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Key takeaways
Prepare for multiple policy scenarios now, not after the election.
Some of the most consequential changes may happen outside the beltway.
Trade, AI, energy, and capital should be treated as interconnected business issues.
Agility is becoming a strategic capability.
C-suites have endured significant volatility over the past couple of years, including new tariff policies, deregulation at home, and increased geopolitical instability Now, with a little more than a month to go before the 2026 midterm elections, proactive companies are already taking steps to prepare for what’s coming next. While the most likely election scenarios are unlikely to yield the sort of extensive legislative and regulatory changes that occurred over the last two years, we believe there will still be important strategic shifts that companies need to adjust to moving forward.
CEOs should scenario plan for several possibilities.
The party controlling the White House historically loses seats in midterms, and a divided Congress—with a Democratic House and a reduced Republican Senate majority—is what many political analysts have long been projecting will be the most probable result this fall. Under this scenario, any legislation would need Democratic backing, and 2027 could see standoffs over government funding, raising the debt limit, and extending programs with specified statutory expiration dates. For business leaders, the most significant consequence could be more public and targeted oversight rather than new legislation. A Democratic House would be likely to scrutinize both the administration and the private sector, including businesses, through document requests, hearings, and subpoenas.
A Democratic sweep of the House and Senate—now considered more conceivable than was thought possible earlier this year—would slow the pace of nominations and push the administration even more toward executive action and rulemaking.
Conversely, Republicans’ keeping control of both chambers would yield a reinvigorated majority that would double down on the current policy trajectory.
Whatever the midterm outcome, CEOs should expect continued volatility, geopolitical uncertainty, and a policy environment shaped by executive action, particularly on tariffs and trade policy.
There are some steps that CEOs can take to position their companies to succeed regardless of how the midterms play out. The following should be on the agenda for US leadership teams.
Shape policies while they’re still in development
If Democrats retake a chamber of Congress, they will likely focus legislative activities on issues they think demonstrate why voters should support their party in 2028. Look for them to emphasize policy priorities on affordability, housing, healthcare, taxes, congressional authority over tariffs, AI, and potentially data centers, as well as other issues of concern regarding energy and the environment. Their policy proposals may not become law over the next two years, but they could be a blueprint for new legislation following the 2028 election. That creates a window of opportunity for your company to influence the structure of those policies before the political stars are aligned in a way that causes proposals to move more fully into the legislative machinery.
The 2014 midterms offer a precedent. In the middle of then-President Barack Obama’s second term, Republicans expanded their majority in the House, took control of the Senate, and won several governorships and state legislatures. Following that election, the House Ways and Means Committee published several proposals to revamp the international tax system, a change that remained on the drawing board until the 2016 presidential election, quickly becoming the basis for a significant overhaul that President Trump signed into law in 2017.
Know your exposure before it becomes an issue
Many political insiders caution that if Democrats win the House, congressional committees are likely to hold hearings and investigations of some companies’ business practices during the past two years where there have been allegations of unethical behavior. Donations to projects that are administration priorities may receive scrutiny. Companies in certain sectors may face subpoenas and document requests and should prepare for rigorous questioning at public hearings.
Reallocate resources to manage trade uncertainty
No midterm outcome is likely to change the course of tariffs. Companies may need to bring in more resources, given the continued complexity. Tariffs at some organizations are now the biggest cost item in the P&L, even bigger than taxes. At the same time, enforcement is growing, with US Customs and Border Protection (CBP) using more data-driven enforcement tools and the Department of Homeland Security aligning with the Department of Justice in a cross-agency Trade Task Force to make sure that companies are complying. From 2024 to 2025, the number of CBP audits increased only modestly, from 417 to 465. But the net revenue recovered increased from $668 million to $34.4 billion. The federal government is going after bigger targets and winning bigger awards.
For this reason, many companies are finding that their established trade function doesn’t have the bandwidth to meet its growing set of responsibilities. Trade functions now are expected to present to the CEO and board, model potential trade scenarios, and meet greater compliance requirements—challenges that aren’t likely easing up anytime soon.
Understand that bigger policy shifts may come at the state level
Some states could see significant swings and a greater divergence between Republican-led states and Democratic-led states. Several states—including Pennsylvania, Michigan, and Minnesota—could see Democrats take control of all three branches of government, including the governorship. In those situations, the party newly in control often passes a wave of legislation, leading to a greater divergence across state lines.
Taxes are a good example. Some Democrat-led states, which often have large public-sector unions and greater fiscal demands, are considering raising taxes, in part to offset looming reductions in Medicaid reimbursement scheduled to hit later this decade. Others are taxing technology. Washington, for instance, passed an advanced computing surcharge on its business and occupancy tax. In contrast, some Republican-led states are reducing income taxes in favor of consumption taxes.
AI oversight is following the same pattern
California has enacted the first state framework for independent verification of AI systems, setting criteria for who’s qualified to perform those assessments and directing the state to align them with established auditing and assurance standards. Federally, the picture is unsettled. The administration continues to resist state AI rules, while the leading bipartisan House proposal would preempt some of them and require independent assessment of frontier developers.
The midterms are likely to showcase growing concerns about AI. Republicans are likely to continue to hold a pro-innovation stance regarding model governance and chips, while Democrats will push for greater regulation, including calls to slow the develop of frontier AI models. The two sides may find common ground regarding new or enhanced rules for data center development.
What’s consistent across these paths is that someone outside the company will eventually be asked to verify how AI systems are governed and whether they perform as claimed. For CEOs, the challenge is to prepare for different outcomes now, through model inventories, documented controls, and clear human accountability, rather than waiting to see which framework prevails. Similarly, you should understand the implications of different AI futures on your workforce and talent strategies. While federal legislation is unlikely, state-level rules could create complexity by forcing companies to comply with varying regulations. Some states, for instance, already ban the use of AI in screening résumés.
Intensify efficient use of capital
The growing federal budget deficits and inflationary pressures contribute to elevated interest rates and higher corporate bond yields. However, even at today’s elevated rates, there’s intense competition for capital. Data centers and energy infrastructure projects are attracting global investor interest. Projects outside of the AI ecosystem are competing for credit, making capital allocation processes and efficient use of capital a differentiator as investors assess their AI exposures. In this environment, budgeting and business portfolio reviews should prioritize allocating the next dollar of capital as efficiently as possible. The same holds true of M&A. An acquisition needs more than scale and synergy. To unlock value, deals should be grounded in a coherent, strategic rationale that elevates the predictability of debt capital returns.
Expect a shifting energy environment
Both parties are increasingly aware of looming energy issues. Growth in AI, data centers, electrification, advanced manufacturing, and reshoring are all leading to greater demand. Energy affordability is triggering populist resistance to data centers in many municipalities. Grid reliability is a critical issue looking ahead, especially given the increased severity and frequency of extreme weather events impacting aging power grids. Democrats would likely focus more on preserving or creating clean-energy tax incentives, supporting investments to modernize the grid. Republicans, in contrast, would likely continue to prioritize energy abundance and domestic production. The one area of potential bipartisanship is the long running effort to streamline permitting for new projects—a goal that both parties now see as critical to advancing their sometimes divergent interests.
These issues can affect operations and reshape sustainability agendas. In the near term, some companies will need to start reporting in line with Corporate Sustainability Reporting Directive’s disclosure requirements and California’s climate-related disclosure laws. Similarly, companies are taking a far more pragmatic approach to sustainability investments. In the past, companies set net-zero targets and framed the decision as the right thing to do. Today, the business case for sustainability needs to be far stronger, with an explicit ROI based on increased revenue, reduced costs, mitigated risk, or other quantifiable metrics that can be mapped to the P&L.
Use AI for real-time scenario-planning
In a more disruptive, volatile environment, companies should plan for a wider range of potential futures. For example, critical minerals are a point of vulnerability across industries. Securing domestic access to lithium, graphite, rare earths, copper, and other critical minerals is likely to remain a shared priority because of its implications for energy, defense, manufacturing, and grid reliability. There’s also likely to be bipartisan support for policies that expand the domestic semiconductor chip manufacturing as a way to reduce supply chain dependency and strengthen national competitiveness.
Talent access is another variable CEOs should pressure-test. Access to talent and the ability to move people and skills where they’re needed most are both critical to meeting changing demand. Ongoing immigration policies may affect workforce availability in certain industries and regions, creating implications for service delivery, operations, and growth.
Across your business, AI tools and capabilities can help gather information from a wider range of sources—both inside the enterprise and externally—and distill it down to more actionable, quantifiable insights. But effective scenario planning requires domain expertise and judgment from business, policy, geopolitical, cyber, risk, and operational leaders, combined with AI-enabled models and digital twins. This combination can help companies see disruptions earlier, model effects on a key node, supplier, or input, and bring timely intelligence closer to the CEO and board. The result is stronger resilience, sharper decision-making, and a better ability to identify and capitalize on emerging opportunities.
Build resilience and be adaptable
A stronger supply chain is a starting point, but it’s not enough. Companies also need to identify where the business is most exposed and build redundancy, optionality, and contingency plans where disruption would cause the greatest risk. That requires scenario-planning capabilities that look beyond supply-chain disruptions to broader shifts in their customer base, competitors, technology, industry boundaries, and policy. The companies that are better positioned don’t simply react more effectively. They anticipate changes and contingencies, develop plans to pivot effectively, make decisions confidently, move with agility, and use data and AI to become more intelligent over time.
Know what you stand for
Core values can provide a steady framework for making decisions under pressure. In a volatile political environment, organizations need a North Star that orients their behavior, both internally and externally. Define what your company stands for, communicate it clearly to employees, customers, suppliers, and any other stakeholders, and use it as a filter for where they want to focus their efforts. A clear stance can be both a good offense and a good defense, helping companies act consistently on the issues that matter to the business while providing a defensible basis to avoid being forced into weighing in on issues that risk distraction. To make it real, your HR, legal, and leadership teams should be aligned.
The bottom line
Midterm results may shift the balance of power in Washington, but they won’t eliminate volatility. They may even intensify it. In this environment, CEOs should focus on what they can control—understanding their exposure, investing in more intelligent and transparent operations, staying anchored to clear corporate values, and building the organizational capabilities to adapt, repeatedly, over time. This is what separates companies that react to volatility from those that move through it with confidence and compete through what comes next.
America in Motion
Cut through the election noise. Tune into business impact.
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