Mild U.S. Recession Likely by Late 2025 Amid Tariff Pressures
Nouriel Roubini, the economist dubbed “Dr. Doom” for his historically bearish market views, now foresees a shallow U.S. recession by the end of 2025, largely driven by inflationary effects of tariffs. According to Roubini, the aggressive tariff policies proposed by President Donald Trump—a 10-15% universal import duty and a 60% levy on Chinese goods—could erode disposable income and weaken consumer and business sentiment, thus triggering a downturn.
Despite these headwinds, Roubini suggested the Federal Reserve would respond with rate cuts, preventing a deep recession. He projects that the core PCE inflation rate could rise to 4% by year-end, up from 2.6% in March, further tightening household budgets.
Highlights:
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Predicted recession by Q4 2025, driven by tariff-induced inflation
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Core PCE seen rising to 4%, affecting consumption
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Recession expected to be short and shallow, followed by Fed rate cuts
Tech-Led Investment Boom to Offset Tariff Drag
While acknowledging the risks from trade policy, Roubini believes technology will be the overriding economic driver, stating that “tech trumps tariffs”. He forecasts a U.S. investment boom driven by leadership in AI, robotics, and quantum computing, which he argues will significantly lift national productivity.
The economist estimates that even if Trump’s tariffs are implemented, they would trim GDP growth by only 0.5%, whereas tech advancements could boost long-term U.S. growth from 2% to 4% by 2030. In this view, America’s innovative edge will shield it from long-term trade-related drag.
Highlights:
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Forecasted annual growth of 4% by 2030, driven by tech
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AI, robotics, quantum computing cited as growth engines
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Tariffs seen as a minor drag, outweighed by tech-led productivity
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“Tech trumps tariffs… tech trumps Trump too,” Roubini said
Bond Vigilantes Could Force Trump to Dial Down Tariffs
Roubini warned that bond market dynamics could check Trump’s trade ambitions. He pointed to the influence of “bond vigilantes”—investors who sell off Treasurys to signal disapproval of inflationary or fiscally irresponsible policies—as a potential constraint on tariff escalation.
Trump, focused on lowering borrowing costs, is watching 10-year Treasury yields, especially after markets reacted to his initial tariff plans with a sell-off in bonds. This market pressure, Roubini argued, was likely a factor in Trump’s decision to pause tariffs for 90 days in April.
Highlights:
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Bond vigilantes seen as a key force pushing tariff de-escalation
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Trump aiming to keep yields low to support borrowing and growth
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Treasury sell-offs may serve as market guardrails on policy overreach
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“He’s boxed in… there’ll be de-escalation,” Roubini asserted
Gold to Emerge as Safe-Haven Winner Amid Tariff and Dollar Risks
Roubini expects gold to remain a favored asset, as tariffs, inflation, and geopolitical uncertainty weigh on the U.S. dollar and Treasury markets. Investors, wary of holding U.S. reserves after the 2022 seizure of Russian assets, may opt for gold as a non-confiscatable, neutral store of value.
He argued that currency realignments would be politically sensitive and limited, making gold a more viable alternative. With both Treasurys and the dollar under pressure, gold could be the “biggest winner” in the evolving macroeconomic landscape.
Highlights:
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Gold favored over Treasurys and foreign currencies amid reserve uncertainty
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USD weakness and tariff fears to increase demand for safe havens
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Gold seen as non-seizable and politically neutral
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Roubini: “The best thing you can do is sell Treasurys and buy gold”
