Don't Think That What's Now Happening Is Mostly About Tariffs | Ray Dalio

At this moment, a huge amount of attention is being justifiably paid to the announced tariffs and their very big impacts on markets and economies while very little attention is being paid to the circumstances that caused them and the biggest disruptions that are likely still ahead. 

 

Don't get me wrong, while these tariff announcements are very important developments and we all know that President Trump caused them, most people are losing sight of the underlying circumstances that got him elected president and brought these tariffs about. They are also mostly overlooking the vastly more important forces that are driving just about everything, including the tariffs.  

 The 80 Year Big Debt Cycle.

The far bigger, far more important thing to keep in mind is that we are seeing a classic breakdown of the major monetary, political, and geopolitical orders. This sort of breakdown occurs only about once in a lifetime, but they have happened many times in history when similar unsustainable conditions were in place. More specifically:

 

1. The monetary/economic order is breaking down because there is too much existing debt, the rates of adding to it are too fast, and existing capital markets and economies are supported by this unsustainably large debt. The debt is unsustainable because the of the large imbalance between a) debtor-borrowers who owe too much debt and are taking on too much debt because they are hooked on debt to finance their excesses (e.g., the United States) and b) lender-creditors (like China) who already hold too much of the debt and are hooked on selling their goods to the borrower-debtors (like the United States) to sustain their economies. 

 

» We are seeing a classic breakdown of the major monetary, political, and geopolitical orders. « 

There are big pressures for these imbalances to be corrected one way or another and doing so will change the monetary order in major ways. For example, it is obviously incongruous to have both large trade imbalances and large capital imbalances in a deglobalizing world in which the major players can't trust that the other major players won't cut them off from the items they need (which is an American worry) or pay them the money they are owed (which is a Chinese worry). This is a result of these parties being in a type of war in which self-sufficiency is of paramount importance. Anyone who has studied history knows that such risks under such circumstances have repeatedly led to the same sorts of problems we're seeing now. 

 

So, the old monetary/economic order in which countries like China manufacture inexpensively, sell to Americans, and acquire American debt assets, and Americans borrow money from countries like China to make those purchases and build up huge debt liabilities will have to change. These obviously unsustainable circumstances are made even more so by the fact that they have led to American manufacturing deteriorating, which both hollows out middle class jobs in the US and requires America to import needed items from a country that it is increasingly seeing as an enemy. In an era of deglobalization, these big trade and capital imbalances, which reflect trade and capital interconnectedness, will have to shrink one way or another. 

 

  From Trade War to Financial War.

Chinese Embassy in the US, April 11, 2025.

Also, it should be obvious that the US government debt level and the rate at which the government debt is being added to is unsustainable. (You can find my analysis of this in my new book How Countries Go Broke: The Big Cycle.)  Clearly, the monetary order will have to change in big disruptive ways to reduce all these imbalances and excesses, and we are in the early part of the process of it changing. There are huge capital market implications to this that have huge economic implications, which I will delve into at another time.  

2. The domestic political order is breaking down due to huge gaps in people's education levels, opportunity levels, productivity levels, income and wealth levels, and values—and because of the ineffectiveness of the existing political order to fix things. These conditions are manifest in win-at-all-cost fights between populists of the right and populists of the left over which side will have the power and control to run things. This is leading to democracies breaking down because democracies require compromise and adherence to the rule of law, and history has shown that both break down at times like those we are now in. History also shows that strong autocratic leaders emerge as classic democracy and classic rule of law are removed as barriers to autocratic leadership. Obviously, the current unstable political situation will be affected by the other four forces I’m referring to here—e.g., problems in the stock market and economy will likely create political and geopolitical problems.  
 

 » Tariffs on US goods will rise to 125% — and this will be our final adjustment.
Regardless of future US actions, China will no longer respond. «
China's Customs Tariff Commission, April 11, 2025.

3. The international geopolitical world order is breaking down because the era of one dominant power (the US) that dictates the order that other countries follow is over. The multilateral, cooperative world order the US led is being replaced by a unilateral, power-rules approach. In this new order, the US is still largest power in the world and is shifting to a unilateral, "America first" approach. We are now seeing that manifest in the US led trade-war, geopolitical war, technology war, and, in some cases, military wars.  
 

4. Acts of nature (droughts, floods and pandemics) are increasingly disruptive, and
 

5. Amazing changes in technology such as AI will be highly impactful to all aspects of life, including the money/debt/ economic order, the political order, the international order (by affecting interactions between countries economically and militarily), and the costs of acts of nature. 

 

 Shadowboxing in a hall of mirrors:

On April 12, Trump excluded smartphones and electronics
from his April 9, 125% tariff on China.

Changes in these forces and how they are affecting each other is what we should be focusing on. For that reason, I urge you to not to let news-grabbing dramatic changes like the tariffs draw your attention away from these five big forces and their interrelationships, which are the real drivers of Overall Big Cycles changes. 

 

Ray Dalio, founder of the world’s largest hedge fund, said mismanaged global tariffs and economic

policies could push the US economy, already nearing recession, into a far worse crisis, April 13, 2025.

[...] I also urge you to think about the interrelationships that are critically important. For example, think about how  Donald Trump's actions on tariffs will affect 1) the monetary/market, economy order (it will be disruptive to it), 2) the domestic political order (it will likely be disruptive to it as it will probably undermine his support), 3) the international geopolitical order (it will be disruptive to it in many obvious ways that are financial, economic, political, and geopolitical) 4) climate (it will somewhat undermine the world’s ability to deal with the climate change issue effectively), and 5) technology development (it will be disruptive in some positive ways to the US, like bringing more technology production into the US, and in some harmful ways, like being disruptive to the capital markets that are needed to support technology development and in too many other ways to innumerate here.)
 

Quoted from:
Ray Dalio (April 7, 2025) - Don't Make the Mistake of Thinking That What's Now Happening is Mostly About Tariffs.

[Ray Dalio is the founder, CIO mentor, and member of the Bridgewater Board.]

 

See also:
Ray Dalio (March 26, 2025) - How Countries Go Broke: The Overall Big Cycle.

Lu QiYuan (December 8, 2024) - Scott Bessent's Covert MAGA Strategy for Trump 2.0.  

Trump commenting on how much money his billionaire friends made when he paused

tariffs on Wednesday, April 9: "He made $2.5 billion today, and he made $900 million". 

Corruption, insider trading, or just good timing and coincidence? 

April 10, 2025.

We Support Trump’s Tariffs. Here Is Why | Dimitri Simes Jr.

We support Trump’s tariffs. They are beneficial for humanity. They will accelerate the collapse of the Globalist American Empire.

 

Economic Self-Sabotage: Tariffs raise costs for US consumers and businesses, resulting in higher prices for everything from cars to electronics. This impacts the average American's wallet, shrinking purchasing power and slowing growth. A weaker economy means less leverage on the world stage.

» Trump’s tariffs are beneficial for humanity. They will 

accelerate the collapse of the Globalist American Empire. «

Alienating Allies: Imposing 25% tariffs on Canada and Mexico, or 20% on the EU, doesn’t exactly convey a “team player” mentality. Allies are already retaliating—China’s counter-tariffs and Europe’s threats are just the beginning. When your friends abandon you, your influence diminishes rapidly.

The formula Trump's team used to calculate tariffs. 

 Brilliant minds at work: Tariffs = Trade Deficit/US Imports.

Deindustrialized Reality: The US is no longer the manufacturing giant it once was. Decades of offshoring have gutted its industrial base. Tariffs can’t protect industries that barely exist anymore. Steel mills and factories won’t magically return. Instead, higher costs will simply burden the service-heavy economy that remains.
 

» Damn smart penguins. «

Handing Rivals a Win: China is eager to capitalize. Tariffs push global trade away from the US, and Beijing is ready to fill the void, strengthening ties with Asia, Africa, South America, and even Europe. The more the US isolates itself, the more rivals like China and Russia gain ground.
 

 » The more the US isolates itself, the more rivals gain ground. «

Dollar’s Status at Risk: The US dollar’s position as the world’s reserve currency relies on trust and trade. Tariffs breed chaos, retaliation, and currency wars, potentially leading to a push by BRICS nations to abandon the dollar. If this happens, America’s financial power could crumble—especially considering the historically high price of gold.
 

 » History shows that empires don’t survive self-inflicted wounds like these. «

Overreach and Collapse: Empires fall when they overextend. Tariffs are a gamble; Trump is betting on short-term gains, but the long-term consequences could be a fractured trade system and a US too weakened to lead. History shows that empires don’t survive self-inflicted wounds like these.
 

Trump’s tariffs might seem like a bold move to “Make America Great Again,” but they could end up being a wrecking ball to its global influence. The empire is already on shaky ground, and tariffs could be the final push that sends it crashing down.

Dimitri Simes Jr., April 3, 2025.  

 

  

  

» The problem is that Trump will be blamed for the recession/depression
the world is headed into, which will not bottom until August 25th, 2028. «

Martin Armstrong (April 2, 2025) - Trump, Tariffs, and Liberation Day.

 

Treasury Secretary Scott Bessent breaks down Trump's Tariff
Plan and its impact on the middle class, April 4, 2025.

 

 » They’ve all been living in our house. Driving our car. They open our fridge, eat our food. 

They’ve taken advantage of us. You have to pay. « Unless you are Israel.
US Secretary of Commerce Howard Lutnick, April 6, 2025.

Medvedev Watching the River Flow

» As it is, Russia barely does any trade with the US and EU, nearly all of it is under sanctions. Yet, our economy is growing 3% now. 

We’ll take the advice of Lao Tzu and sit by the river, waiting for the body of the enemy to float by.
The decaying corpse of the EU economy. «

 

Dmitry Medvedev, April 3, 2025.

A significant number of European politicians have succumbed to acute Russomania (also known as Russophobia)—a psychiatric disorder stemming from a bipolar affective exaggeration of Russia’s influence on the lives of Europe and Europeans. The condition typically alternates between two distinct phases: manic and depressive.

The manic stage is characterized by motor agitation, aggressiveness, and a tendency to provoke and attack stronger opponents without assessing one’s actual capabilities against the target of the attack. Sometimes, it ends in uncontrolled urination and defecation. Examples of patients in the manic stage include Macron, Starmer, Stubb, and several other European politicians.

 

From Third Reich to European Union.

The depressive phase is characterized by melancholy, emotional and physical fatigue, eating disorders, hypochondria, and self-harm. A patient in the depressive stage of Russomania may harm themselves, including self-sterilization (self-castration). At present, this stage is more commonly observed in women (Ursula von der Leyen, Kaja Kallas) or in hermaphrodites suffering from drug addiction (patients Zelensky, Saakashvili).

Treatment is symptomatic. Traditional medications are generally ineffective. The best therapeutic effect has been observed with the combined use of strong sedative drugs such as "Kalibr," "Onyx," "Iskander," and the powerful multi-component tranquilizer "Oreshnik." In particularly severe cases, nuclear neuroleptics such as "Yars" and "Sarmat" must be used.

 

Dmitry Medvedev, March 31, 2025.

 

See also:

 Martin Armstrong (March 21, 2025) - Europe's Date with Destiny: Collapse by 2029 is Inevitable.

Martin Armstrong (March 1, 2025) - Europe Will Go to War around May 15, Lose, and Euro Will Become Extinct.

Alex Krainer (March 18, 2025) - The Tragedy of Europe's Idiocracy.

Red Alert: Is the US Economy Headed for a Devastating Recession?

1. Stock Markets are facing significant uncertainty. US stocks ended last week with a 2% decline. Goldman Sachs has assigned a 35% chance of a US recession within the next 12 months. The firm has also officially reduced its S&P 500 forecasts, citing the impact of higher tariffs and increasing recession risks.

2. The Trade Deficit reached unprecedented levels in February, ballooning to $147.9 billion. January's revised deficit also soared to $153.3 billion. This surge is primarily due to a significant increase in imports of industrial supplies, such as oil, liquefied natural gas (LNG), gold, and steel, as producers prepare for an extended trade war.

3. The financial storm is intensifying. Since January 31st, the S&P 500 and the US Dollar Index have dropped by 6.5% and 3.5%, respectively. This is a rare occurrence, as the last time both stocks and the Dollar fell in tandem by such a significant margin was in 2008.

4. The US Stock Market is experiencing historically unprecedented concentration levels, surpassing even the intense frenzy of the 2000 Dot-Com Bubble. The top 10 stocks now make up 36% of the S&P 500, approaching an all-time high.

5. Gold is gaining attention as a safe haven. According to Bank of America, 58% of fund managers believe gold performs best during a trade war. Over the past 12 months, $7 trillion has been added to gold's market capitalization, signaling significant economic uncertainty.

6. The Congressional Budget Office (CBO) has issued a concerning forecast regarding the US debt. Federal deficits are expected to rise from 6.2% of GDP in 2025 to 7.3% by 2055. Public debt is projected to surge dramatically, growing from 100% of GDP in 2025 to a staggering 156% by 2055.

7. The Yield Curve typically shows higher yields on long-term US bonds compared to short-term bonds, reflecting the greater risk associated with lending money over a longer period. However, the US is currently experiencing an inversion of the curve, a historical pattern that has reliably preceded past recessions.

8. By February 2025, the U3 Unemployment Rate is projected to be 4.1%, while the U6 unemployment rate is expected to be 8.0%. Peter Schiff argues that the U3 rate appears low because it doesn't account for millions of unemployed individuals who aren't included in the official statistics. According to him, the US systematically hides the true extent of unemployment.

9. If Trump were to escalate with Tariffs, the impact on complex supply chains could be significant. Cars, for example, could see an additional $12,200 in costs due to tariffs, particularly those with parts from Canada or Mexico, which would face the steepest increases. Additionally, domestically produced goods that rely on imported materials would incur hidden tariff costs, further adding to the economic burden.

Reference:
New Rules Geopolitics (April 1, 2025) - Red Alert: US Economy Headed for Devastating Recession?

 

» China is crushing the US in the technological innovation race. China’s economic model is superior to America’s. Chinese companies reinvest their profits into expanding production, employment, research, and development, while US companies reinvest their profits into stock buybacks. « — Prof. Michael Hudson, November 21, 2024.

 

See also:
Jeffrey A. Hirsch (April 1, 2025) - Down Q1 Can Lead to More Trouble.

Jim Bianco (February 13, 2025) - The ‘Mar-a-Lago Accord’ Chatter Is Getting Wall Street’s Attention.

Simon Hunt (January 11, 2025) - Markets Amidst Trump 2.0: Geopolitics and Geoeconomics in 2025.

Martin Armstrong (December 21, 2024) - Outlook for 2025: Depression, Debt, Default & Destruction.  

Lu QiYuan (December 8, 2024) - Scott Bessent's Covert MAGA Strategy for Trump 2.0. 

 TPR (December 10, 2024) - 2025 in J.M. Funk’s '56-Year Cycle of Prosperity and Depression'.

Europe's Date with Destiny: Collapse by 2029 is Inevitable | Martin Armstrong

Comment by Hans: Mr. Armstrong, thank you for speaking the truth about the timeline of this war with Ukraine. Every news story here in Europe says the same thing. Russia was unprovoked. Never in my entire life have I ever witnessed such outright lies by the press. I do not see the Europeans rising up to overthrow these governments. We are sheep being led to the slaughter. You have forecasted that the euro will no longer exist, and they are rapidly moving to digital currencies, which will be, as you say, for capital control. We will not be able to leave or get our money out. [...] I think it is time to prepare for the future sooner than later.

» From about May 15th 2025 on, Europe is going into war, 

Europe will lose, and the Euro will become extinct. «
Martin Armstrong, March 1, 2025.

Reply by Martin Armstrong: It gives me no pleasure to live through Socrates’ forecasts [...] The euro has broken last year’s low and is still trading below it. We have a very serious Panic Cycle for Europe next year [2026], and they are pushing to cancel the currency’s move to digital as soon as possible. All they look at is capital controls, which will prevent bank runs and stop capital fleeing. They are trying to control their risk of the collapse of the EU. [...] Lagarde runs the ECB, pushing for the cancellation of the currency and moving to digital [by October 2025]. This is about taxes all over again.
 

» We are witnessing capital contracting in both the United States and Europe. «

Martin Armstrong, March 17, 2025.

[...] I have been warning that we are approaching World War III as a distraction from the collapse of sovereign debt in Japan and Europe. The total outstanding government and corporate bonds globally have now exceeded $100 trillion in 2024, as reported by the OECD. As I have also been warning, the central banks have been neutered. They can no longer fight inflation by raising interest rates because government debt just explodes. Governments have NO INTENTION of ever paying off their debt. They think there is no end to this game.

 » We are approaching World War III as a distraction from the collapse of sovereign debt in Japan and Europe.

Germany is heading into a very serious debt crisis for 2026. PANIC Cycles in 2026 around the globe. 

Major recession globally into 2028. EU prepares for war as a distraction from their inevitable collapse by 2029. «

[...] While central banks are cutting interest rates, borrowing costs remain much higher than before 2022’s rate hikes because the ECM, in particular, went to negative interest rates in 2014, which only encouraged governments to issue more debt. This all comes at a time when the EU wants to fund an army and prepare for war as a distraction from their inevitable collapse by 2029.

» Macron and Starmer are insane. Putin can detonate a 100-megaton nuke and the tidal wave

will wipe out Britain entirely. The Computer Has NEVER been Wrong. Europe Will Lose!!! «

Martin Armstrong, March 21, 2025.

 

[...] Germany is heading into a very serious debt crisis for 2026, and this does not bode well for Europe or the Euro. Nearly HALF of ALL outstanding government debt among OECD countries and emerging markets and around ONE THIRD of corporate debt will mature by 2027. Our computer is showing PANIC Cycles in 2026 around the globe. The defaults come when you cannot sell the NEW debt to pay off the old. [...] Everything is coming to the point of a major Sovereign Debt default that the government will not survive. [...] Add the trade wars and what our model shows a major recession globally into 2028; it is hard to see how many countries can even make it to 2029.

Reference:
Martin Armstrong (March 21, 2025) - Europe’s Date with Destiny.
Martin Armstrong (March 20, 2025) - Sovereign Debt Crisis Unfolding.

 

See also:

Martin Armstrong (March 17, 2025) - Ahead of Iran War, Capital Flows Flee the US and Europe.

Martin Armstrong (March 1, 2025) - Europe Will Go to War around May 15, Lose, and Euro Will Become Extinct.

Martin Armstrong (December 21, 2024) - Outlook for 2025: Depression, Debt, Default & Destruction. 

TPR (March 11, 2025) - The ECB's Dystopian Digital Euro Dictatorship Set to Launch in October 2025. 

Jim Bianco (February 13, 2025) - The ‘Mar-a-Lago Accord’ Chatter Is Getting Wall Street’s Attention.

The ‘Mar-a-Lago Accord’ Chatter Is Getting Wall Street’s Attention | Jim Bianco

It might sound too extreme to even consider, but the idea that President Donald Trump could force some of the US's foreign creditors to swap their Treasuries for "zero-coupon" bonds—in other words, zero-interest bonds that do not mature for a century—in order to lighten the nation’s debt load is being taken seriously by some.

That’s exactly what Jim Bianco guided his clients to discuss after rumors of a so-called "Mar-a-Lago Accord" began to spread. To be clear, Bianco doesn’t anticipate this happening soon, if ever. But in many ways, that’s beside the point. Trump, Bianco said, could very well disrupt the entire global financial system within the next four years, and Wall Street needs to be ready for that.

 A User’s Guide to Restructuring the Global Trading System, Stephen Miran, November 2024.

Bianco, a market veteran with over 30 years of experience and founder of Bianco Research, explained that restructuring America’s debt is part of the Trump administration’s broader plan to overhaul global trade through tariffs, weaken the dollar, and reduce borrowing costs—all with the goal of making US industries more competitive on the world stage. Other pieces of the plan include setting up a sovereign wealth fund (which Trump has already started) and pressuring US allies to contribute more to defense spending.

“You have to start thinking big and you have to start thinking bold about what is going on here. The Mar-a-Lago Accord is not actually a thing, it’s a concept. It is a plan to basically remake some of the financial system.”

The Mar-a-Lago Accord. - Jim Bianco, February 13, 2025.

 

The term “Mar-a-Lago Accord” is a play on the 1985 Plaza Accord and the 1944 Bretton Woods Agreement—two major agreements that shaped the modern global economic system, each named after the locations where they were negotiated.

Many of the ideas behind this agenda stem from a November 2024 paper by Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisers. In it, the former Treasury official proposed a strategy for reforming the global trading system and addressing economic imbalances caused by the “persistent dollar overvaluation.” The paper also highlighted that President Trump has long been focused on putting American industries on a fairer playing field globally.

» Everything that President Trump’s administration is doing will be disinflationary. «
US Treasury Secretary Scott Bessent, February 20, 2025.

 

Bianco noted that this vision doesn’t necessarily clash with Treasury Secretary Scott Bessent’s statement that “the US still has a strong dollar policy.” This is because, while the US may aim for a weaker trade-weighted dollar (which measures the dollar’s value against that of its trading partners) to narrow the trade deficit, financial indicators of the dollar, such as the Bloomberg Dollar Spot Index, could still rise. 

“Stephen Miran and Scott Bessent seem to be kind of singing from the same hymn sheet. The whole idea hopefully is lower the value of the dollar, lower the value of interest rates, bring down the debt burden in the country. And that’s what they’re trying to do.”

» Scott Bessent is one of the most powerful champions of the US deep state. He is the real gladiator behind Trump 2.0,
not Elon Musk. His role will be crucial in keeping the US empire alive. Bessent is extremely intelligent and capable.
Bessent’s capabilities go beyond what most people can imagine. He possesses a deep understanding of monetary, currency,
and financial systems—and, more importantly, he has real-world combat experience in financial warfare. He is a genius.
But like everyone, Bessent also has his flaws. People like him, who are highly capable and self-confident,
often don’t hide their moves or intentions. «

Lu QiYuan, December 8, 2024.

 

Bianco, echoing Miran’s paper, also referenced former Credit Suisse strategist Zoltan Pozsar, who has long argued for a “Bretton Woods III” overhaul as part of his theory that the dollar will play a less dominant role in global finance in the coming decades. One of Pozsar’s central ideas is that other countries should pay more for the security and stability provided by the US. One potential way to do this is by swapping some of their Treasuries for 100-year, non-tradable zero-coupon bonds. If these nations needed immediate access to funds, the Federal Reserve could make it temporarily available to them via a lending facility.

Bianco emphasized that such a debt swap may never actually happen, and if it were pursued, it would require extensive international cooperation and could potentially destabilize the global financial system. However, bond markets have shown little concern so far, with Treasury trading remaining relatively calm in recent days. Still, Bianco’s point in discussing these ideas with his clients is to highlight the magnitude of the potential changes ahead.

“Take them seriously, don’t take it literally. If Trump is willing to blow up NATO, why wouldn’t he be willing to blow up the financial system?”

Reference:

Thierry Meyssan (March 12, 2025) - Trump Managing the Collapse of the American Empire.

Torsten Sløk (March 9, 2025) - What Is the Mar-a-Lago Accord?

Bloomberg (February 28, 2025) - Here's Why 'Mar-a-Lago Accord' Chatter Has Everyone's Attention. (podcast) 

Jim Bianco (February 13, 2025) - The Mar-a-Lago Accord. (podcast).

Stephen Miran (November 2024) - A User’s Guide to Restructuring the Global Trading System.

Lu QiYuan (December 8, 2024) - Scott Bessent's Covert MAGA Strategy for Trump 2.0.