Macro investor Ray Dalio of Bridgewater Associates - one of the world’s largest hedge funds - has voiced concerns that it’s already too late to walk back the damage to the market caused by tariff disruptions.
“Some people believe that the tariff disruptions will settle down as more negotiations happen and greater thought is given to how to structure them to work in a sensible way,” Dalio says.
“However, I am now hearing from a large and growing number of people who are having to deal with these issues that it is already too late.”
Now with a net worth of US$19 billion (according to Forbes), Dalio pioneered the ‘risk parity’ approach to portfolio management, emphasising diversification and balancing risk across asset classes.
He's now bullish on the negative effects and retribution from countries that have been scorned by the Trump administration's scorched earth approach to imposing import taxes on nations across the globe.
Posting an article on X earlier in the week, Dalio says many exporters to the United States and importers from other countries that trade with the United States are saying they have to greatly reduce their dealings with the nation.
They recognise that whatever happens with tariffs, these problems won't go away and that radically reduced interdependency with America is a reality that has to be planned for.
The trust is lost. "Without trust, negotiation itself becomes an impossibility, and when trust erodes, even those predisposed toward cooperation will be deterred,” Dalio said.
Risky and unsustainable
Dalio makes the case that enormous trade and capital imbalances are creating unsustainable conditions and major risks of being cut off, “so they must come down”.
“What I am saying is that, based on many of my indicators, it appears that 1) we are on the brink of the monetary order, the domestic political and the international world orders breaking down due to unsustainable, bad fundamentals that can be easily seen and measured,” he wrote.
"2) the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history, so this one looks like a contemporary version of the old story of how monetary, domestic political and social, and international geopolitical orders change.
"3) There is a growing risk that the United States, imposing these challenges to deal with, will increasingly be bypassed by a world of countries that will adapt to these separations from the United States and create new synapses that grow around it, and…
“4) If these circumstances are managed in the best way, the outcomes will be much better than if they are managed in the worst ways.”
Market remains cautious
There's nothing to move sentiment one way or another this week, as they wait to see the next salvo Trump fires regarding trade relations.
Last week Trump walked back his stern stance on tariffs and commented that the levy against China would be nowhere near a reported 145%.
He's also publicly reduced the impacts of crippling automotive import taxes to give carmakers credits of up to 15% of the value of cars assembled domestically - and imported parts - could be applied against these costs, giving some breathing room for supply chains to return.
Markets across the last handful of trading days are generally up, as positive earnings reports from some of the ‘Magnificent Seven’ worth >US$6 trillion (Amazon, Meta, Microsoft, Apple) that are rolling out this week are keeping the exchanges buoyant.
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