Doomsday Doctor Nouriel Roubini: Trump Will Lead the U.S. into Stagflation

Renowned economist Nouriel Roubini warns that the potential policy mix of Trump 2.0 may pose a stagflation risk to American society.

Recently, Nouriel Roubini, known as "Dr. Doom," a professor at New York University and chairman and CEO of Roubini Macro Associates, appeared on the Odd Lots podcast to discuss the economic outlook for the United States in 2025.

During the program, Roubini mentioned that the risk of inflation in the U.S. still exists, and he expects that Trump's potential policy mix will push the U.S. economy toward stagflation.

In Roubini's view, in the long term, at least two policies will drive up inflation and affect economic growth: one is strict immigration restrictions or even mass deportations, and the other is tax cuts that lead to a vicious expansion of fiscal deficits, further disrupting and weakening the position of the dollar.

"Stagflationary Policies" Will Be the Biggest Drag on Economic Growth

Although Trump 2.0 is generally favorable for economic growth, Roubini believes that protectionist policies regarding the labor market and tariffs will also weaken economic growth by affecting inflation expectations (long-term neutral interest rates).

Therefore, Roubini believes that the biggest risk dragging down economic growth in 2025 lies in the aforementioned "stagflationary policies."

"If you really implement large-scale tariffs, repatriate millions of people, try to weaken the dollar, and push for large fiscal deficits, leading to rising bond yields and slowing economic growth, you may find yourself in a situation of significantly slowing economic growth while inflation intensifies. I think this is definitely a risk."

Roubini predicts:

"If our economic growth this year is 2.8%, then next year our economic growth will still be above the potential growth rate, but will decrease to around 2.4%. However, I do not believe there will be a large-scale economic slowdown unless he (Trump) really adopts radical 'stagflationary policies.'"

Next Treasury Secretary, Bond Market, and Federal Reserve May Suppress Stagflation Risks

However, Roubini also added that the risk of rising inflation is constrained by several factors.

First, Trump's nominated Treasury Secretary Scott Bessent may curb some policies that could easily lead to extreme stagflation. Wall Street Insights previously mentioned that although Bessent supports Trump's tariff and tax cut plans, investors expect he will prioritize economic and market stability rather than purely pursuing political goals.

Second, if Trump 2.0 promotes large-scale fiscal spending, it may welcome the return of the “bond vigilantes”, at which point, as long-term inflation expectations rise, bond yields/real interest rates will also rise, which may lead to a stock market correction and harm the economy, expected to put pressure on Trump The concept of "bond vigilantes" was first proposed by Wall Street veteran analyst Ed Yardeni in the 1980s, referring to investors who successfully force governments and central banks to change policies by driving down bond prices and raising bond yields.

The third factor that may alleviate inflation risks is that the independence of the Federal Reserve will continue to play a role.

Roubini believes that if Trump implements policies that are likely to lead to inflation risks, at this month's monetary policy meeting, the Federal Reserve's expectations for interest rate cuts next year may be significantly reduced, and in extreme cases, it may even return to a rate hike cycle, which would also reduce the possibility of stagflation to some extent