The founder of Bridgewater Associates wrote on X (formerly Twitter) that tariff-like measures were necessary in times of an “international great power conflict” to boost domestic production capabilities.
Dalio suggested that tariffs can reduce a country’s dependence on foreign production and foreign capital, which he says is “especially valued in times of global geopolitical conflicts/wars” and can help reduce current account imbalances.
The US’s current account deficit, which measures the flow of goods, services, and investments, stood at $1.13 trillion in 2024, representing 3.9% of the country’s GDP — the highest since 2022. Simply put, a high current account deficit shows that a country imports more than it exports.
Also read: India gains early edge in US trade talks amid tariff hurdles and export opportunities, say sources
While tariffs are an attractive mode of raising funds for a country, considering the money comes from the pockets of foreign producers and domestic consumers pay, Dalio argued that tariffs could also make global production less efficient and cause stagflation.
“Tariffs are more deflationary for the tariffed producer, and more inflationary for the importer that imposes the tariffs,” he added.
The impact of Trump’s April 2 tariffs, Dalio argued, would depend on several “moving parts” like monetary, fiscal, and currency control policies. “There is a lot to measure in order to judge the market impact of big tariffs,” he wrote on the Elon Musk-owned microblogging site.
The best-selling author predicted that Trump’s tariffs could lead to “abrupt but unconventional” changes in the global monetary, economic, and geopolitical orders.
“The longer-term monetary, political, and geopolitical effects would depend mostly on the trust in the quality of the debt and capital markets as a safe store-hold of wealth, countries’ productivity levels, and the political systems that make countries attractive places to live, work, and invest,” he concluded.
Also read: From shrimp to smartphones: Indian exporters brace for US tariff impact
Moreover, he backed the US dollar to remain the global reserve currency, arguing that it creates a “greater demand for its debt and other capital.” But a strong greenback has led to over-borrowing and debt problems, he noted.
The US national debt currently stands at a whopping $36.22 trillion, having grown fivefold in the last 20 years. The US President has pitched tariffs as one of his solutions to resolve the debt problem and offset some income taxes.
TRUMP TARIFFS
On April 2, dubbed ‘liberation day’, Trump fell short of imposing fully reciprocal tariffs. Instead, the US President said the US would charge half of the tariff a country imposes on US imports.
Speaking at the Rose Garden of the White House, Trump announced a universal baseline tariff of 10% on all countries, folded into the additional tariffs.
The US would impose a 27% tariff on Indian imports. Trump said the rate was calculated based on cumulative tariffs, including non-monetary barriers. By this calculation, Trump said India imposes a 52% tariff on US goods.
However, a Bloomberg analysis showed that the reciprocal tariffs were calculated by dividing the total trade surplus with the US with its total exports. This number was then halved to reach the discounted tariff rate.
China would face 34% tariffs (in addition to the 20% the US had imposed in February), while the European Union and Japan would attract 20% and 24% tariffs, respectively. All three countries are among the top 10 trading partners of the US.
Trump claimed that his tariff policies would generate “trillions and trillions of dollars” for the US . “This is one of the most important days, in my opinion, in American history. It’s our declaration of economic independence,” he said.
Also read: ‘440-volt shock’: Economists react to Trump’s global tariff jolt
