Bridgewater's Dalio: 6 Major Effects and 4 Variables of Trump's Tariffs on the World Economy

Ray Dalio, founder of Bridgewater Fund, the largest hedge fund in the United States, systematically analyzed the multiple impact mechanisms of tariffs: the basic level includes six major effects: fiscal revenue, efficiency loss, inflation differentiation, and industrial protection; The deep impact depends on the policy countermeasures of various countries and the dynamic adjustment of exchange rates and monetary and fiscal policies. This article is based on a tweet written by Dalio and compiled, curated and contributed by BlockBeats. (Synopsis: Gold hits another all-time high!) Market “capital hedge” Trump global tariff war, oil and US debt volatility intensified) (Background supplement: Trump declared a “national emergency” tariffs washed Asian stocks in blood, the Nikkei index plunged 3%, South Korea held an emergency meeting: US President Donald Trump officially unveiled his latest tariff policy at the White House Rose Garden this morning (3), according to a statement issued by the White House, the tariff plan includes a 10% benchmark tariff on all imported goods and higher reciprocal tariffs for specific countries, affecting more than 180 countries around the world. Just yesterday (2), Ray Dalio, founder of Bridgewater Fund, the largest hedge fund in the United States, published an article on the X platform, systematically analyzing the multiple impact mechanisms of tariffs: the basic level includes six major effects such as fiscal revenue, efficiency loss, inflation differentiation, and industrial protection; The deep impact depends on the policy countermeasures of various countries and the dynamic adjustment of exchange rates and monetary and fiscal policies. The article argues that global imbalances must be resolved by drastic adjustments, with long-term effects dependent on market trust and national competitiveness, and specifically explores the debt dependence associated with dollar privileges. The following is the original content of Dario (the original content has been consolidated for ease of reading and comprehension): Tariff is essentially a special tax, and its impact is mainly reflected in the following six basic levels: Revenue-generating function: shared by foreign producers and domestic consumers (the exact share depends on the elasticity of demand between the two sides), this double tax base makes it an attractive fiscal tool Efficiency Loss: Reducing Global Production Efficiency Inflationary differentiation: exerting stagflationary pressure on the global economy and forming a deflationary effect on the taxed countries, Exacerbate inflation for taxing countries Industrial protection: Enhancing the competitiveness of taxing countries’ firms in the domestic market, although resulting in efficiency losses, can improve firm survival when monetary and fiscal policies maintain aggregate demand Strategic value: a key means of securing domestic production capacity in the era of great power games Balancing effect: simultaneous improvement of current account and capital account imbalances, in layman’s terms, reducing dependence on foreign production capacity and capital – which is especially important in times of global geopolitical conflict The above is a first-level impact. Subsequent development depends on four major variables: Countermeasures in taxed countries Exchange rate fluctuations Monetary policy and interest rate adjustments by central banks Fiscal policy responses of central governments These constitute the second level of influence. Specific transmission paths include: If retaliatory tariffs are triggered, they will lead to broader stagflation Deflationary pressure countries usually adopt loose monetary policy, resulting in lower real interest rates and depreciation of their currencies; Inflationary pressure countries tend to tighten policies, pushing up real interest rates and local currency exchange rates Fiscal policy will target stimulus in deflationary areas and contract in inflationary areas to hedge some of the price fluctuation effects Therefore, assessing the market impact of large-scale tariffs requires consideration of many dynamic factors, which go beyond the above six basic levels, and need to be comprehensively analyzed in conjunction with the second-level policy feedback mechanism. Three basic judgments have always been true: Imbalances in production, trade, and capital (especially debt) must be resolved because they are unsustainable in monetary, economic, and geopolitical dimensions – the current international order is bound to be reshaped The adjustment process is likely to be accompanied by drastic and unconventional changes (as described in his book The Road to National Bankruptcy: The Great Cycle) Long-term monetary, political, and geopolitical effects ultimately depend on the credibility of debt and capital markets as stores of wealth, the level of productivity in countries, and the attractiveness of political institutions The current discussion about the status of the dollar is worth paying attention to: The advantage of the dollar as the main reserve currency is that it can create excess debt demand (although this privilege often leads to excessive borrowing) A stronger dollar is beneficial, but market mechanisms inevitably lead to abuse of privilege, ultimately forcing us to take extreme measures to address debt dependence I will continue to follow developments and analyze the impact at all levels in a timely manner. Related reports Trump’s 32% tariff on Taiwan “exempted semiconductors” TSMC ADR still fell more than 6% after hours, and $880 million in agricultural exports were urgent Moody’s analysis: Trump’s tariffs will kill “5.5 million jobs”; Coupled with the destruction of the US economy by AI, Trump is “very hot” to Putin threatened to increase Russian oil tariffs, and then threatened Iran to bomb if it does not reach a nuclear deal “Bridgewater Fund Dalio: 6 major effects and 4 variables of Trump’s tariffs affecting the world economy” This article was first published in BlockTempo “Dynamic Trends - The Most Influential Blockchain News Media”.