Eric Wallerstein: Geopolitical shifts prioritize natural resources, the US holds significant geoeconomic leverage, and tariffs require a broader context

Key takeaways

• Geopolitical shifts are increasingly prioritizing natural resources.
• The US holds significant geoeconomic leverage over countries like China and Iran.
• Personal goals and public perception are intertwining with macroeconomic fundamentals.
• The America First movement hasn’t led to a complete global withdrawal.
• Evaluating tariffs requires a broader geopolitical context.
• US tariffs on China have increased significantly, with mixed perceptions of their effectiveness.
• The US is making progress on supply chain issues related to rare earths.
• Tariffs are expected to remain at 15% beyond 2028.
• The Federal Reserve should incorporate foreign exchange rates more into its policy directive.
• The dollar’s value will reflect macroeconomic fundamentals in the coming years.
• The geopolitical landscape is shifting towards valuing natural resources.
• The US has greater geoeconomic leverage compared to some other nations.
• Tariffs have been raised significantly, especially on China.
• The Federal Reserve’s policy does not sufficiently consider foreign exchange rates.

Guest intro

Eric Wallerstein is Chief Macro Strategist at Clocktower Group. He previously worked at the Fed and White House. Prior to Clocktower, he served at Yardeni Research.

The return to natural resources in geopolitics

• The geopolitical landscape is shifting back towards valuing natural resources.

  — Eric Wallerstein

• The world is moving into spheres where natural resources are increasingly important.

• Think like the world is going into spheres whether you like it or not we’re going back to like natural resources matter.

  — Eric Wallerstein

• This shift reflects a tangible story in global economic strategies.
• Understanding current geopolitical tensions is crucial for economic strategies.
• The importance of natural resources is becoming a significant viewpoint in global economics.

• It’s like a tangible story.

  — Eric Wallerstein

• Countries are realigning their strategies to focus more on natural resources.

US geoeconomic leverage

• The US has greater geoeconomic leverage compared to countries like China, Venezuela, and Iran.

  — Eric Wallerstein

• The US is not seen as having an equal geoeconomic standing with China.

• I don’t think like China is our equal so to speak or has the same geoeconomic leverage.

  — Eric Wallerstein

• Venezuela and Iran lack the same leverage as the US
• The US holds significant power dynamics in global economics.

• Venezuela and Iran prove they clearly don’t have the same leverage as us.

  — Eric Wallerstein

• Knowledge of economic and political dynamics is essential for understanding US leverage.
• The US continues to maintain a dominant position in global economics.

Intertwining of macroeconomic fundamentals and personal goals

• The intertwining of macroeconomic fundamentals with personal goals and public perception has surprised many.

  — Eric Wallerstein

• This relationship has caught people off guard in political movements.

• I think that’s been really interesting and instructive for me.

  — Eric Wallerstein

• Understanding economic policy and individual motivations is crucial.
• The interplay influences policy and political trends significantly.

• Those two things I think have caught people off guard.

  — Eric Wallerstein

• This insight highlights a nuanced perspective on political movements.
• Personal and macroeconomic factors are increasingly influencing policy.

The America First movement and global engagement

• The America First movement has not led to a complete withdrawal from global engagement.

  — Eric Wallerstein

• Expectations of isolationism haven’t equated to a global pullback.

• People were expecting this complete withdraw from multilateral institutions.

  — Eric Wallerstein

• The movement continues to provide global maritime defense.

• That hasn’t necessarily equated with like a pullback from the world.

  — Eric Wallerstein

• This challenges common assumptions about the movement’s impact.
• The movement’s global strategy is more complex than perceived.
• Understanding the movement’s actions is crucial for international relations.

Evaluating tariffs in a geopolitical context

• Evaluating tariffs requires understanding their impact within a broader political and geoeconomic context.

  — Eric Wallerstein

• Evaluating tariffs in isolation is insufficient for understanding their impact.

• The issue with tariffs is like evaluating them in a vacuum is one thing.

  — Eric Wallerstein

• Tariffs must be considered alongside geopolitical factors.

• Evaluating them relative to the confluence of political and geoeconomic crosscurrents is also pretty tough.

  — Eric Wallerstein

• Understanding international trade complexities is essential.
• Tariff evaluation requires a comprehensive geopolitical perspective.
• This insight emphasizes the need for broader geopolitical considerations.

US tariff strategy and its implications

• The US has raised tariffs significantly, particularly on China, which has led to mixed perceptions of their effectiveness.

  — Eric Wallerstein

• Tariffs on China have increased by 30 to 35%.

• We obviously raised tariffs 10 to 15% or or 20 minus exceptions it was more like 10 to 15 depending on the partner.

  — Eric Wallerstein

• The effectiveness of these tariffs is perceived differently.

• China was 30 to 35%.

  — Eric Wallerstein

• Understanding specific tariff rates is crucial for analyzing their outcomes.
• This strategy has significant implications for international trade.
• The US tariff strategy provides a factual basis for trade policy understanding.

Progress on rare earth supply chain issues

• The US has made significant progress in addressing supply chain issues related to rare earths.

  — Eric Wallerstein

• The US response to rare earths has improved significantly.

• I think the US has come a long way in terms of like starting to address this issue.

  — Eric Wallerstein

• The situation today is vastly different from a year ago.

• Where we are today versus a year ago is two completely different things.

  — Eric Wallerstein

• Understanding geopolitical implications is crucial for supply chain vulnerabilities.
• This progress reflects a clear assessment of US economic strategy.
• The US continues to address critical supply chain issues effectively.

Long-term tariff expectations

• Tariffs will likely remain at 15% for the foreseeable future, even beyond 2028.

  — Eric Wallerstein

• The expectation is for long-term tariff stability.

• I think we’re gonna have 15% tariffs in the rest of the world like for the foreseeable future.

  — Eric Wallerstein

• This prediction impacts global economic relations significantly.

• Even post 2028.

  — Eric Wallerstein

• Understanding current tariff policies is essential for trade analysis.
• Long-term tariff expectations provide insight into future trade policy.
• This forecast indicates a stable view on trade policy.

Federal Reserve’s approach to foreign exchange rates

• The Federal Reserve does not incorporate foreign exchange rates into its policy directive as much as it should.

  — Eric Wallerstein

• The Fed includes foreign exchange rates in forecasts but not in policy.

• The Fed is one of the few central banks that almost doesn’t incorporate fx into its its policy directive.

  — Eric Wallerstein

• This approach could impact economic stability and inflation.

• It obviously includes it in its forecast and it’s aware of what the impact for inflation is but it doesn’t really think about it as much.

  — Eric Wallerstein

• Understanding the Fed’s role in the US economy is crucial.
• This insight highlights a critical aspect of monetary policy.
• The Fed’s approach to foreign exchange rates requires reconsideration.

Dollar value and macroeconomic fundamentals

• The value of the dollar will reflect macroeconomic fundamentals for the next couple of years.

  — Eric Wallerstein

• This forecast provides insight into expected economic trends.

• The dollar is gonna reflect macroeconomic fundamentals for the next couple years.

  — Eric Wallerstein

• Understanding macroeconomic factors is essential for currency value analysis.
• This expectation could affect investment and policy decisions.
• The dollar’s value will continue to be influenced by economic fundamentals.
• This forecast highlights the importance of macroeconomic considerations.