Ray Dalio: Odds Are Rising for Trade and Other Types of Wars (Edited)

"Recent geopolitical developments have led me to raise my probabilities of trade and other types of wars, such as capital wars, cyber wars (and possibly even shooting wars)," Bridgewater Associates Co-Chairman Ray Dalio wrote on LinkedIn.

"I’m not saying they’re probable," but "it seems to me that the odds have increased"
Dalio said he initially "thought trade tensions would subside because the Chinese are very amenable to a trade deal," and "there are lots of ways to make a good deal happen"
Since President Trump "raised the stakes by another $100 billion," which led China to promise to retaliate in equal measure, "we have a very public game of chicken going on"

"In any case, I’m worried and forced to look harder at the question of where Donald Trump is leading us"
Dalio cited President Donald Trump's decision on Thursday to instruct the U.S. trade representative to consider $100 billion in additional tariffs against China. The Asian country vowed to retaliate. This is on top of Trump's earlier proposed tariffs on $50 billion in Chinese goods, which was also followed by a заобеpledge by China.

Given China’s role in financing U.S. deficits and its bond holdings, "one should consider the possibility that this trade war could also become a capital war," which "will be even uglier than a trade war"

"To whatever extent anyone believes that the US has the advantage in a trade war because it has a big deficit (so it has more to gain) one could say the same for China in a capital war because it has the bigger deficit," he wrote.

The hedge fund manager said the current developments are similar to the global political environment of the 1930s in regard to the periods' large wealth inequality, protectionist trade policies and the "emergence" of populist politicians.

Source: Bloomberg Pro Terminal

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