Powell Waiting for Trump to Blink First, Roubini Suggests

‘Dr. Doom’ Roubini: Fed Won’t Rush to Rescue Markets Shaken by Trump’s Tariffs

Nouriel Roubini, the economist dubbed “Dr. Doom” for his prescient call on the 2008 crash, is warning investors not to bank on the Federal Reserve as a first responder to the latest market fallout—this time triggered by President Trump’s tariff escalation.

Last week, Trump stunned global markets with sweeping new tariffs, including a surge in duties on Chinese goods to 104%. The move has rattled investor confidence, wiping 12% off the Nasdaq 100 and dragging bitcoin down 10%—briefly sending it below $75,000. Treasury markets were equally rocked, with yields on 10- and 30-year bonds jumping sharply as prices tumbled, stoking fears of another dollar funding crunch.

With memories of the Fed’s rapid-fire interventions in 2020 still fresh, market participants are now pricing in five rate cuts for the rest of the year, expecting Fed Chair Jerome Powell to act fast to prevent a deeper slide. Roubini, however, is throwing cold water on those expectations.

“There’s a standoff happening—call it the Trump put versus the Powell put,” Roubini told Bloomberg. “And Powell’s threshold for intervention is lower. He’s waiting for Trump to blink.”

Roubini argues that since the volatility was politically triggered, Powell is unlikely to act until the political landscape shifts. The implication: the Fed won’t stabilize markets until Trump signals a step back or a change in tone on trade.

Markets remain hyper-reactive. On Monday, a false report suggesting a temporary tariff pause sparked a brief rally—underscoring how jittery investors are and how quickly sentiment could swing on even a single tweet from Trump.

Tariffs Fuel Inflation, but Recession Not Inevitable

Looking further out, Roubini expects the new tariff regime to lock in higher inflation, particularly damaging for long-dated bonds. That outlook aligns with the steep selloff in Treasuries and the corresponding yield spike.

Despite growing fears of a slowdown, Roubini doesn’t see a recession taking hold. Betting markets might peg the probability of two negative quarters above 50%, but in his view, the U.S. economy remains resilient enough to sidestep a full contraction.

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