Fear of Trade war and other wars

04-26

By Ray Dalio

Politics is playing a bigger role in influencing the markets than is typical, and I (and others) am still trying to figure out where Donald Trump is taking us, especially as it regards trade and other wars. Besides prompting me to think hard and dig deep into what』s now happening, it is leading me to delve deeper into past trade and military wars to see their effects on economies and markets. I will pass along my findings when I complete the examination. In the meantime, I will share some of my ruminations for the little that they are worth.

Since Donald Trump sounds more willing to enter into a trade war than any president since Herbert Hoover, and since starting a trade war is like throwing rocks in the gears of the world economy, his recent moves are naturally scary to the markets. However, thus far what he has actually done is modest and appears significantly politically motivated, so what we are seeing could be a negotiation tactic and a political move that needn』t mean a trade war is likely. Also, as expected, the Chinese response to his move was modest, so thus far we have seen a lot of threatening without much damage, which is understandable ahead of midterm elections. If this is the negotiating that I expect, the next move will be toward some trade agreements that will look like victories for Trump, so tensions will subside and the markets will like it. That』s the most likely scenario. I would consider that scenario to be broken if there is any new worsening in trade relations with China from here. We will find out soon enough.

At the same time, I can』t help but wonder if the trade war is part of a bigger impending conflict. The analogy with the late 1930s continues to echo in my head—i.e., the confluence of wealth gaps and economic stress leading to moves to populism of both the left (communism) and the right (fascism), accompanied by the shifts in the world order from a dominant power coming out of the Great War to a rising power rivaling that dominant power (if you don』t know about this dynamic, read up on Thucydides』s Trap), all leading to military conflicts. During such times, chaotic democracy and laissez-faire commerce tend to give way to more directed authoritarianism and 「state capitalism」 (i.e., government redirecting 「business」 activities into the service of the country』s interests and away from the service of the shareholders』 interests). It is notable that Donald Trump, at the same time as his tariffs were announced, changed key leaders from moderates to hardliners, who are more inclined to believe that broader conflicts are likely/warranted. One could conjecture that some of Donald Trump』s recent interventions in the economy—e.g., his executive order that prevented Broadcom from buying Qualcomm, protectionism to assure domestic production capabilities, and limiting of Chinese purchases of technology and other key resource companies—are all straws in the wind pointing in that direction.

We are certainly in a period in which the world order is transitioning from being U.S.-dominated to being multipolar (so Thucydides』s Trap is worth considering), wealth gaps are large and rising, and populism, nationalism, and militarism also appear to be rising—and these factors will likely play larger roles in affecting economies and markets (e.g., populism in Mexico as manifest in the upcoming July election could have a bigger effect on Mexico』s economy and markets than anything else). At such times, I believe that it is especially important to keep one』s portfolio liquid (to be flexible) and diversified (to not have concentrated risks).

翻譯： @陳小胖

政治目前在影響市場方面發揮的作用比它往常典型的作用更大。我（還有其他人）仍在試圖弄清楚唐納德·特朗普將把我們帶到何處，特別是在貿易戰和其他戰爭方面。除了促使我認真思考和深入了解現在發生的事情外，它還引導我深入研究過去的貿易和軍事戰爭並且觀察它們對經濟和市場的影響。完成研究後，我將把研究結果傳遞給大家。在此期間，我也同時會分享一些有價值的想法。

由於唐納德·特朗普看起來比自赫伯特·胡佛以來的任何一任總統更願意發動一場貿易戰，而發動貿易戰就像在世界經濟的齒輪上扔出一塊石頭一樣，他最近的舉動對市場自然是可怕的。然而，到目前為止，他的舉動實質上是溫和的，而且明顯具有政治動機，所以我們可以把這些舉動視作一種談判策略和一場不太可能導致真正貿易戰的政治行動。同樣，正如預期的那樣，中國對他的行動的反應是溫和的，因此到目前為止，我們看到了許多威脅，但他們並未造成顯著的危害，這些在中期選舉之前是可以理解的。如果這是我所預想中的談判策略，下一步將是達成一些貿易協議，這些協議看起來像是特朗普的勝利，所以緊張關係將會平息，市場也會喜歡它。這是最有可能發生的情況。我能想到破壞這種局面的情況是，和中國的貿易關係有新的惡化因素，我們將拭目以待。

與此同時，我不禁思考，貿易戰是否是更大衝突的一部分。我將現狀與30年代後期情況進行類比，比如財富差距和經濟壓力的匯聚導致左派（共產主義）和右派（法西斯主義）的民粹主義運動，伴隨而來的是世界秩序從來自一戰的主導性力量轉移到一個與之競爭的新崛起勢力（如果你不知道這個動態，讀一讀修昔底德陷阱），這些都導致了軍事衝突。在這種時期，混亂的民主和自由的商業將讓位給更直接的集權主義和「國家資本主義」（如政府將「商業」活動重新定向到為國家利益服務，而遠非為股東利益服務）。值得注意的是，唐納德·特朗普在宣布他的關稅政策的同時，將關鍵領袖從溫和派換成了強硬派，他們更傾向於認為，更廣泛的衝突是可能發生的。我們可以推測，唐納德·特朗普最近對經濟施加的一系列干預，都指向了那個方向的：比如他的行政命令阻止博通收購高通、保護主義來保證國內的生產能力、對中國購買有關技術和其他關鍵資源公司的限制。

毫無疑問，我們處在世界秩序由從美國主導到多極主導的過渡時期（所以考慮修昔底德陷阱是值得的），貧富差距大並且將繼續擴大，民粹主義、民族主義和軍國主義似乎也在上升，這些因素可能在影響經濟和市場方面發揮更大作用（例如民粹主義在墨西哥即將到來的七月大選中可能對經濟和市場產生比其他因素更大的影響）。在這種情況下，我認為保持投資組合的流動性（保持靈活度）和多樣化（沒有集中的風險）是尤其重要的。