US tariffs: Veteran investors raise fears about 'global efficiencies of production'

New Delhi, April 3 (IANS) Veteran hedge fund manager Ray Dalio on Thursday sounded cautiously optimistic on US reciprocal tariffs, saying it could raise revenue and help shore up domestic production capabilities.

At the same time, he also highlighted its adverse impact on "global efficiencies of production" and the potential "stagflationary effect" on the entire world.

The levies are "more deflationary for the exporting country", and "more inflationary for the importer" that imposes the tariffs, said Dalio, the chief investment officer of Bridgewater Associates, in a social media post.

Such policies make importing countries — those levying tariffs — more protected from competition. This makes them "less efficient but more capable of surviving" if aggregate domestic demand is maintained through monetary and fiscal policy, Dalio explained.

Tariffs raise the revenue for the country imposing them that both the foreign producers and the domestic consumers pay, "which makes them an attractive tax", he said.

Dalio further said that tariffs can "reduce both current account and capital account imbalances", which, in simpler words, means reducing the dependencies on foreign production and foreign capital which is especially valued in times of global geopolitical conflicts.

Meanwhile, veteran investor Jim Rogers criticised Trump for pushing the world towards a global trade war.

"I am sure of recession in the US. We haven't had a problem since 2009. A problem is overdue and it is coming," Rogers said. The challenge for the US economy is aggravated by the actions of Trump, Rogers suggested, adding that the president had "no idea what he wants".

"I know trade war is bad. It isn't good for the world. Trump thinks if there is a trade war, he will win. But he will not," said the 82-year-old, who is also co-founder of Quantum Fund.

The American President has so far announced several rounds of tariffs -- a 25 per cent tariff on all steel and aluminium imports, a 25 per cent tariff on imports from Canada and Mexico, and 10 per cent tariff on China, and a 25 per cent duty on all imported cars, trucks and auto parts. He has indicated more sector-based tariffs, such as pharmaceuticals.

--IANS

na/