Billionaire investor Ray Dalio says Trump’s economic agenda could be catapulting America toward ‘something worse than a recession’

A recession is typically defined as two consecutive quarters of negative GDP growth. A much more “profound” change would be a breakdown of the current monetary order (it’s worth pointing out that Dalio correctly predicted the 2008 financial crisis).

What’s worse than a recession?

Trump has triggered global economic chaos with his on-again, off-again tariffs. But Dalio fears something worse — the U.S. could end up isolated as its biggest trading partners sign cross-border agreements which exclude the world’s largest economy.

“But by and large, it’s changing the world order in a way which is making it more inefficient and actually causing growth around the United States,” Dalio said during the Paley Media Council event on May 22.

The end of the Second World War ushered in a new monetary and geopolitical world order. But history tends to repeat itself. Tariffs, combined with a high level of debt and a rising superpower challenging the existing superpower, could lead to “profound changes” in the world order.

“Such times are very much like the 1930s,” he told NBC.

“These go in cycles that can be measured, and I worry about the breakdown of that kind of order, particularly since it doesn’t need to happen,” he told NBC, adding that there are better ways to restructure debt.

Whether tariffs are implemented in a “stable” way or a “chaotic and disruptive way” can make “all the difference in the world,” he said. But so far, the tariffs have been akin to “throwing rocks into the production system.” In other words, highly disruptive.

How can you prepare your finances?

If you’re an average American, how can you heed Dalio’s warning? Start by establishing an emergency fund (if you don’t already have one) that will cover at least three to six months of expenses — perhaps more, if you’re in a job that could be impacted by tariffs and trade wars.

Pay down high-interest debt (like credit cards) and avoid building up more debt if possible. If you have a great deal of high-interest debt to get rid of, consider tapping into your home's equity through a Home Equity Line of Credit (HELOC).

A HELOC is a secured line of credit that leverages your home as collateral. Depending on the value of your home and the remaining balance on your mortgage, you may be able to borrow funds at a lower interest rate from a lender as a form of revolving credit.

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After you’ve taken care of your emergency fund and high-interest debt, you can prioritize saving for retirement and other long-term goals. If your budget is tight, you can still find a way to invest in your future through Acorns.

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