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Robert Kahn: Tariffs continue to cause instability in US markets, industrial policy shift reshapes economy, gas prices key to voter sentiment

6 Min Read

Important points

  • Tariffs continue to play an important role in US economic policy and contribute to market volatility.
  • Despite high tariffs, the U.S. economy has shown resilience and adaptability.
  • The three-tier pricing structure is expected to stabilize and reduce market volatility.
  • The US administration is moving away from relying solely on tariffs and is shifting its direction toward industrial policy.
  • Industrial policy and government intervention are expected to become key economic themes by 2026.
  • The affordability debate due to rising costs will likely be at the center of the upcoming midterm elections.
  • Gasoline prices are an important factor in determining public perceptions of economic affordability.
  • There is a high possibility that the House of Representatives will shift to Democratic control in the midterm elections.
  • Kevin Hassett could face challenges in aligning Fed policy with the administration’s goals.
  • The Fed chair requires the support of a majority of voting members to implement policy.
  • The political landscape is changing and industrial policy is becoming more important than traditional tariff strategy.
  • Voter dissatisfaction with the rising cost of living is expected to influence the election outcome.

Guest introduction

Robert Kahn is Global Strategy Director for Eurasia Group. He previously served as Director of the U.S. Department of the Treasury’s Bureau of Industrial Countries and a Senior Strategist at Moore Capital Management. His expertise spans macroeconomic policy, sanctions, and global crisis resolution.

The ongoing impact of tariffs on the U.S. economy

  • Tariffs remain a major factor in the fluctuations in the US economy.

    — Robert Kahn

  • The current administration sees tariffs as central to the restructuring of global trade.

  • Tariffs will never be eliminated in this administration…they will come back.

    — Robert Kahn

  • The US economy has shown resilience despite high tariffs.

  • The U.S. economy has been very resilient to these tariffs.

    — Robert Kahn

  • Understanding trade policy is critical to understanding its impact on world affairs.
  • Tariffs will continue to impact the economy, but volatility is expected to decrease.

  • I do think that interest rates are starting to settle down.

    — Robert Kahn

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Shift to industrial policy

  • The US administration is increasingly relying on industrial policy rather than tariffs.

  • What we’re starting to see…is that the administration…is steering toward greater reliance on industrial policy.

    — Robert Kahn

  • This change can have a significant impact on market dynamics and investor behavior.
  • Industrial policy is expected to be a major theme in 2026.

  • I think it will be a big topic in 2026…more government intervention in the market.

    — Robert Kahn

  • Understanding the role of industrial policy is key to evaluating economic strategy.
  • The turn to industrial policy marks a strategic shift in economic management.
  • This approach could lead to increased government intervention in the market.

Political situation and midterm elections

  • The affordability debate will be central to the next midterm elections.

  • Voters are extremely dissatisfied with the rising cost of living.

    — Robert Kahn

  • Rising costs are a top concern for voters and influence political debate.
  • There is an 80% chance that the House will shift to Democratic control.

  • I think it’s very likely that the House will move to the Democratic side.

    — Robert Kahn

  • Midterm elections are expected to reflect voters’ sentiments regarding economic issues.
  • Understanding election trends is important to predicting election outcomes.
  • The political landscape is shaped by economic and affordability concerns.

The role of gasoline prices in public perception

  • Gas pump prices have a significant impact on public perceptions of affordability.

  • Gas pump prices are perhaps the most important single variable that determines how people feel about affordability.

    — Robert Kahn

  • Historical analysis highlights the impact of gasoline prices on consumer sentiment.
  • Gasoline prices are an important factor in economic and political debates.
  • It is important to understand the relationship between gas prices and consumer sentiment.
  • Public opinion regarding economic conditions is greatly influenced by gasoline prices.
  • The rise in gasoline prices is partly due to voters’ dissatisfaction with the economic situation.
  • Gasoline prices are an important variable in assessing public sentiment towards affordability.
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Federal Reserve Board of Governor Kevin Hassett’s Challenge

  • Kevin Hassett may have a hard time finding a majority that supports Trump’s policies.

  • As chairman, Kevin Hassett will have a hard time finding a majority that supports Trump’s policies.

    — Robert Kahn

  • The dynamics of the Fed’s Open Market Committee pose challenges.
  • The support of a majority of the chairs is required to implement the policy, but this is not guaranteed.

  • We need most of them, but we can’t just have a chairman come in and say, “We want this, and we expect to get that.”

    — Robert Kahn

  • It’s important to understand the Fed’s decision-making process.
  • It is unclear whether the committee is consistent with administrative goals.
  • Mr. Hassett’s ability to align the committee with the administration’s goals will be critical.

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