(Bloomberg) -- Nouriel Roubini predicted that the stock market correction may deepen before investor sentiment then stabilizes as US President Donald Trump dials down his global trade onslaught.

The chief executive officer of Roubini Macro Associates, whose doom-laden warnings accompanied key moments of the global financial crisis that took hold in 2008, offered a comparatively sanguine view of the outlook for economics, trade and equities in an interview on Friday.

“The correction can be slightly more, given uncertainty,” Roubini said at a gathering of economists and business leaders on the banks of Lake Como in Cernobbio, Italy. “Even if in the next few weeks it looks like we’re going to start negotiations, and you get a de-escalation, I think the market corrects a little bit more, bottoms out.”

Roubini spoke in the wake of a selloff that saw the S&P 500 suffer its worst day in five years, with roughly $3 trillion in market value wiped out, after Trump rolled out the highest tariffs in over a century. The new measures could increase the average US rate by triple the 5% change the Smoot-Hawley duties of 1930 did, according to Bloomberg Economics.

The “baseline” for Roubini is that Trump will ultimately climb down and cut his levies by half, leaving the US with economic growth in a range of 1-1.5% this year, in which case the Federal Reserve would keep interest rates on hold.

“If he’s rational he’s going to de-escalate,” said Roubini, who worked as an economist at the White House during the Clinton administration. “He’s saying unless somebody gives me a ‘phenomenal’ offer I’m not going to back down, but he has to say it because if he says ‘I’m going to negotiate and de-escalate,’ he loses his leverage.”

One problem there, according to Mohammed El-Erian, is that countries may be reluctant to offer concessions to Trump if they see the process as drawn out.

“De-escalation requires both sides to play along, and for that there has to be trust that this is not a multi round where you have to renegotiate every time,” the Queens’ College, Cambridge president, who is a contributor to Bloomberg Opinion, told Bloomberg Television in an interview from the same event in Cernobbio. “That isn’t there right now.”

Trump himself gave little sign of shifting position in a Truth Social post on Friday. “To the many investors coming into the United States and investing massive amounts of money, my policies will never change,” he declared.

For all the drama in US stock markets, Roubini observed that Trump isn’t as focused on equities as he used to be, giving him time to hold out before changing tack.

“He cares more about the bond market and the dollar,” he said. “Most of the stock market is owned by 10% of the population. So a correction of the stock market doesn’t matter, while lower bond yields are good for his base that has mortgages, student loans auto loans credit cards personal loans.”

Aside from the stock reaction, Treasuries rallied, sending the 10-year yield briefly below 4% for the first time since Trump was elected, as investors fled for safety.

Roubini said that the political cost of Trump sticking with his current tariff plan is such that it’s clear he will change approach in due course.

“If he pushes too high, you get a recession this year, if you get a recession this year you lose the mid terms, if you lose the mid terms then your MAGA plan of taking over America forever is going to be destroyed,” he said. “So if he has any brain in his head, he will know that he has to de-escalate.”

Ultimately Roubini has a rosy view of the medium term, anticipating that technological such as artificial intelligence will drive productivity gains that will still drive stronger economic growth.

“Mickey Mouse could be in power in the United States, the US is going to have 4% growth by the end of the decade, and it’s going to be higher in the next decade,” he said. “We’ll go from from 2% growth to 4% maybe to 6% by 2040. That’s first order compared to anything else. Even Trump, even with the bad policy, cannot screw up technological innovation.”

--With assistance from Alberto Brambilla, Sonia Sirletti, Jonathan Ferro and Lisa Abramowicz.

(Updates with El-Erian in eighth paragraph, Trump in ninth)