Hedge fund manager Ray Dalio praised President Donald Trump‘s decision to press pause on the tariffs imposed on several of the country’s trading partners on Wednesday, with the exception of China.
What Happened: In a post on X, the billionaire founder of Bridgewater Associates said “Trump’s decision to step back from a worse way and negotiate how to deal with these imbalances is a much better way,” before urging the President to conclude the trade deal with China and focus on reducing the fiscal deficit to 3% of GDP.
Dalio suggested a deal with China that involves “appreciating the RMB [Renminbi] against the [U.S.] dollar” which can be achieved by the “Chinese selling dollar assets while also easing their fiscal and monetary policies to stimulate their demand.”
A renowned macro expert, Dalio then suggested Trump focus on “cutting the [fiscal] deficit to 3pct of GDP” before linking to a chapter of his new book ‘How Countries Go Broke’ where he describes how this is to be done without any disruption.
Why It Matters: According to Reuters, policymakers in the country were planning to further undervalue the Yuan in December to reduce the impact of tariffs. Treasury Secretary Scott Bessent addressed this issue early this week, saying, “If China tries to devalue their way out of this, then that’s a tax on the rest of the world.”
Even The Economist’s Big Mac Index, a measure of purchasing power parity between different currencies, suggests that the Yuan is substantially undervalued against the U.S. dollar, giving credence to Dalio’s suggestions.
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