US-China Talks Could Lead to Stronger Yuan, Lower Tariffs - Dalio
Investing.com - Ray Dalio, founder of Bridgewater Associates, suggested that the US and China could negotiate a deal to strengthen the Chinese yuan in exchange for lower tariffs.
Dalio's comments came after meetings with senior Chinese leaders where he shared his thoughts on the current economic situation. According to Dalio, a US-China deal could help strengthen the Chinese yuan while reducing tariffs on Chinese exports. This could have a major impact on the global economy and create a wave of changes in monetary and fiscal policies of the countries involved.
Dalio believes that the tariffs imposed by the US could lead to stagflation in the US, while causing deflation or recession in the countries that are being punished. He predicts that these impacts will force countries to adjust their policies to mitigate the undesirable consequences, mainly through fiscal and monetary measures.
In addition, Dalio also emphasized that the agreement between the US and China to strengthen the yuan may help reduce the weakening of the Chinese economy, but it could also lead to further deflation and recession in the country. This will require the Chinese government to adopt more flexible monetary and fiscal policies.
In his post, Dalio warned of imbalances in production, trade and capital, which are at unsustainable levels. He stressed that these imbalances could lead to abrupt changes in the future, which he describes in his new book, *How Countries Go Broke: The Big Cycle.*
Long-term impacts on currencies and politics
Dalio said the long-term effects of this crisis will depend on confidence in the quality of debt and capital markets as a safe store of wealth, along with the productivity levels of countries. Political systems and other factors will determine whether countries remain attractive destinations for investors and businesses.
Dalio also stressed the importance of a diversified portfolio, with a balance between asset classes and geographies. Investors need to have a clear understanding of what works well in different inflation and growth environments. He predicted that major shifts in the monetary, political and geopolitical orders will create both challenges and opportunities for investors.
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