Billionaire hedge fund manager Ray Dalio expressed concerns in an interview on Sunday about potential economic challenges that could surpass a typical recession if ongoing trade conflicts lead to a disruption of the broader financial system. Speaking as the co-chief investment officer of Bridgewater Associates, the world’s largest hedge fund, Dalio shared these insights during an appearance on NBC’s “Meet the Press with Kristen Welker.” He described President Donald Trump’s tariffs as highly disruptive, equating them to “throwing rocks into the production system.”
When asked whether Trump’s tariffs might trigger a recession, Dalio indicated that the economy is currently at a critical juncture, potentially on the brink of a recession. He warned that mishandling the situation could lead to outcomes worse than a recession. He further elaborated on the issue, describing it as more profound than typical economic cycles due to the ongoing “breaking down of the monetary order,” which involves the dollar, as well as disturbances in both domestic and global systems.
Dalio likened the current economic climate to the 1930s, emphasizing that historical patterns often repeat. He pointed to tariffs, rising debts, and shifts in global power dynamics as major disruptive factors.
In responding to predictions about the future economic trajectory, Dalio pointed out that the U.S. federal government is at a significant turning point with its budget deficit. He noted that projections estimate the deficit could rise to 7% of gross domestic product (GDP) if tax and spending reforms are not enacted.
Dalio advocated for reducing the deficit to 3% of GDP to manage trade deficits and other economic issues effectively. He encouraged Congress to implement bipartisan measures similar to the fiscal policies of the 1990s, when the federal government last operated with a surplus. Failure to address the deficit could lead to rising interest rates on the national debt, further exacerbating economic challenges.
Dalio explained that if the deficit is not stabilized, it could lead to a supply and demand imbalance for debt, compounding existing problems and resulting in conditions “worse than a normal recession.” In outlining possible worst-case scenarios, Dalio mentioned potential declines in the value of money, increased internal conflict diverging from democratic norms, and the risk of international conflict, which could heavily disrupt the global economy.