Market pressure forced US to adjust tariffs, says global economist

Financial market pressure forced the US administration to adjust its tariff policy, Nouriel Roubini, CEO of New York-based macroeconomic consultancy firm Roubini Macro Associates, told the 2nd Azerbaijan International Investment Forum (AIIF 2026) in Baku.

According to Roubini, the resilience of the global economy and financial markets to major negative supply shocks can be attributed to at least two factors: market discipline and the supportive effects of artificial intelligence and other emerging technologies, Caliber.Az reports per local media.

He cited the US tariff increase announced on April 2 last year as an example. According to Roubini, the average US tariff rose from 3% to 30%. Had tariffs remained at that level, he said, the US and global economies could have faced recession and a significant increase in inflation. Instead, economic growth remained comparable to 2024, while inflation changed little.

Roubini noted that in the two weeks following April 2, the S&P 500 fell 15%, the Nasdaq declined 20%, the yield on 10-year US Treasury bonds increased by 80 basis points, and high-yield bond spreads widened by 150 basis points. The dollar also weakened sharply as then-President Donald Trump intensified his criticism of the Federal Reserve.

Roubini said Trump subsequently recognized that the market shock could develop into a financial shock and eventually trigger a recession, potentially undermining his political agenda and affecting the upcoming midterm elections. He said the administration then instructed its advisers to negotiate trade agreements aimed at reducing tariffs.

“Those tariffs fell from 30% to 25%, then to 20%, and then to 15%. Today they stand at 12% and are falling further because inflation is high and there is an affordability crisis. Essentially, the process was forced into a framework by market discipline,” Roubini said.

He said a similar dynamic had emerged this year amid the US-Iran war. According to Roubini, two months into the conflict, Brent crude had settled at around $120 per barrel, bond yields had risen sharply, and the US stock market had declined by 10%.

With the November midterm elections approaching, Roubini said, the resulting market shock posed a risk of serious economic and financial weakening. He argued that this pressure again prompted the administration to adjust its course.

“I think market discipline is working,” Roubini said.

By Vafa Guliyeva