MacroVoices #511 Robert Kahn: Geopolitical Outlook For 2026

Episode Summary

Executive Summary: Macro Voices features Robert Kahn arguing that 2025’s tariff shock is settling into a more durable industrial-policy regime, with affordability and the 2026 midterms likely to dominate U.S. politics. He sees likely Democratic House control, escalating Fed independence concerns, strained U.S.-Europe ties over Ukraine, and a temporary U.S.-China ceasefire. In markets, the hosts highlight volatility in oil, gold, uranium, the dollar, and the risk of a dovish Fed policy error.

Main Topics: Tariffs evolving into industrial policy (Priority: 5/5): Kahn says tariffs remain central but are stabilizing into a three-tier structure and being supplemented by direct government intervention in corporate deals, investments, and market access. Midterms and affordability politics (Priority: 5/5): The conversation centers on rising living costs, voter frustration, and the likelihood that affordability will shape the 2026 midterm debate and policy responses. Fed leadership, independence, and policy risk (Priority: 5/5): The likely next Fed chair is uncertain, but the bigger issue is political pressure on the Fed, potential dissents, and the risk of a dovish policy error that could steepen the curve and hurt credibility. Ukraine-Russia war and U.S.-Europe strain (Priority: 4/5): Kahn argues peace talks are unlikely to break through soon, Europe may shoulder more of Ukraine’s financing, and the conflict is worsening transatlantic tensions. U.S.-China trade ceasefire and dependency (Priority: 4/5): He says the relationship remains competitive long term but near-term dependence on China for rare earths and manufacturing inputs has led both sides to de-escalate for now. Macro market setup and technicals (Priority: 4/5): The post-game segment emphasizes oil at a key inflection point, gold testing highs, dollar weakness, uranium exposure to AI sentiment, and rising Treasury yields.

Key Arguments: Tariffs are not ending; they are becoming a permanent tool of U.S. industrial strategy and will continue to create volatility. The average tariff rate is now around 17%, lower than feared, but still the biggest tariff shock since the 1930s. Affordability will dominate the midterm narrative, with gasoline prices especially important to voters. Eurasia Group assigns an 80% probability that Democrats retake the House and a 30% probability they win the Senate. The next Fed chair matters, but the committee’s broader composition means policy outcomes will depend on consensus, not just the chair. Political pressure on the Fed could produce lower short rates but higher long-end yields if inflation fears rise. The Russia-Ukraine conflict is unlikely to reach a breakthrough soon because the sides remain far apart on territory, security guarantees, and reconstruction financing. Europe is likely to bear more of the financial burden for Ukraine, including potentially using frozen Russian assets. U.S.-China tensions have eased temporarily because both sides recognize their mutual dependence, especially on rare earths and processing capacity. The Fed’s long-run neutral rate may be higher than in the previous low-rate era, implying structurally higher borrowing costs. In markets, oil volatility is underpriced relative to geopolitical and policy uncertainty, while precious metals remain strong and uranium remains a bullish long-term theme but is vulnerable to AI-basket selling.

Data Points: Episode number: 511 - Macro Voices episode identifier Production date: December 18, 2025 - Episode production date S&P 500 weekly change: -240 bps to 6721 - Macro scoreboard as of Dec. 17, 2025 close U.S. dollar index weekly change: -23 bps to 98.40 - Macro scoreboard WTI crude (Feb) weekly change: -426 bps to 55.81 - Macro scoreboard RBOB gasoline (Feb) weekly change: -449 bps to 170 - Macro scoreboard Gold (Feb) weekly change: +360 bps to 43.76 - Macro scoreboard Copper (Mar) weekly change: +150 bps to 543 - Macro scoreboard Uranium (Dec) weekly change: +136 bps to 78.30 - Macro scoreboard U.S. 10-year Treasury yield: +3 bps to 4.15% - Macro scoreboard Average tariff rate: around 17% - Kahn’s estimate of stated tariff rate China tariff tier: around 30% - Kahn described China as the high-tariff tier Most countries tariff tier: 10% to 15% - Kahn’s three-tier tariff structure Mexico/Canada tariff tier: below 10% - Legacy tariff treatment under the current structure House midterm probability: 80% Democrats retake the House - Eurasia Group’s call Senate midterm probability: 30% Democrats take the Senate - Eurasia Group’s call Oil trade structure: Jan. 14, 2026 53/50 put spread and 58/61 call spread for $1 net debit - Patrick’s long iron condor on crude volatility Oil time spread entry: Dec. 26/Dec. 27 spread at -$1.75 contango - Eric’s long crude time-spread position Oil technical level: $55 WTI - Key support/retest level discussed repeatedly Gold resistance: $4,400 - Previous all-time high/test area Gold measured move target: $4,930 to $5,140 - Projected upside if gold closes above $4,400 Dollar critical level: 98 - Patrick’s key level for possible downside acceleration SPY/SMH risk levels: SMH below 340; S&P 500 below 6700 - Thresholds Patrick flagged for increased volatility 10-year yield technical note: higher high after holding above 50-day moving average - Post-game chart discussion

Pivotal Quotes: "Tariffs are disruption deferred, not disruption avoided." — Robert Kahn: On why tariffs remain central even as volatility settles "I think we are starting to see going into 2026 is an administration that... are moving, are pivoting towards a greater reliance on what economists call industrial policy." — Robert Kahn: On the shift from tariffs to direct market intervention "What the Fed does down the road... depends a lot on what they see as what they call the neutral rate, or what some economists call R star." — Robert Kahn: On the possibility of structurally higher interest rates

Implications: Listeners should expect 2026 to be driven less by headline tariffs and more by political intervention, Fed credibility risk, and geopolitical bargaining. Market implications include higher macro volatility, a possible regime shift in rates, and continued opportunity in energy, metals, and selective hedges.