The Midterms Flipped the Global Calculus. Here’s Why | Fortune Daily

Colossal changes have rocked the United States both in and outside of government in just one short week. Firstly, America voted to upend the power balance in Washington and we're seeing the very beginning of the global response in both markets and posture. With both chambers of Congress flipped. The Trump administration must also grapple with another destabilizing development that emerged over the weekend. Jensen Huang has become entangled in a Chinese espionage plot. Could this sour the public's and the government's attitude to the AI race? From trade policy to the AI buildout and more, Fortune's Kamal Ahmed, who is the former economics editor at BBC News, joins us now to explain what the midterms mean for global business and what's still firmly in the president's hands. He also takes us inside the minds of European and Gulf leaders over the past few days. Hi from New York, I'm Ellie Austin, and this is Fortune Daily. We'll be right back. Kamal, hello. Thank you for joining us from London. Always great to have you on the show. So we're here to talk about the midterms. We're a few days out now. The dust has settled. It was obviously a huge win for the Democrats, described as a blue wave. They flipped governorships in five previously Republican states, just as one example of what happened, including Texas, a Republican stronghold. As everything kind of starts, as I said, to settle, how has this news reverberated in Europe? Well, let's take a few of the countries in turn. Let's take the United Kingdom. We're here in London at the moment. I think for the United Kingdom, which has a left-leaning Labour government under Andy Burnham, there will be a degree of, you'd call it, relief. This idea that the MAGA wave It can be stopped to an extent. It can be diverted. And of course, the Democrats in America are much closer to the Labour Party here that is the party of government. So for someone like Andy Burnham, his hope will be this is a strong signal about who may be the next president of the United States. And that next president, if Democrat, is going to be closer to the UK. But if you move to the continent, then you've got a very, very different type of picture. A lot of the reason for what happened in America is, of course, down to the economy. James Carville famously said to Bill Clinton, it's the economy, stupid. And that's as true in Europe as it is in America. So if you think about France, you think about Germany, you think about Spain, there, if you are the incumbent, whether you are left or you are right, you are being attacked by the other side of the political debate. So, in France... There's a big, big movement which is much more MAGA-friendly, much more right-friendly under Marine Le Pen, who are looking like they could well win the next French presidency. For a country like France and for someone like Marine Le Pen, the fact that the Democrats seem now to be closer to a possible White House win in the future would not be seen as good news for relationships with France. She's much more aggressive on things like immigration, on the the size of the state, et cetera, et cetera. Similarly in Germany. Now, Germany, a much more caustic and toxic right-wing side of German politics, is doing incredibly well in the polls. In Italy, you have, again, a right-leaning leader in Maloney, but actually they are being outflanked on the right as well. So a lot of... And continental Europe is actually a little bit behind, in a way, where America is. That's sort of where America was maybe in 2024, looking to a solution to the problems they had, which America had under Joe Biden, which now seem to be similar in Europe. So I think you've always got to be careful when thinking about Europe. It is a mixed picture. So one of the biggest economies, UK, probably pretty positive. But a lot of economies on the continent, a lot of politics on the continent, ...are probably more wary of what the Democrats might mean for American politics in the future. At Fortune, we cover the Gulf pretty extensively in our Gulf briefing newsletter. Obviously, the Gulf, just like Europe, is not one block. But what is your coverage, our coverage over the past few days reported about reaction in the Gulf specifically to these election results? If the election results, Ellie, are as... As many people say they are, a constraint on what the president feels he's able to do abroad, in terms of tariffs and in terms of conflict, then if that is true around the Gulf, and actually there's probably slightly more singular reaction to the events of the midterms, it will be relief. Relief that the tensions of the Gulf conflict sparked around the U.S.-Israeli attacks on Iran and then, of course, Iran's response to those attacks, that the threat of that escalation has now reduced. Speaking to Gulf leaders, whether that's government Gulf leaders or business leaders in the Gulf. They are all about long-term stability, and what the events of 2026 have introduced to the Gulf, and we've seen it in how many things have been cancelled, how many events have not happened, and of course the terrible bombings and drone attacks, is the idea that the Middle East, as an investment opportunity, as a place to go on your holidays, as a place to go and work and to Flourish has been put at risk through Conflict. And the Gulf was incredibly uncomfortable in that position. And that has led to increasing tensions between some of the Gulf states. So Saudi, the United Arab Emirates, those tensions have flourished because they've had different points of view about how to approach this conflict. So I think from the Gulf, as long as it eases tension, there will be widespread relief. I guess there's an argument that Trump now realising that his power at home has diminished could focus all his efforts abroad and it could lead, unfortunately, to an escalation of the conflict. You're right, Ellie, that whole point that where he can now, possibly the only place A degree of real independence is on his foreign policy. What does that mean for Russia-Ukraine? What does that mean in the Gulf? Thank And that will cause concern for people that does the reaction. The reaction isn't one of less activity abroad. you It's actually more activity abroad. But I think there's less chance of that happening. very What will President Trump do? I'll be thinking about now. There's the legacy issue. How will he be remembered? much. Does he really want to sort of crash and burn economically, increasing inflation worry, increasing his critics? Or is he going to go... For a two years where there's a slightly different feel to the president and certainly his response to the elections, the fact that he hasn't challenged their legitimacy, the fact that he has says he wants to work with people from both sides of the aisle. I think that the view at the moment is that that is not going to be the reaction. You can't talk about these midterms without talking about AI, obviously. The data centre conversation in the US is never ending. And for some context, 41 data centre related ballot measures were up for a vote in the elections last week in 10 states. And voters rejected infrastructure build-outs 40 out of 41 times. So a pretty clear message there. What's the conversation about data centres like Kamal in Europe right now? Maybe we start in the UK and then speak more broadly. In Europe, the polling shows that the public are not as anti-artificial intelligence development as is happening in America. Why do you think that is? Why is that? I think a couple of reasons. First of all, there's much more concern here that Europe is going to be left behind. We're not going to innovate quickly enough. In a way, you've already gone to the next chapter of AI development, that you know you have the people who can seize the future and show the great opportunities of artificial intelligence. You've always moved on to chapter two, which is, and here are the worries and data centres is one of them. In Europe, we're still worrying, have we got the innovators? Are we actually going to make as much out of the AI revolution as America looks like it's going to be able to make and is already making, as China looks like it's going to be able to make and is already making? And obviously, the news of the day is Jensen Huang becoming entangled in this Chinese espionage plot. It's all across the newspapers here. It's big news because of his cozy relationship with President Trump. How's it being reported? In the UK, Kamal, and is this likely to impact Huang and NVIDIA's relationship with the UK government, for example? And it is leading a lot of the bulletins here, just like it is in America. So there is certainly a focus on it. But the connection between Jensen Huang and politics here is not really understood as much. In America, he's much more political. It's more difficult for him to navigate this story around, particularly the allegations of... of connections with Chinese spying activity. In the UK, these issues are far, far further away. Affordability was another defining issue of this election, and Trump's tariffs are really at the centre of that debate. Does this election change Europe's outlook on trade with the US? Does it change Europe's leverage at the negotiating table? I think it probably does. I think that there is a sense of maybe a little bit more confidence for the European Union, the European Commission, on the direction of travel now for tariffs. There is an idea, an understanding, that the Democrats would never have been as aggressive on tariff rules as the president was when he came in. So I think there is a sense, and it connects back to what we were talking about, about banking stocks. There is a sense that this, what would be described in many European sort of power centres as this calming influence, this anti-volatility trade that the American voters have supported is going to be helpful in terms of global institutions, global trade. It'll be really interesting. We've got a big Euro summit here between the UK and the rest of the European Union about the UK's relationship, close relationship. With the European Union, we have the G20 next year hosted by the United Kingdom. And I think there will be a little more confidence that global institutions, global trade relationships will go back a little. I don't want to overplay this because I think people have to be careful about not over interpreting one vote in America. But... People are thinking this will mean that some of that volatility will go out of the system. Some of those more global norms of the last two, three decades will come back to the fore and that will be better and more positive for global growth. We're two years out from a presidential election. What will the smartest global CEOs be doing over the course of the next two years to stand themselves in the best possible stead, regardless of what? The result is, and who wins in two years' time? Such an interesting question, Ellie. I think the smartest global CEOs are keeping relatively quiet about what they may think about the next person to be in the White House. And the reason I say that is because if you think about how a lot of those AI CEOs might now be feeling about standing sort of shoulder to shoulder with Trump as he came towards Um, his second presidential win and then being very clearly aligned with him. You raised the Jensen Huang issue. There are a number of others who might be thinking, how is that going to now play over the next two to three years, the smartest CEOs always talk about their values, never talk about politics. And I think that the ones that really understand that and understand that the thing that they've got to do is serve their customers, their clients. Run their business as well as they can, not get confused by the polarised debates around politics, which has become so harsh over the last 10, 20 years. Whichever country you happen to live in, because of the cost of living, the failure of many government projects, those CEOs realise, I've got to focus on my business. And the number of CEOs I speak to, there is a slight relief rally amongst some CEOs I speak to privately, and this would always be private, is we can say we're American again. Now, I don't mean that as an anti-Trump point. I really mean that as an anti-political point. They don't want to take sides. And the less they're asked to do that, the happier they feel. So I think that in terms of America appearing to maybe have moved slightly on from the big mega wave of two years ago, I think a lot of smart CEOs are thinking a little bit of relief. But I'll keep my head down. I'll keep running my business. And that's what I'm going to be. That's what my investors want. And that's what my customers want. It's always fascinating talking to you. Thank you so much for joining us. Thanks, Ellie. Okay, so staying on the midterm election theme, Elon Musk dropped a ton of money, nearly half a billion dollars, backing Republicans. And still, the party lost control of Congress. So does losing elections translate to losing real influence? Well, Fortune's Sasha Rogelberg joins us next to explain what that money could still buy Musk. Elon Musk is $474 million poorer post-election and it still might not deter his influence in 2028. So Elon Musk spent $474 million, nearly half of a billion dollars ahead of the 2026 midterm elections, nearly double 2024 when he donated about $290 million toward his candidates. Musk has very little to show for all of the money that he spent on this election. Republicans saw a trouncing overall, and in particular, what really hurt him were the losses in Texas, where he gave about half of his money, about $200 million, the loss of incumbent Governor Greg Abbott, as well as the loss of Senate candidate Ken Paxton. Those local losses in Texas mean that Musk's companies like Tesla and SpaceX are going to face additional hurdles in order to expand. That Tesla-SpaceX merger that is coming down the pike Will likely still happen, but Democrats are going to be an absolute thorn in Musk's side. Democrats have signaled that they plan to heavily scrutinize Musk's role in Doge, how it could have personally benefited him. His companies received $6 billion in government contracts, and after he left, his companies received an additional... $10 billion in contracts. There is one silver lining for Musk here, which is kind of the changing benefits of campaign financing. So no longer are we really seeing this strong relationship between giving a ton of money to a particular candidate and that particular candidate winning. However, we are beginning to see a relationship between the amount of money donated and what issues are being talked about. Musk. Basically gets to steer a political party. I think that the other kind of potential risk here with Musk's campaign failure has also been how he might be seen by certain members of the Republican Party. And while he certainly may be able to influence the party, there's a real chance that he might also be turned away. And that has to do with... His really public role in the Trump administration, there's real potential here that combined with the incredible losses that he saw this past election, that candidates are going to see him less as an asset and more as a liability. Logan Phillips, who is the founder of the election forecasting site Race to the White House, told Fortune, I think this might just be the biggest big money in politics in American history. There are some early signs that Musk could continue to donate a ton of money in future elections. Research shows that the best indicator for political donations is someone's income. And certainly as the richest man in the world, Elon Musk is making a lot of money. This donation of almost half a billion dollars is Thank An incredible amount of money to everyone else and an absolute drop in the bucket for him. And lastly, while the election is over, the fight over America's bills is really only just beginning. Washington faces a December the 11th funding deadline with more than $40 trillion dollars in national debt looming behind it. Fortune's Eleanor Pringle chats to us now about the upcoming budget battles and what gridlock could cost businesses and households. Congress's first task post midterm elections is to figure out how to keep funding America and that's before it addresses the 40 trillion dollar national debt question. The first deadline is December the 11th and that is when the current temporary 72-day window that President Trump signed back in September is going to run out. The second deadline is harder to define and this is Analysts and economic commentators refer to as the X date. This is the date that the US government reaches what is called the debt ceiling, which is currently set at just over $41 trillion. Now, the national debt in the US is currently at $40 trillion. So while it sounds like it might take a while to get there, a lot of Wall Street banks and Policy commentators are saying that that exit date will be reached by about autumn 2027. This all feeds into a wider conversation about the fiscal trajectory of the United States. Currently, the federal deficit is running about 6% to 7% of GDP, and watchdogs like the Committee for a Responsible Federal Budget would like to see that closer to 3%. I was reading a note from Goldman Sachs earlier this week, which was discussing the possibility of a government shutdown next month. The Goldman Sachs note pointed out that it's not uncommon for this lame duck standoff to result in a shutdown because The outgoing party sees one last chance to exert greater influence while the incoming party sees an opportunity. To select clear items from their agenda before taking power. Now, there are some factors which may contribute to there not being a shutdown. For example, both Republicans and Democrats have things they want to be spending on over the next couple of months. Republicans, for example, are going to be wanting to spend on defence, whereas Democrats may be wanting to spend more on healthcare, for example. Caleb Quackenbush of the Bipartisan Policy Centre has been thinking about this for a very long time. His concern is that the closer the US economy gets to the X date, the closer it gets to hitting that debt ceiling, the less responsible policymakers look. If policymakers are seen as acting potentially irresponsibly, then this has a range of implications. Chief among them is that the people who are lending to the US Treasury. The bond buyers are potentially going to demand higher rates of return in order to buy that debt because they see a higher risk associated with lending to the US government. This pushes up bond yields and as a result, longer term interest rates across the economy increase. This increases borrowing costs for consumers, for businesses and for the government itself. With a lot of new faces coming into Congress, budget watchdogs are going to want to see how high the national debt question is on the priority list for them. They're going to want to see some action that will potentially allay bond market fears. And will reduce the implication in the long term for American consumers. That's it for Fortune Daily. I'm Ellie Austin. What's your biggest takeaway from the midterm elections? Let us know in the comments. Please remember to subscribe to the channel. It helps other people find the show. We'll see you tomorrow.