Ray Dalio warns of ‘export embargo war’ between U.S. and China

The ongoing trade disputes between the Trump administration and the Chinese government could spiral beyond tit-for-tat tariff impositions into a full-blown “export embargo war,” according to Ray Dalio, founder of the Westport-headquartered hedge fund Bridgewater Associates.

Dalio used his LinkedIn blog to fault the Trump administration”™s decision to shut off supplies to China”™s Huawei saying that it appeared to be a “step forward by the United States in weaponizing export controls.” Dalio observed that the Chinese could respond by not selling rare metals to U.S. companies, which he defined as a “critical import that American companies don”™t produce and need to get from China to produce many needed products in the U.S. such as mobile phones, magnets, night vision glasses, gyroscopes in jets, LED lights, glass and ceramics.”

Dalio also warned that the increase of export controls could have deleterious effects on both sides of the Pacific.

“Worth keeping in mind is how Chinese and Americans fight wars differently (the Chinese more strategically by gaining relative strength and the Americans more by exchanging blows until one side gives up),” he said. “While all of this enters into my thinking, what is now most important at this time of brinksmanship is seeing what actually happens next ”“ i.e. whether we see the ”˜tariff war”™ slip into an ”˜export embargo war”™ intended to shut parts of the other country down.”