USA & Canada Intelligence Brief — March 13, 2026

1 Carney unveils C$35 billion (~$25bn) Arctic defence and infrastructure plan — northern base upgrades, runway expansions, Mackenzie Highway extension to Inuvik, Canada’s first overland connection to a deepwater Arctic port at Grays Bay; Carney departs for Norway — Prime Minister Mark Carney landed in Yellowknife on Thursday to announce the comprehensive Arctic package before departing for Norway; approximately C$32 billion (~$23 billion) is drawn from money set aside under Canada’s defence update almost four years ago; the plan includes northern base upgrades with runway improvements, hangar construction and road building across multiple Arctic locations; the 227-kilometre Grays Bay road and port will become Canada’s first overland connection to a deepwater port on the Arctic Ocean, opening commercial opportunities along the route; the Mackenzie Highway extension will connect Yellowknife to Inuvik; civilian airport improvements at Rankin Inlet and Inuvik are included alongside military investments; the announcement follows Canada’s first-ever defence industrial strategy, which pledges 70% of defence acquisitions to Canadian firms, a 50% boost in defence exports and 125,000 new jobs; a Globe and Mail/Nanos poll found only 9% of Canadians view the US as a “trustworthy ally”

2 FOMC March 17–18 looms as the most consequential meeting of the year — first dot plot incorporating the oil shock; rate at 3.50–3.75%; February PCE due Friday (consensus 2.9% y/y, core 3.1%); one cut priced for September; Powell’s last projections meeting before term expires May 15 — The Federal Reserve will release new economic projections and a dot plot that must now incorporate $100 oil, the Iran war, tariff pass-through and a softening labour market; February PCE data due Friday is expected at 2.9% y/y with core at 3.1%; Carson Group’s chief macro strategist Sonu Varghese warned it is “the calm before the storm that will show up due to surging gasoline prices in March”; if core inflation remains sticky at 2.5%+ before the oil shock hits, the dot plot could eliminate rate cuts entirely for 2026; markets have already repriced from two cuts to one, with the sole remaining cut priced for September; gas at the pump hit $3.58 — up 21% in a month; initial jobless claims held steady at 213,000; the Atlanta Fed GDPNow jumped to 2.7% from 2.1% on the January trade data, but that reading predates the oil shock’s economic impact

3 US budget deficit hits $1.004 trillion through February — down 12% y/y as revenues rose faster than spending; but SPR drawdown and military escalation could reverse improvement; CBO projects $1.9T deficit for full FY2026 at 5.8% of GDP; 30-year auction tails — The fiscal year-to-date deficit through February narrowed to $1.004 trillion, a 12% improvement over the same period in FY2025; the February deficit alone was $308 billion; however, the 172-million-barrel SPR drawdown contributing to the IEA’s coordinated release and the escalating military spending on the Iran war could reverse the improvement in coming months; CBO projects a full-year deficit of $1.9 trillion (5.8% of GDP), growing to $3.1 trillion (6.7% of GDP) by 2036; federal debt is on track to reach 118% of GDP by 2035, surpassing its 1946 wartime peak; the 30-year bond auction tailed at 4.871% versus 4.750% prior — a sign of weakening demand for long-duration Treasuries amid inflation fears; the 10-year yield climbed to 4.24%, a five-week high

4 Section 301 trade probes target 16 economies — USTR rebuilding tariff wall after Supreme Court struck IEEPA; public comments due April 15; remedies by July; Bessent: “back to pre-ruling levels by August”; CUSMA zombie review begins March 16 — The USTR opened Section 301 investigations targeting 16 economies including the EU, Japan, South Korea and China, pivoting to the Trade Act of 1974 after the Supreme Court struck down IEEPA-based tariffs; USTR Jamieson Greer aims for remedies before Section 122 temporary tariffs expire in July; Treasury Secretary Scott Bessent said the administration targets “back to pre-ruling levels by August”; public comments are due April 15 with hearings expected around May 5; CUSMA review talks begin March 16 with the agreement in zombie status — neither extended, updated nor terminated; Trump has been dismissive of CUSMA, threatening to block the Gordie Howe bridge and saying “I want to build the cars here, not in Canada”; Stellantis committed $13 billion to US facilities, boosting made-in-America production by 50% at the expense of its Brampton, Ontario plant

5 Wall Street posts worst session of 2026 — S&P 500 −1.52% to 6,672; Dow −739 below 47,000 for first time this year; Brent closes above $100; 10Y at 4.24%; recession probability hits 32% on Kalshi; Bessent authorises temporary purchase of sanctioned Russian crude at sea — Thursday’s selloff was the worst since the Iran war began; the S&P 500 fell 1.52% to 6,672.62, the Dow shed 739 points to close below 47,000 for the first time in 2026, and the Nasdaq lost 1.78%; Brent settled at $100.46, its first close above $100 since August 2022; WTI surged 9.7% to $95.73; markets shrugged off the IEA’s record 400-million-barrel reserve release; Goldman Sachs forecast Brent averaging $98 in March-April before easing to $71 by Q4; US recession probability on Kalshi hit 32%, the highest of 2026; Treasury Secretary Bessent authorised the temporary purchase of sanctioned Russian crude already at sea to stabilise energy markets; Energy Secretary Chris Wright admitted the Navy cannot yet escort tankers through Hormuz; Trump downplayed gas prices as “a little glitch”

DEFENCE Carney’s C$35 billion (~$25 billion) Arctic plan is the clearest signal yet that Canada is building a defence posture independent of the US rather than complementary to it. The Grays Bay deepwater port — Canada’s first overland Arctic connection — is as much about commercial sovereignty as military capability. Only 9% of Canadians trust the US as an ally. That number is doing the political work that defence white papers cannot.

MACRO The FOMC meeting next week is the most important since the war began. The dot plot must now price in $100 oil, 4.24% yields, tariff pass-through, and a labour market that isn’t cracking but isn’t strengthening. If the dots eliminate 2026 cuts entirely, markets will reprice violently. Powell’s term expires May 15. This may be the last projections meeting where his credibility backstops the institution.

FISCAL The deficit improving 12% year-to-date is the good news that won’t survive contact with the war. The SPR drawdown burns fiscal reserves. The Iran military escalation adds spending. And CBO’s projections — $1.9 trillion for FY2026, debt at 118% of GDP by 2035 — were calculated before Brent hit $100. The 30-year auction tail at 4.871% is the bond market saying it has noticed.

TRADE The Section 301 probes are the administration rebuilding the tariff wall from rubble. The Supreme Court demolished IEEPA; Section 122 is temporary scaffolding; now Section 301 becomes the new foundation. Sixteen economies are on notice. The CUSMA zombie review starting March 16 adds urgency. Stellantis moving $13 billion to US production while cutting Brampton is the market pricing in the new trade architecture before it is formally built.

POLITICS Trump calling $3.58 gas “a little glitch” while his own voters identified gas prices as a top concern before the war is the political gap that defines midterm risk. Bessent authorising the purchase of sanctioned Russian crude at sea — the same Russia that the administration spent years sanctioning — tells you how acute the supply panic has become. Wright admitting the Navy cannot escort tankers through Hormuz punctures the promise of a quick resolution.

1 February PCE data due Friday — consensus 2.9% y/y, core 3.1% — the last major inflation reading before the FOMC; pre-dates the oil shock but sets the baseline for forward projections; Deloitte estimates tariffs raise CPI by 1pp between H2 2025 and H1 2026; if core PCE surprises above 3.1%, the dot plot next week becomes even more hawkish.

2 US trade deficit narrowed sharply to $54.5 billion in January — crushed the $66.6 billion consensus on record exports; the Atlanta Fed GDPNow jumped to 2.7%; but as covered in yesterday’s USA & Canada Intelligence Brief, this is backward-looking good news that predates the war and the Hormuz closure.

3 Canada’s defence industrial strategy targets 70% domestic procurement — pledges to boost defence exports by 50% and create 125,000 jobs; UBC defence expert Michael Byers warned that Canadian defence industry is “dominated by subsidiaries of American companies” and that hitting 70% without counting foreign subsidiaries would take a decade; the strategy follows Carney’s pledge to “double defence expenditures by the end of this decade.”

4 Congress questions $5.6 billion spent in first two days of Iran war — concerns mounting about military spending escalation; the SPR drawdown of 172 million barrels is the US contribution to the IEA release; Wright confirmed delivery begins next week over 120 days; Trump reversed his opposition to SPR draws after Brent hit $100.

5 Brookings: Canada at a “forked road” away from North America — analysis published this week argued Carney’s effort to negotiate a Strategic Economic Agreement with the US “ultimately failed” because the Trump era operates on “transactionalism” where “economic relief is contingent and reversible”; the question is whether Canada pursues a modernised Third Option of diversified trade partnerships or accepts continued US dependence.

6 Bessent authorises purchase of sanctioned Russian crude already at sea — framed as a “temporary disruption” measure to stabilise energy markets; the irony of an administration that imposed Russia sanctions now buying Russian oil to offset a war it started has not been lost on markets or Congress.

Mark Carney — Canada’s PM announced the C$35 billion (~$25 billion) Arctic defence plan in Yellowknife before departing for Norway; the package combines military modernisation with civilian infrastructure in a strategy designed to assert Canadian sovereignty independently of the US at the moment when the bilateral relationship is at its lowest point in modern history.

Jerome Powell — the Fed Chair faces the most consequential projections meeting of his tenure on March 17–18; the dot plot must now incorporate $100 oil, tariff pass-through, and a softening labour market; his term expires May 15, making this potentially his last meeting where the institution’s credibility is fully backed by his personal authority.

Jamieson Greer — USTR opened Section 301 probes targeting 16 economies to rebuild the tariff architecture the Supreme Court dismantled; his stated timeline of remedies before the July Section 122 expiry signals urgency; the CUSMA review beginning March 16 adds a separate track for North American trade restructuring.

Scott Bessent — Treasury Secretary authorised the temporary purchase of sanctioned Russian crude at sea to stabilise energy markets while targeting “back to pre-ruling tariff levels by August”; the simultaneous management of energy panic, trade reconstruction and fiscal sustainability makes him the most overloaded cabinet member in the administration.

Chris Wright — Energy Secretary confirmed the 172-million-barrel SPR contribution to the IEA release but admitted the Navy cannot yet escort tankers through the Strait of Hormuz; the admission punctures the administration’s ability to promise a quick resolution to the supply disruption and explains why Bessent had to turn to Russian crude.

1 FOMC March 17–18 — new dot plot and economic projections; expected to hold at 3.50–3.75%; February CPI stale but core remains above target on tariff pass-through; oil shock adds supply-side inflation the Fed cannot address with rate policy; Powell’s statement language on inflation risks will set the tone for Q2.

2 Section 301 timeline — public comments due April 15; hearings ~May 5; Greer aims for remedies before Section 122 tariffs expire in July; Bessent targets “back to pre-ruling levels by August”; 16 economies including all major US trade partners; auto, manufacturing and agriculture sectors most exposed.

3 CUSMA review — March 16 — the agreement enters its mandated sixth-year review in zombie status; Trump wants bilateral leverage rather than trilateral constraints; Canada’s defence industrial strategy and Arctic investment are partly designed to demonstrate strategic independence in advance of these talks.

4 Bank of Canada — March 18 — one day after the FOMC; rate at 2.25%; Canada’s resource-heavy economy benefits from higher oil but consumers and airlines suffer; the BoC will watch Powell’s inflation language before deciding; CUSMA talks beginning two days earlier add trade uncertainty to the decision.

Carney’s Arctic plan is the most significant Canadian defence investment in a generation, and it is deliberately designed to be independent of the United States. The Grays Bay deepwater port, the Mackenzie Highway extension, and the northern base upgrades are not just military infrastructure — they are sovereignty assertions at a moment when only 9% of Canadians trust the US as an ally. The defence industrial strategy’s 70% domestic procurement target is ambitious; whether it can be achieved without counting American subsidiaries is the question that will determine whether Canada builds real capability or maintains a branch-plant defence economy.

The FOMC meeting next week is the most important in years because the dot plot must now reconcile irreconcilable forces. The oil shock imports inflation the Fed cannot control. Tariffs add cost-push pressure that rate hikes would worsen. The labour market is softening but not cracking. And the February PCE data — expected at core 3.1% — sets a baseline that is already above target before the March energy shock hits the data. If the dots eliminate cuts for 2026, the equity market reprices. If they signal cuts, the bond market reprices. Powell’s last projections meeting before his term expires May 15 carries institutional weight that transcends the data.

The deficit narrowing 12% year-to-date is the good news nobody should believe will hold. The SPR drawdown, the Iran war escalation, and the potential for tariff revenue to decline if trade volumes fall all point toward a deteriorating fiscal trajectory. CBO’s $1.9 trillion projection was calculated before Brent hit $100. The 30-year auction tailing at 4.871% is the bond market’s verdict on long-term fiscal sustainability — and it is not favourable.

The Section 301 probes and the CUSMA review beginning in the same week tell a single story: the US trade architecture is being rebuilt from scratch. The Supreme Court demolished IEEPA. Section 122 is a temporary bridge. Section 301 is the new foundation. Sixteen economies are on notice. CUSMA is in zombie status. Stellantis moving $13 billion to US production while cutting Canadian plants is the market pricing in the new reality before the legal framework catches up. For Latin American exporters, this is the most important trade development of 2026.

Bessent authorising the purchase of sanctioned Russian crude at sea is the single most revealing decision of the week. An administration that built its energy policy on sanctions against Russia is now buying Russian oil to offset a war it started. Wright’s admission that the Navy cannot escort tankers through Hormuz explains why. The supply panic is real, the tools are limited, and the contradictions are becoming impossible to manage. Gas at $3.58 — up 21% in a month — is the political fact that will define the midterms.