take effect and use the pressure to condition eventual re-engagement. The U.S. Trade Representative's parallel negotiations with Mexico add leverage on Canada.

• Escalating trade war (possible): A more severe scenario would have Canada's retaliation proceed unchecked while Trump uses his broad authority under Section 338 and 232 to intensify pressure before year-end – though the 2026 midterms could temper Republican appetite for sustained conflict. Hardened positions in Ottawa, backed by provincial leaders and opposition parties, make compromise difficult. 

• Negotiated re-engagement (likely later in the year): Substantial groundwork was reportedly laid before talks broke down, including tariff relief, aerospace supply chain coordination, and USMCA renegotiation, giving both sides a framework to return to. Section 338 gives Trump unilateral flexibility to reverse course. Carney's public framing, however, signals Canada needs a materially different offer before resuming talks.

For support on supply chain exposure, regulatory strategy, or stakeholder communications, contact FGS's Global Public Affairs team.

For most of this election cycle, the Senate was treated as settled – but the calculus is shifting. The chamber has long been a Republican-held stronghold, with too few genuinely competitive seats for Democrats to realistically contest. Now, Cook Political Report has moved the Senate into "toss-up territory" for the first time this cycle, and the list of races once considered safe keeps shrinking. 

Democrats still need a net gain of four seats to take control, and must win four of six currently competitive races while running the table on every other Democrat-favored seat – but the map itself has expanded in ways few predicted back in the spring. Nine races will decide it:

• Michigan: Open seat with a crowded Democratic primary in a state that flipped to President Trump in 2024.

• Maine: Republican incumbent in a state Harris won.

• Ohio: Republican incumbent facing a former Democratic Senator.

• North Carolina: Open seat with former Democratic governor facing the former RNC chair.

• Georgia: Democratic incumbent in a state that flipped to President Trump in 2024.

• Alaska: Republican incumbent facing a former U.S. Rep.

• Iowa: Recent polling has this race surprisingly close.

• Texas: Attorney General Ken Paxton’s primary win over incumbent Senator John Cornyn gives Democrats hope for an upset in the fall.

• New Hampshire: Republicans are bullish on New Hampshire after a recent Emerson College poll showed the race in a statistical tie.

Reach out to the Alternative Futures team at us-midterms@fgsglobal.com to discuss what the current landscape means for your organization.

Six months in and with no end in sight, the Iran conflict remains one of the most consequential variables for the midterms. Fighting and economic coercion continue, while the Strait of Hormuz remains contested, severely disrupting commercial shipping. Neither side has secured a decisive strategic outcome, and stalled diplomacy leaves substantial risk of prolonged conflict and escalation. The conflict’s growing impact is reshaping the election landscape:

• Public opposition is firm. Unlike most military engagements, the conflict hasn’t produced a rally-around-the-flag dividend for the president. Nate Silver’s latest analysis of U.S. polls shows 55.1% of Americans oppose the military action, and 57% say in hindsight it was the wrong decision. Neither figure has improved meaningfully as the conflict has dragged on.

• Gas prices are at a record high for late August. The national average hit $4.11 per gallon as of August 21 – up $0.17 in a month – driven by Strait of Hormuz shipping disruptions and Ukrainian strikes constraining Russian refining capacity.

• Inflation remains above target. Year-over-year inflation sits at 3.4%. The Wall Street Journal noted July's CPI report "was not soft enough to take a rate hike off the table, but not firm enough to force one."

• Consumer confidence is falling. Sentiment dropped to 51.0 in August, down from 55.2 in July. Only 8% of consumers now expect their income growth to outpace inflation over the next year, down from 18% in late 2024.

FGS Global's Alternative Futures team is tracking the Iran conflict and other election variables monthly. To learn more, reach out to us-midterms@fgsglobal.com.