Ray Dalio fears ‘capital wars’ could follow Trump’s actions with countries dumping U.S. assets
Billionaire investor Ray Dalio has warned that President Donald Trump’s aggressive political drive could trigger a new phase in the global financial conflict as foreign governments and investors reconsider their appetite for U.S. assets amid growing unrest and economic tensions.
“On the other side of trade deficits and trade wars, you have capital and capital wars,” Dalio told CNBC’s “Squawk Box” program at the World Economic Forum in Davos, Switzerland. “If you take conflicts into account, you can’t rule out the possibility of capital wars. In other words, maybe there isn’t the same tendency to buy U.S. debt.”
The founder of Bridgewater Associates, one of the world’s largest hedge funds, worries that countries and Treasuries that hold large amounts of US dollars may become less willing to finance US deficits if confidence erodes. Dalio also said that the United States continues to lend large amounts of money, which would create a problematic situation if trust weakened on both sides.
“We know that both the holders of the U.S. dollar are specific… and the United States, which needs it, is worried about each other. Right? So if there are other countries holding the money and they’re worried about each other and we’re producing more of it, that’s a big problem,” he said.
Trump’s threats of tariffs and trade retaliation against allies and rivals alike have revived fears of a broader collapse in global economic cooperation. The president intensified his rhetoric on Greenland, threatening to impose new tariffs on countries that oppose the sale of Danish territory to the United States. Dalio said history offers numerous examples of similar periods when economic conflicts escalated beyond trade into capital flows and currency disputes.
“When there are conflicts, international geopolitical conflicts, even allies do not want to take on each other’s debts. They prefer to go for a hard currency. This is logical, it is real and it has been repeated throughout world history.” he said.
Dalio reiterated the importance of diversification, arguing that investors should not rely too heavily on a single asset class or country. He emphasized that gold is an important hedging tool during times of financial stress and recommended that gold make up 5% to 15% of a typical portfolio.
“It performs very well when other assets are not performing well,” Dalio said. “It is an effective diversifier.”
Spot gold rose to an all-time high of $4,689.39 on Tuesday as investors flocked to safe-haven assets amid rising tensions.
