China is winning the trade war against the U.S., and the two superpowers are “on the brink” of military conflict, Bridgewater Associates hedge fund manager Ray Dalio said at this week’s World Economic Summit in Dubai.
China’s renminbi is being used more commonly than the U.S. dollar in international trade, said Dalio, the New York Post reports.
“China’s winning the trade war, if you just take the numbers — the percentage of world trade and dominance,” said Dalio, known for his expertise on currencies and interest rates.
While the U.S. and China are on the brink of conflict due to the U.S. shooting down what is believed to be a Chinese spy balloon off the East coast, Dalio said, “Brink doesn’t mean we’ll go over the brink. Hopefully, we don’t go over the brink.”
Commerce Department figures support Dalio’s statements on U.S.-China trade, showing that America’s trade deficit with China rose 8.3% in 2022 to $382.9 billion, the second-highest on record, The New York Times reports.
This was even in spite of American companies sourcing goods from other nations, including Mexico, Canada, India, South Korea, Vietnam and Taiwan.
Overall, the U.S. trade deficit in 2022 reached a record $948.1 billion, up $103 billion from the year before. This also was despite the U.S. exporting more crude and fuel oil, and natural gas to Europe.
“We still have a long way to go to reshore supply chains and bring production back to America,” says Scott Paul, president of trade group Alliance for American Manufacturing. “We’ve seen significant policy shifts that favor U.S. manufacturing over the past couple of years — and we must continue to build on those.”
Former President Donald Trump habitually called out China for its trade dominance over the U.S. and urged for more manufacturing to be sourced domestically. Even previous administrations have accused Beijing of intellectual property theft — but Biden has largely remained silent on the U.S.-China trade gap, the NYT reports.
However, U.S. has been gaining some leverage in its trade with China in recent years, thanks in part to Trump-era tariffs, according to the NYT and the Peterson Institute for International Economics.
U.S. companies have also dialed back their direct investment into China to a low of $8.7 billion in 2020, from a peak of $21 billion in 2008, according to Rhodium Group.
While China is a definite threat to U.S. trade and security, said the hedge fund manager — who popularized many commonly used economic principles, such as risk parity and currency overlay — there are many internal battles America must conquer at home.
Income inequality, the opioid crisis, education and infrastructure deterioration are among the nation’s internal crises, Dalio said.
“The primary threat is internal,” he said.
America’s political leaders need to ensure the country is “strong and healthy” in order to be “domestically and internationally well-off,” Dalio concluded.