Kahn: Tariffs Drive Market Volatility; US Shift to Industrial Policy and Gas Prices to Shape 2026 Politics
Robert Kahn, Director of Global Strategy at Eurasia Group and former US Treasury official, says US tariffs remain a major source of market volatility even as the economy shows resilience. He expects tariff levels to settle into a three-tier structure that should reduce volatility over time. The administration is pivoting from tariffs toward active industrial policy and greater market intervention — a trend Kahn predicts will be a dominant economic theme in 2026. Politically, rising living costs will make affordability a central issue in the midterms; Kahn highlights gas pump prices as the single most important variable shaping public perceptions of affordability. He assigns roughly an 80% probability that the House will flip to Democratic control. On monetary policy, Kahn warns that if Kevin Hassett were Fed chair, he would struggle to secure majority support from the Fed’s voting members, limiting alignment between Fed policy and administration goals. Key points for traders: tariffs and industrial policy increase geopolitical and regulatory risk; energy prices (gas) can quickly shift consumer sentiment and political risk premia; potential House control change raises prospects for policy shifts in regulation, fiscal support and markets heading into 2026.
Neutral
The news is classified as neutral for crypto markets. It outlines macro policy shifts—continued tariffs, a pivot toward industrial policy, and political risks tied to affordability and gas prices—that raise regulatory and geopolitical uncertainty but do not target cryptocurrency directly. Tariffs and industrial policy can increase supply-chain and macro volatility, which historically raises demand for some crypto as risk-on or risk-off hedges inconsistently. Potential Democratic control of the House and higher political scrutiny could lead to increased regulation or oversight, a factor that can be bearish for risk assets if it translates into restrictive policy; however, the piece emphasizes a stabilization of tariff levels and a predictable industrial-policy focus, which reduces surprise risk and can be neutral-to-moderately supportive for crypto that benefits from clearer policy direction. Short-term impact: increased volatility as traders price in policy and energy shocks (neutral-to-slightly bearish for risk assets). Long-term impact: the shift to industrial policy may favor blockchain projects tied to domestic infrastructure, identity, and supply-chain use cases (neutral-to-slightly bullish for selective crypto sectors). The net effect is balanced: elevated macro uncertainty but no immediate sector-specific regulatory trigger for crypto.