Key Points
Ray Dalio explains tariffs' impact on global production efficiencies
Jim Rogers predicts US recession due to trade policies
Tariffs potentially reduce foreign production dependencies
Trump's trade actions create economic uncertainty
At the same time, he also highlighted its adverse impact on "global efficiencies of production" and the potential "stagflationary effect" on the entire world.
The levies are "more deflationary for the exporting country", and "more inflationary for the importer" that imposes the tariffs, said Dalio, the chief investment officer of Bridgewater Associates, in a social media post.
Such policies make importing countries — those levying tariffs — more protected from competition. This makes them "less efficient but more capable of surviving" if aggregate domestic demand is maintained through monetary and fiscal policy, Dalio explained.
Tariffs raise the revenue for the country imposing them that both the foreign producers and the domestic consumers pay, "which makes them an attractive tax", he said.
Dalio further said that tariffs can "reduce both current account and capital account imbalances", which, in simpler words, means reducing the dependencies on foreign production and foreign capital which is especially valued in times of global geopolitical conflicts.
Meanwhile, veteran investor Jim Rogers criticised Trump for pushing the world towards a global trade war.
"I am sure of recession in the US. We haven't had a problem since 2009. A problem is overdue and it is coming," Rogers said. The challenge for the US economy is aggravated by the actions of Trump, Rogers suggested, adding that the president had "no idea what he wants".
"I know trade war is bad. It isn't good for the world. Trump thinks if there is a trade war, he will win. But he will not," said the 82-year-old, who is also co-founder of Quantum Fund.
The American President has so far announced several rounds of tariffs -- a 25 per cent tariff on all steel and aluminium imports, a 25 per cent tariff on imports from Canada and Mexico, and 10 per cent tariff on China, and a 25 per cent duty on all imported cars, trucks and auto parts. He has indicated more sector-based tariffs, such as pharmaceuticals.
Comments:
Interesting analysis! I never thought about how tariffs could actually help domestic production while hurting global efficiency. It's a tough balance to strike. 🤔
Respectfully disagree with Rogers - tariffs have been used successfully throughout history to protect infant industries. The US needs to rebuild its manufacturing base, even if it causes short-term pain.
The stagflation risk is real! We saw this in the 70s. Higher prices + slower growth = bad news for everyone. Maybe we need more targeted approaches instead of blanket tariffs?
Great breakdown of both sides. The "attractive tax" point is particularly insightful - explains why politicians love tariffs despite the economic costs. Always follow the money! 💸
While I appreciate Dalio's balanced view, I think the article could have explored more alternatives to tariffs. There must be better ways to protect domestic industries without starting trade wars. The global economy is too interconnected for these old-school tactics.
82-year-old Rogers dropping truth bombs! Experience matters in these discussions. The younger analysts often miss the historical context of these policies. 👴🏼💥
