Comprehensive Macro Report: Geopolitical Trades With Tariffs

The constraints of in the geopolitical arena

The Global Context:

When prolonged periods of stability occur, they shape the beliefs and worldviews of a generation. The last 40 years have created an extreme degree of complacency on every level in the United States. This wouldn’t be an issue if the rest of the world were all nice people who wanted to the best for us, but it’s not.

The geopolitical conflict between the United States and China is intensifying as sanctions remain on Russia. Ongoing wars from Eastern Europe to the Middle East and simmering flashpoints in Asia underscore an era of contested global power and deep interdependencies. Global trade and tariffs take place within this context.

The greatest risk to market participants in today’s environment is thinking in binary extremes as if we will either move back to all-time highs in equities or transition into a 2008-type recession. While opportunities always exist in taking the other side of the positioning premiums in ES (See Macro Regime Tracker published daily for this: Link), the TYPE of changes is beginning to make a significant divergence from the recency bias that exists in people’s minds. This is going to begin to have a drastic impact on the underlying composition of labor, industry, and asset markets.

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The Goal:

This report is meant to lay out the playbook for HOW to think about managing the geopolitical and tariff risk in this environment and the specific asymmetric opportunities that exist as global trade and capital flows shift. If you can accurately link global balance of payments dynamics to the way supply chain shifts are compressing volatility, the resulting opportunities will reveal themselves with clarity.

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Geopolitical Regime:

Power isn’t distributed the way it used to be. Strategic leverage now lives in supply chains, currencies, and semiconductors just as much as in troop movements. The rules-based order is being contested on every front, and countries are using capital flows, tariffs, and trade deals as weapons in a world where alliances are conditional and economic warfare is continuous. 3 primary ideas that are compressing volatility and risk amidst the economic interdependencies.

1. Strategic Alignment is Conditional, and Power is Distributed Across Interdependencies

The United States provides military and financial support to Ukraine while tightening export controls on China, yet American firms remain deeply entangled in Chinese manufacturing networks. Europe depends on US security guarantees but is energy dependent on Middle Eastern suppliers and still exports into China. Meanwhile, China and Russia trade oil and defense cooperation while managing divergent long-term interests in Central Asia.

2. Trade Corridors, Production Networks, and Balance Sheets Are Now Instruments of Statecraft

China continues to expand its Belt and Road footprint through infrastructure projects in Africa, Southeast Asia, and Eastern Europe. The United States has responded by pushing nearshoring strategies in Mexico, building defense manufacturing ties with India, and tightening Indo-Pacific partnerships through IPEF. Germany is trying to rebalance its exposure away from China, and Japan is underwriting chip supply chains through partnerships with Taiwan and the Netherlands.

3. Economic Tools Have Become the Dominant Weapons in Global Competition

The US has enforced chip export controls to halt China’s military AI development while China restricts rare earth exports to retaliate. Russia circumvents oil sanctions through a shadow tanker fleet while Iran funds proxy conflicts using crypto rails and trade misinvoicing. The EU imposes carbon border adjustments on imports while negotiating battery material deals with resource exporters in Latin America and Africa.

These dynamics connect to Bessent………..

Scott Bessent Understands the Battlefield

In a recent interview, Scott Bessent outlined a three-stage strategy built around tariffs, tax cuts, and deregulation. What separates his thinking is the structural lens; he understands that China’s economy is running a surplus because it produces far more than it consumes, and that this surplus must exit through current account flows that are vulnerable to pressure. Bessent noted the United States is actively negotiating trade agreements with 14 of its largest trading partners aside from China, ensuring that even if China attempts to reroute exports through proxies, those flows will still be caught in the net. He is one of the few who clearly see how GDP structure, capital flows, and geopolitics are now part of the same strategic map.

(Watch the full interview below.)

In macro, one of the primary drivers of change is unilateral action by a government to shift the flows of goods, services, or capital. However, there is an incredibly important timing mechanism embedded in these flows that is THE most important thing to understand in our current environment.

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The Playbook and Redundancy Planning Framework:

The geopolitical regime discussed above translates directly into corporate and market behavior. As tariffs and trade realignment force strategic decisions onto firms, they face an intertemporal dilemma: pay now to restructure and gain resilience, or defer and maintain optionality. The chart below breaks down how these choices operate under conditions of uncertainty, where timing matters just as much as the choice itself. This is where macro becomes tangible, where national policy becomes corporate cost, and geopolitical narrative becomes investment thesis.

Markets react quickly, but the real economy adjusts slowly. A tariff or policy shock may trigger asset repricing in days, while the actual CapEx or supply chain response may take quarters or years to materialize. This time lag is where opportunities develop as short-term positioning and narratives diverge from the physical constraints and capital commitment playing out in the background. As shown below, the edge lies in detecting mismatches early, then structuring trades across long-duration structural themes like onshoring, FX pressure, and global sector rotation.

The real shift underway isn’t toward a clean inflationary surge or a textbook recession, it’s a reconfiguration of the global economic engine itself. Trade flows are rerouting as geopolitical risk, tariffs, and reshoring strategies reshape who makes what, where, and for whom. At the same time, the composition of US GDP is tilting toward investment-heavy, industrial, and defense-aligned sectors, while US equity leadership is slowly rotating from margin-rich tech to capital-intensive producers and logistical infrastructure. Market participants who frame every move as a binary outcome will miss the deeper transition unfolding beneath the surface: one where the dispersion of capital flows, pricing power, and volatility will be defined by positioning along the new supply chains of global power.

Let’s dig into the tangible opportunities that are developing.

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The Opportunities:

I want to walk through the investment theses emerging as second- and third-order effects of the structural changes now underway. The important thing to remember here is that tariffs are causing a recomposition of the economy and market, which means these themes will impact US GDP and CPI, which will in turn impact interest rates and FX flows. So even if tariffs go away tomorrow, monitoring the assets with the highest sensitivity to these changes provides the clearest view into HOW things are changing.