Roubini: Fed Unlikely to Step In Until Trump Retreats on Tariffs

Nouriel Roubini, the economist who gained the moniker “Dr. Doom” for forecasting the 2008 financial crisis, is urging caution amid escalating financial turmoil—this time sparked by a new wave of trade tariffs from President Donald Trump.

In a bold move last week, Trump unveiled sweeping tariffs targeting multiple countries, including a dramatic increase on Chinese imports, now taxed at an eye-popping 104%. The announcement has jolted global markets, sending the Nasdaq 100 into a 12% slide and dragging bitcoin down 10%, briefly dipping below $75,000. Bond markets haven’t escaped the storm either, with yields on longer-term U.S. Treasuries soaring as prices dropped, reigniting fears of a liquidity crunch similar to that seen during the COVID crash of 2020.

Investors are now banking on the Federal Reserve to cushion the blow. Futures markets are pricing in at least five interest-rate cuts for 2025, anticipating a repeat of the Fed’s aggressive response during previous crises. But Roubini says that assumption could be misguided.

“This is a high-stakes standoff between the Trump and Powell puts,” Roubini said in an interview with Bloomberg. “And Powell won’t blink first.”

According to Roubini, the Fed is unlikely to intervene unless Trump softens his trade rhetoric. The central bank, he argues, is taking a wait-and-see approach, allowing political forces to play out before stepping in to stabilize the situation.

Adding to the market’s fragility, even rumors are enough to spark wild swings. Earlier this week, speculation about a possible tariff pause fueled a sharp rally—only for markets to reverse course once the story was debunked.

Persistent Inflation, But No Hard Landing

Beyond the immediate market reaction, Roubini warns that the long-term impact of elevated tariffs will likely be sticky inflation, particularly damaging to longer-duration bonds. That may explain the recent slump in 10- and 30-year Treasuries as yields push higher.

Still, Roubini is not calling for a recession. Despite rising concerns reflected in betting markets—some of which now see a better-than-even chance of consecutive quarters of economic contraction—he believes the U.S. economy will avoid a full-blown downturn.