- Conflict between US and China could be even more devastating to the global economy than war in Ukraine, Ray Dalio said.
- In a blog post titled "The US-China Tit-For-Tat Escalations Are Very Dangerous," he said US-China tensions over Taiwan are following a path to war.
- Dalio noted that China accounts for around 15% of global exports compared to Russia's 2%.
Russia's war on Ukraine has wreaked havoc on energy markets and world trade, but a conflict between the US and China could do even more damage to the global economy, billionaire investor Ray Dalio warned.
In a blog post on Monday titled "The US-China Tit-For-Tat Escalations Are Very Dangerous," he said US-China tensions over Taiwan are following a path to war.
"If events continued to follow this path, this conflict will have a much larger global impact than the Russia-Ukraine war because it is between the world's leading superpowers that are economically much larger and much more intertwined," Dalio wrote, calling Russia-Ukraine conflict "minor by comparison."
US House Speaker Nancy Pelosi's visit to Taiwan last week triggered a new round of escalation from China, which fired missiles over the island in retaliation. China also sanctioned Pelosi and canceled scheduled meetings with US leaders, CNN reported, raising concerns that the US may impose its own sanctions on China.
Dalio noted that China accounts for around 15% of global exports compared to Russia's 2%, according to data from Statista and the United Nations.
China also makes up 19% of US imports for manufactured goods, according to the Office of the US Trade Representative, meaning that any economic sanctions placed on China would send a chunk of the American economy into trouble and create a domino-chain of consequences for the rest of the world.
"Imagine what sanctions on China would be like for the world. Supply chains would collapse, economic activity would dive, and inflation would soar," he said. And those were just the impacts of economic warfare – military war could make the situation far worse.
But the star investor and hedge fund manager does see some hope, as there are leaders in both countries who are looking to avoid conflict. The dynamic between the two though is still precarious:
"Some people on both sides want to intensify the fight because to not do so in the face of provocation [would] be perceived as a sign of weakness," Dalio said. "That dynamic of upping the ante to avoid looking like one is backing down has throughout history been shown to be a very dangerous dynamic."