By Steve Goldstein
Nouriel Roubini says Trump blinked in three-way game of chicken
Two high-profile hedge-fund managers employed colorful language as they debated the finer points of the tariff strategy of President Donald Trump.
Clifford Asness, the hedge-fund manager and co-founder of AQR Capital Management, looked at Pershing Square CEO Bill Ackman’s description the tariff-policy change as “brilliantly executed” and said, “one of the main benefits of making some money is not having to wear a gimp suit for anybody. To each his own.”
Ackman, who over the weekend had been pleading publicly for a pause, went into great detail with a response to his fellow billionaire, according to Forbes’ calculations.
From Monday: Yes, Bill Ackman, this is exactly what you voted for
“No gimp suit for me Cliff,” Ackman wrote on the social-media service X. “If I were president, I would have started with a 90-day period for negotiations and then brought the hammer down. By doing it President Trump’s way, the entire world and their citizens got to experience the visceral impact of what massive tariffs would do to their businesses, their stock and bond markets, and their economies,” said Ackman.
Ackman maintained that the Trump approach separated preferred partners from problematic countries and that now, every country is incredibly motivated to make a deal.
Asness later replied – apologizing for the language, but saying Ackman was being illogical. “It may or may not have been good negotiating, but the man clearly feels any trade deficit with any country is ‘stealing’ from us, and has believed this for 40 years, so there’s clearly some idiocy about the actual topic at hand to go with potential luck and/or brilliance,” said Asness.
Trump himself suggested the 90-day pause on reciprocal tariffs for all but China, which now faces a 125% tariff, was motivated by financial markets.
“I thought that people were jumping a little bit out of line,” Trump said at a White House ceremony. “They were getting yippee, you know, they were getting a little bit yippee. A little bit afraid.”
Nouriel Roubini, the professor at NYU’s Stern School of Business and CEO of Roubini Macro Associates, said it was Trump who blinked in a three-way game of chicken with Fed Chair Jerome Powell and Chinese President Xi Jinping.
“Market discipline forced Trump to blink versus most trading partners with the exception of China: Trump’s put strike price was always higher than the Powell put and the Xi put. And the market discipline that forced Trump to blink was not only a bear market in equities but also and more importantly the spike in bond yields and credit spreads (especially HY) and the risk of a disorderly collapse in the dollar,” he said.
The S&P 500 SPX had dropped 12% over four sessions while the yield on the 10-year Treasury BX:TMUBMUSD10Y started surging. Yields move in the opposite direction to prices.
After the pause announcement, the S&P 500 closed 9.5% higher, in the best single-day percentage gain in more than 16 years. Through early trade on Thursday, the index is still down 13% from its mid-February record high.
Economists cautioned that there’s still plenty of tariff pain in place. Not only do sector-specific tariffs remain on autos, aluminum and steel, more are to come on pharmaceuticals and semiconductors.
“Our calculations show the average effective tariff rate rising 21 [percentage points] from its level at the beginning of the year,” say Citi economists led by Andrew Hollenhorst. “It would not be surprising to see at least some of the China tariffs are reduced at some point but that could be offset by higher sector-specific tariffs or some reciprocal tariffs that come back into effect after 90 days.”
The pause does not mean the economy will avoid a slowdown in growth and increase in inflation, the economists added.
Related: JPMorgan still forecasts economy to contract even as tariff bite decreases
-Steve Goldstein
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04-10-25 1037ET
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