Ray Dalio of Bridgewater: Trump's Tariffs Severely Damaged the US's Reputation

Ray Dalio, founder of the world's largest hedge fund Bridgewater Associates, stated on Thursday that investors have fallen into "some kind of trauma, shock, or fear" amid the ongoing severe turbulence in global financial markets triggered by Trump's tariff policies, which has severely damaged the US's reputation.

In an interview with the media that day, Dalio pointed out that recent events have severely shaken people's trust and confidence in the US. He also mentioned that this situation could have been avoided or at least handled more properly.

For now, Dalio believes that the depreciation of the US dollar and the sell-off of US Treasury bonds are particularly noteworthy for investors, as these signs may indicate that investors are moving away from assets long considered the safest in the world.

Wall Street initially expected the tariff policies to boost the US dollar and Treasury bonds, but the opposite has happened. Since Trump took office, the US dollar index has fallen by more than 7%.

The decline of the US dollar has been accompanied by the sell-off of US stocks and Treasury bonds, which may be a response from foreign investors to Trump's protectionist policies. They are selling US assets, putting downward pressure on the dollar.

When asked whether some investors might face the risk of bankruptcy if Trump does not cancel the tariffs, Dalio replied, "Certainly, some investors will go bankrupt, not only because of the tariffs themselves but also due to the chain reaction in the capital markets." He added, "When capital markets continue to decline, a self-reinforcing spiral effect is formed."

Although Trump announced on Wednesday a temporary suspension of reciprocal tariffs on many trading partners, triggering a massive rebound in the stock and bond markets, the optimism quickly faded, and investors began to worry again about the possibility of an economic recession and more corporate defaults.

Earlier this week, Dalio warned that the market avalanche triggered by the Trump administration's comprehensive tariff hikes has deeper implications beyond the surface of stock market turbulence, potentially leading to the collapse of the world's three major orders: the monetary system, the political landscape, and the world order.

He warned again on Thursday that the US economy is likely to fall into a recession and is also concerned about further escalation of conflicts. The current economic situation is the result of a combination of complex factors, including financial market turbulence, political policy uncertainty, and international tensions. "This is not an ordinary recession; we are changing the monetary order."

Dalio expressed satisfaction with Trump's change in policy direction but believes that the severe market volatility will have lasting effects. He said, "Now the capital markets may be in a stalemate, and this feeling itself has changed everyone, especially the way companies handle their business."

Meanwhile, reports indicate that Trump privately acknowledged that the comprehensive tariff plan announced last week could push the economy into a recession, but he does not want an economic depression. Trump also told advisors that he is willing to accept the "pain" brought by the policy.

Economists believe that when a recession becomes more severe, unemployment rises, and the economic downturn lasts longer, a depression occurs. However, no one has yet said that tariffs will lead to an economic depression.