"To be clear, I'm not saying they're probable, and I'm not sure that my assessment is right. I'm just saying that it seems to me that the odds have increased relative to where they were, and I am just sharing the thinking that leads me to that conclusion," Mr. Dalio wrote.
Before the Trump administration's announcement on April 5 that the U.S. would add another $100 billion in tariffs on Chinese goods, Mr. Dalio said, he thought trade tensions would subside "because the Chinese are very amenable to a trade deal, because there are lots of ways to make a good deal happen, and because aggressive posturing ahead of midterm elections is understandable."
But after the administration's announcement, the Chinese government said it would match any such moves. Mr. Dalio said in his post that given China's role in financing U.S. deficits and its bond holdings, this trade war could become a capital war, which would "even be uglier than a trade war."