Ray Dalio: Here's The Reason Why "There Won't Be A Trade War Anytime Soon"

While Ray Dalio initially praised Trump after his election, the founder of the world's biggest hedge fund subsequently grew increasingly concerned and sour on the president, warning that populism is "more likely than not to become extremism", and that "Donald Trump is moving toward conflict rather than cooperation." It got so bad that two weeks ago, Bloomberg reported that Bridgewater had derisked massively, and had gone net short equities, perhaps a testament to Dalio's growing pessimism.

Or maybe not, because while the billionaire investor may have lost faith in the US, he appears to have rediscovered it... in China, and as he writes in a brief LinkedIn post this morning, Dalio predicts that "There won't be a trade war anytime soon because of the wisdom of Chinese leaders" and makes the following bold assumption:

... to the extent you trust my honesty and my judgement, please believe that these policy makers are highly principled, wise, and have great historical perspectives and competence — and, for these reasons, they are committed to having no war of any sort because they understand that one bit of war can easily lead to another and these bits of conflict can easily grow beyond anyone’s control and lead to a horrendous war that is beyond one’s imagination

If Dalio is correct it has huge implications because it means that Trump has all the leverage in any negotiations with Beijing in which he threatens to fall back on "trade war" as his final position, and which contrary to populist propaganda, China will do everything in its power to avoid and in appeasing the US president will eventually concede to Trump's demands.

Unless, of course, Dalio is wrong, and China is quite willing to escalate any trade confrontation with the US, even to the point of a "horrendous war."

Conveniently, in light of Trump's surprising cancellation of the North Korean summit, we may very soon find out just how hard China is willing to push Trump and if indeed it has everything to lose and nothing to gain from trade war.

Dalio's full post below:

Yesterday I was in Beijing and once again I was inspired. I have been a part of the evolution there for over 30 years and have continuously been inspired by the system that has evolved so well to produce remarkable people who produce remarkable results.

People who have repeatedly and wrongly expected the collapse of the Chinese economy while it has progressively become more revitalized have accused me of not being objective in assessing China’s prospects and leaders. They don’t understand.

I wish you could know the policy makers and issues the way I know them to form your own views because there are so many misunderstandings due to lack of contact.

Of course these leaders have challenges and have to make difficult choices.

However, to the extent you trust my honesty and my judgement, please believe that these policy makers are highly principled, wise, and have great historical perspectives and competence — and, for these reasons, they are committed to having no war of any sort because they understand that one bit of war can easily lead to another and these bits of conflict can easily grow beyond anyone’s control and lead to a horrendous war that is beyond one’s imagination.

Of course there is competition and there are differences in values and approaches, and of course there will be tensions and the Chinese cannot be pushed past a breaking point.

But, most fundamentally, there is broad awareness of the perils of Thucydides’s Trap (described here) and a commitment to evolving well without war.   

And now we sit back and watch as Trump gleefully takes advantage of China's "pacifism."

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Comments

revolla Thu, 05/24/2018 - 13:51 Permalink

The reason: Trump, who's been bluffing the whole time and leading the nation astray while hiding his failures behind distraction after distraction at the same time his Trumptard followers are instructed to blame Obama.

The only people who can claim to have benefited so far from Trump's policies are the Fake Hebrews in Israhell, as Satanyahoo controls the Potus puppet and wags him as he sees fit.

Quantify skbull44 Thu, 05/24/2018 - 15:27 Permalink

I call it a continuation of hostilities from the late 1790s.

Barbary Pirates

 

The north African states of Tunis, Tripoli, Algiers, and Morocco harbored pirates in the early years of the United States, and demanded from all maritime nations an annual tribute to ensure safe passage through the Mediterranean waters. As the United States did not have a navy and did not offer tribute, American merchant ships suffered from the hands of the Barbary Pirates, as the pirates from these states were known, in the years after the War of Independence.

Thomas Jefferson chafed under the demands of the Barbary states and in a letter to John Adams on July 11, 1786, suggested the use of a strong naval force:

However if it is decided that we shall buy a peace, I know no reason for delaying the operation, but should rather think it ought to be hastened; but I should prefer the obtaining it by war. (1) Justice is in favor of this opinion. (2) Honor favors it. (3) It will procure us respect in Europe, and respect is a safeguard to interest. 4. It will arm the federal head with the safest of all the instruments of coercion over their delinquent members, and prevent it from using what would be less safe.

In reply to by skbull44

Hal n back Bill of Rights Thu, 05/24/2018 - 15:04 Permalink

The unfortunate issue is the US just does not have hte clout anymore--we do not instill fear without economic and military proness.

But we do have a society as disclosed by CBO yesterday where the govt spends 700 billion on insuring and paying for healthcare those that cannot afford it.

This healthcare program will not cost you one thin dime; and the same people call Trump a liar?

The US society has become rather fragmented. With people who have come here who don't give a shit  or came here to change society.

We actually need a serious discussion which wil not happen or its too late-

we have also reached the point where what  margaret Thacker allegedly said "The problem with socialsim is eventually you run out of we are running out of other people's money", hits us in the frontside.

Frankly, hispanic congressmen and woman want more immigration not for the purity of it but for the voters numbers. They also do not think about the cost of more imigrants. legal or not. The US needs a populatio where people can be free to chose what they do, and contribute a bit to society rather than taking from society. Which is why the big cities and states are in trouble-NY CA IL, etc.

On the other hand, many immigrants, notibly from Asia and parts of Europe, come here and build medical practices or software or business empires.

in short, we are all screwed up. We are incentivizing the wrong people to come here for the free stuff.

We already have a 3rd rail of polities an dimmigration wil lbe noted as the 4th rail. Try not to go near it to cut it back  if you want to be re-elected.

 

In reply to by Bill of Rights

Karl Marxist bobcatz Thu, 05/24/2018 - 14:58 Permalink

I have to laugh at crazies like you. It's so easy to spot which commenters get their "information" from the mainstream and which don't. You, sir, fall into the first category. How do I know? Your lazy intellect tells me so.

All your manufactured anger and hatred against just Trump is the clue. For some reason and with folks like you, all memory of criminals Clinton, both Bushes and Obama are mysteriously absent as if surgically removed to do any proper comparative analysis of Trump. O, yes, Trump is allowing criminal wars to continue in Yemen specifically. Tiny babies and infants are starving to death because of Washington, Inc. There is no one in the administration speaking out whatsoever against Israels in-your-face crimes out outright murder of the youngest, most innocent Palestinian children for the crime of playing in the street. Yes, those are just a few of Trump's glaring failures. But he's also had far more success as president for speaking out against the criminal deep state, the criminal Obama administration -- crimes too lengthy to list in a post -- and the glaring crimes of the Clintons who still roam free. I have to give Trump credit because, to me, he's pointed straight at them whereas Obama never made a comment about Bush's illegal million death wars in Iraq, Afghanistan, who really was behind 9/11, who made off with trillions -- I hope you get the idea. We're talking about a corporation called United States, Inc. As chief exec, Trump has blasted those within who need blasting. A major accomplishment for decades and hopefully for decades to come.

In reply to by bobcatz

KrazyUncle Yen Cross Thu, 05/24/2018 - 14:07 Permalink

" If Dalio is correct it has huge implications because it means that Trump has all the leverage in any negotiations with Beijing in which he threatens to fall back on "trade war" as his final position, and which contrary to populist propaganda, China will do everything in its power to avoid and in appeasing the US president will eventually concede to Trump's demands."

I did not read anything in what Dalio said as it is construed in the above paragraph.

 

In reply to by Yen Cross

zzz111 Thu, 05/24/2018 - 14:11 Permalink

The will of the people is now called "populism" and after all, what's popular is not always good, so we must have dictatorship of someone who knows better what's good for us.  

And the slippery slope of a butterfly flapping it's wings leading us all the way into war.

 

moneybots Thu, 05/24/2018 - 14:54 Permalink

"...to the extent you trust my honesty and my judgement, please believe that these policy makers are highly principled, wise, and have great historical perspectives and competence — and they are committed to having no war of any sort because they understand that one bit of war can easily lead to another."

 

A foolish belief by Dialo. It was well known why Glass Steagall existed, yet it was dismantled anyway. When a trade war benefits certain people's agenda, it will occur. Same with a military war.

snblitz Thu, 05/24/2018 - 15:06 Permalink

Wow, in your face propaganda! I suppose the Chinese paid him for it.

China has been happily pocketing US citizens' money for decades via advantageous trade policy that it has put in place.

Here is one example:

  • Auto Import Tariff: US 2.5% vs China 18%+

Oh and China announced it is going to change that to

  • Auto Import Tariff: US 2.5% vs China 15%+

What a win for the USA!

The USA has been on the losing side of the trade war for 40+ years:

https://www.finitespaces.com/2018/02/15/taxes-and-trade-wars/

Honest Sam snblitz Thu, 05/24/2018 - 15:52 Permalink

True, but,  all those FRNs we send them for $1 pr tube socks, is recycled back to Mnuchin at the Treasury, when China's Treasurer buys our bonds sending it back to us and gets 2% t-bills in exchange and other paper guaranteed by the full faith of the FED. 

It's like a Benzene ring of mutual trust and admiration. 

 

In reply to by snblitz

dietrolldietroll Thu, 05/24/2018 - 15:10 Permalink

Dalio assumes they DONT want war. That's a dumb assumption. Psychopaths are everywhere, seeking power for power's sake. Some would say power for power's sake is what defines the postmodernist left's ideological foundation.

Desslok17 Thu, 05/24/2018 - 15:23 Permalink

Dario you globalist piece of trash. Do you mean the China that uses slave lablor? Has a "social credit /citizen score" to put there people on no travel lists. Wait a minute, we have a "no fly" list you can never find how you got on or how to get off, never mind the TSA. And a credit score that is used to shiv the middle and lower class. Also the majority of both of our political parties want unlimited import of low wage slave labor to protect their bottom lines. God I hate governments.

el buitre Thu, 05/24/2018 - 15:23 Permalink

"... to the extent you trust my honesty and my judgement, please believe that these policy makers are highly principled, wise, and have great historical perspectives and competence"

Well put Ray.  Trusting either your honesty or judgment, other than getting solid front running tips from the lizards, is a non-starter.  Our current policy makers are psychopathic psychotics.  They consider 93% of us, according to the Georgia Guide Stones, useless eaters to be eliminated as soon as possible.  Maybe the planet can avoid a war anyway, but it will probably be thanks to Xi and Putin.

TrustbutVerify Thu, 05/24/2018 - 15:49 Permalink

The first paragraph suggests Dalio has become so concerned he de-risked - "net short."  Forget Dalio.  Forget Trump.  

Anyone that hasn't derisked by this point is crazy, or at the very least is playing a very dangerous game.  

The list of factors that make things unsustainable is longer than so many people can understand.  And many factors go back decades.  By itself, look at the debt figures - government, corporate, and personal - so much of which is financed by phony non-market interest rates.  In regard to government debt, the deficit will be exploding in large measure because of non-discretionary entitlement promises.  And entitlement promises for the future are 4x to 5x what the debt is.  

And there's so much more.  

Drawing any conclusions in regard to recent moves by Dalio is useless.  If you think big picture you'll be "net short," too. 

bahaar Thu, 05/24/2018 - 15:56 Permalink

So Ray Dalio does not want to trust Trump because as a populist he's on his way to become an autocrat and therefore trusts Xi Jinping who is already an autocrat?

nicxios Thu, 05/24/2018 - 18:29 Permalink

"The wisdom of Chinese leaders" Did I just read that? LMAO. The shithole where they build ghost cities to jack up GDP. The most corrupt place on Earth. Where contracts don't matter, the legal system is weak and the Chinese will fuck you in any way they can.

 

That's called a clown statement bro.