Donald Trump's latest trade whiplash is drawing fire from renowned economist Nouriel Roubini, who says the president's threat-retreat cycle is getting shorter and shorter—and markets still haven't learned to ignore it.
In a post on X.com, Roubini pointed to Trump's Friday outburst against China, which triggered a sharp selloff across financial markets. Trump had threatened to slap 100% tariffs on Chinese goods and hinted at pulling out of a scheduled meeting with President Xi Jinping. But by Sunday, the tone had flipped. In a post on Truth Social, Trump wrote:
"Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!"
Roubini's diagnosis? A familiar pattern—just faster.
"Another TALO and TACO cycle," he wrote, using his shorthand for Trump's tendency to lash out (TALO) and then chicken out (TACO). "They get shorter but markets still over-react to them rather than fading them in advance knowing that as soon as he lashes out, market discipline will force him to chicken out."
The phrase "market discipline" is key. Roubini seems to suggest Trump's reversals aren't strategic—they're reactive. When markets slump in response to his threats, Trump backs off to avoid economic fallout. What's changed, Roubini argues, is the speed: the time between threat and retreat is shrinking, but investors still treat each outburst as if it might stick.
Friday's threat was one of Trump's most aggressive in months. The 100% tariff warning came with a dose of diplomatic brinkmanship, as Trump floated the idea of canceling his meeting with Xi. The result was immediate: stocks fell, bond yields dipped, and traders scrambled to reassess risk.
But by Monday, the storm had passed. Trump's conciliatory message from Sunday—praising Xi and promising cooperation—left analysts wondering whether the initial threat was ever serious. Markets rallied.
Roubini's critique isn't just about Trump. It's about the market's reflex. Despite years of exposure to Trump's threat-retreat rhythm, investors still react to the lash-out phase as if it's policy.
That, Roubini seems to suggest, is a mistake. Because if the cycle keeps shortening, the only thing predictable about Trump's threats is how quickly they'll collapse.
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