Why Geopolitical Chaos Is Bullish For the US w/ Eric Wallerstein

**Eric Wallerstein** (0:00)
It is actually a pretty good growth environment, and I think people continue to discount the resilience of the US economy, and just the fundamental drivers of growth, instead focusing on policies that they either don't like or disagree with. But like, at the end of the day, I think strategists and certain commentators think that, like they write for Vox or their, you know, a pundit giving political opinions, but that's not what we're paid to do.
It's just economic forecasting and outlooks. And AI is really important, but there's other things happening outside AI. It's just not happening in the traditional sectors we're used to looking.

**John Gill** (0:33)
Everyone has been watching Trump and Xi making deals about planes and beans, but what's going on in Europe? Could the US withdrawing support for NATO lead to the end of the European Union, and what would that mean for investors? Hello and welcome to Milk Road Macro, the podcast that knows that the Domro doctrine might be hard to define, but it definitely includes Diet Coke. I'm your host, John Gill, and today is Monday, May 18th, and today we are joined by Eric Wallerstein. Eric is the principal and chief macro strategist at Clock Tower Group, where he leads the firm's US strategy team and oversees macroeconomic research. He has served as an advisor at the Federal Reserve Board and the White House Council of Economic Advisors, two very big jobs, especially these days, as well as a reporter for the Wall Street Journal. Eric is going to give us his thoughts on everything going on in macro right now. So if that all sounds good to you, make sure you like and subscribe, share this episode with somebody who's going to enjoy it. Today's episode is brought to you by CAPE, the Privacy First Mobile Carrier and Nexo, Earn Interest, Borrow and Trade Crypto. And without further ado, welcome to Milk Road Macro, Eric Wallerstein, how are you sir?

**Eric Wallerstein** (1:33)
Thank you, John, great to be here.

**John Gill** (1:34)
I'm really excited to have you. I think this is going to be a really interesting conversation today. Eric, you've spent a lot of time working with this White House, this administration. I'm curious just your initial reaction off of this meeting between Trump and Xi, any headlines that came out of this that got your attention, or maybe headlines that didn't that got your attention?

**Eric Wallerstein** (1:51)
I think the meeting itself was, you know, Bowings, beans and beef. It was pretty much to be expected. I think the most important thing for me and for the US-China relationship to come out of the meeting is that, you know, President Trump's comments on Taiwan following it to the media. I think it would really be a big strategic misstep for the US to concede anything on Taiwan.
Our economies are incredibly interlinked at this point. If you look at trade with Taiwan, they have a, I think, a little approach or if not reach, a 200 billion dollar trade surplus with us, just a bilateral Taiwan to the US. Taiwan is only a trillion dollar economy. So if you think about it, 20 percent of GDP is just their bilateral trade surplus with us. And that's obviously due to semiconductors and the entire AI infrastructure build out.
That figure was only 15 billion dollars before the pandemic. So the run up has been really extreme.
And I think I've started to see, I'm sure you've seen some large investors and commentators saying, they think that the Taiwan question or issue, it won't really be strategic for the US anymore, even just a year or two out. We'll have completely hedged our exposure.
We won't need it.
I don't think that's economically or geographically feasible. I think Taiwan will continue to be not just a critical node, but really a fulcrum of the entire AI program. I think they're a critical ally, and I just really hope no concessions are made. I think it would be a detriment for the US economy, a cultural and geopolitical detriment. So that's the most important thing for me for the next couple of years in the US-China relationship and something I'm watching closely.

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