Bridgewater Associates founder Ray Dalio has painted a bleak picture of the potential fallout from Trump’s trade war, which he warns could lead to an outcome that is worse than global recession.
While the veteran investor says he believes we are “very close to recession,” he told NBC’s Meet The Press about his concerns that if tariffs and other major economic decisions are not correctly handled by the president and his administration, there could be “something worse” to come.
Dalio talked about the build up of government debt, the conflict between left and right and between wealth and values, and how these are changing the monetary order, political order, and – with the trade war – the world order. Added to this are changes in nature and technology.
The billionaire hedge fund founder believes that these factors are conspiring to shift the world from a US-led multilateral order to a unilateral order.
Questioned by NBC’s Kirsten Welker about whether Donald Trump’s tariffs have exacerbated the issues Dalio said that the desire to grow US manufacturing and raise tax income through tariffs is “a reality” but stated that the difference is whether it is done in a stable way with quality negotiations, or in a chaotic and disruptive way.
While he says the tariffs have been handled in a chaotic way so far, he said we will have better knowledge after the 90 day pause.
Asked more about his concerns of recession – and worse – Dalio said that the breaking down of the monetary order is a bigger worry. But he added that we are at a junction where the decisions made could be huge.
He urged lawmakers to pledge to bring down the federal budget deficit to 3% of GDP (it’s currently around 7% as per the CBO’s latest report) to avoid a supply/demand problem with debt alongside other factors that would make the downturn “worse than a normal recession.”
Dalio warned this could lead to situations reminiscent of the effective end of the Bretton Woods system in 1971 or the Global Financial Crisis of 2008, perhaps worse. But he stressed that this does not need to happen, if politicians work together to avoid a worst case scenario.
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