Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, said the United States is losing the trust of its allies and that the world order is entering a kind of China-centered "tribute system." As the war the United States is waging with Iran stalls, skepticism has spread among allies that the United States will not be able to protect them in an emergency, analysts said.
On the 16th (local time), Dalio said in a Bloomberg TV interview that "global perceptions are shifting as people watch whether the United States has the ability to win the war with Iran," adding that the global balance of power is undergoing upheaval. He said, "The United States has about 750 military bases in 80 countries around the world, which is based on the premise that the United States will come defend them in an emergency," and analyzed, "But as doubts grow over whether it can even win the war with Iran, there are major changes in how countries perceive external leadership."
Dalio said he recently confirmed this shift in perception firsthand during a monthlong tour of several Asian countries. He noted that national leaders flocked to Beijing before and after U.S. President Donald Trump held a summit with Chinese President Xi Jinping. Timed to Trump's visit to China, Pakistan President Asif Ali Zardari and Prime Minister Shehbaz Sharif, and Russia President Vladimir Putin, among other leaders, planned to visit China. Dalio assessed that this diplomatic current of many world leaders heading to Beijing, which wields formidable influence, amounts to a modern-day tribute system that acknowledges relative power differentials.
Dalio said, "We are seeing numerous leaders heading to China," explaining, "This is like the tribute system that existed in history, where countries come to acknowledge power differences." This is interpreted as a coexistence order in which, rather than territorial domination or coercion by force, smaller states acknowledge and pay respect to a great power's superior position, and in return the great power guarantees the smaller states' trade and security.
Dalio assessed that China recognizes visiting heads of state and places great importance on their visits. Dalio emphasized, "This tribute system is a thoroughly hierarchical system," adding, "The most important factors in relations with other countries are the effects on trade and security, and we are entering a new tribute-system-style alignment in which relative power is central." China's economy has more than tripled over the past 20 years and has now risen to about 60% to 70% the size of the U.S. economy.
This geopolitical shift in hegemony is expected to hit global financial markets directly. Dalio advised that investors should overhaul their asset defense strategies as an era of turbulence arrives with reserve currency values under threat. He said, "Investors have to navigate a turbulent period in which currency values are at risk," and advised, "In an uncertain era when the world order is being reshaped, it is essential to secure asset liquidity and diversify portfolios, including gold."