Embrace the new order and seize new opportunities.
Written by: Ray Dalio, Founder of Bridgewater Associates
Translated by: Block unicorn
Now, Trump's right-wing team has achieved a decisive victory over Harris's left-wing proposal in the election, avoiding the nightmare scenario where Trump could have narrowly lost and sparked electoral disputes. With the announcement of some key appointments, a potential scenario is beginning to emerge. I want to make it clear that the picture I am painting is intended to reflect the situation as accurately as possible, not with biases of good or bad, as accuracy is crucial for making the best decisions.
The current state I see includes:
1) A large-scale reform aimed at improving government efficiency, which will provoke internal political struggles to make this vision a reality;
2) 'America First' foreign policy, and external preparations for war with China, as China is viewed as the biggest threat to the U.S. This policy has similarities to the practices of some countries in the 1930s.
Trump is selecting some individuals to assist him in achieving these goals, including Elon Musk and Vivek Ramaswamy, who will be responsible for the newly proposed Department of Government Efficiency; Matt Gaetz, who will serve as Attorney General if confirmed by the Senate, to push the legal boundaries of the new governance order; Robert F. Kennedy Jr., who will lead a complete reform of the healthcare system as Secretary of Health and Human Services; and Marco Rubio as Secretary of State, Tulsi Gabbard as Director of National Intelligence, and Pete Hegseth as Secretary of Defense, who will lead the fight against foreign adversaries. Additionally, many others—some within the government, some as external advisors, such as Tucker Carlson, Steve Bannon, and some members of the Trump family—will work alongside Trump to accomplish this mission. They are all 'victory-first' proponents loyal to the leader and the mission, aiming to overthrow the so-called 'deep state' and replace it with a new domestic order that they hope will bring about maximum economic power and confront foreign enemies.
Once these individuals are in place, this method of appointment is likely to be used to purge personnel accused of being members of the 'deep state', individuals considered to be disloyal or noncompliant with this mission. This purging will extend to various parts of the government system, including those previously thought to be less politically/ideologically controlled, such as the military, the Department of Justice, the FBI, the SEC, the Federal Reserve, the FDA, the CDC, the Department of Homeland Security, the Department of the Interior, and 'F-class' government employees (a classification that Trump hopes to reintroduce to remove civil service protections from certain government positions). Almost all appointed positions that the president can control (in cooperation with a Republican-controlled Senate, House, and Department of Justice) will be controlled to ensure that individuals aligned with Trump and his new domestic order objectives are in place. In this process, nearly everyone inside and outside the government will be seen as allies or enemies, and all available powers in the hands of Trump and his allies will be used to strike against those hindering reform. I believe they will almost certainly have a significant impact on changes in the United States and the world order, so what will these changes look like?
The transition of the American order
It is now clear that Trump and his team will reform the government and the nation like corporate acquirers dealing with inefficient companies. They will drive significant change by replacing personnel, drastically cutting costs, and introducing new technologies. One can think of the ideas conveyed by Gordon Gekko in his 'Greed is Good' speech, but it should be recognized that this approach is taken by the President of the United States towards the federal government and the nation as a whole. As mentioned, the most similar recent historical cases are extreme right-wing countries in the 1930s. It is important to clarify that I am not saying that Trump and his government are fascists, nor that they will act like fascist leaders in many respects; rather, I mean that to understand those who are currently in control and their nationalist, protectionist, top-down government-led economy and social policies, as well as their lower tolerance for internal opposition and involvement in international great power conflicts, one can reference the behavioral patterns of countries that adopted similar policies in the 1930s.
Economic reforms in the country are likely to be achieved through industrial policies aimed at improving productivity and efficiency, but issues that may hinder the implementation of these policies—such as environmental protection, addressing climate change, alleviating poverty, or promoting diversity, equity, and inclusion—will not receive much attention. Some key areas (including what I consider the most important fields of education and debt management) may be neglected (the Democrats may also ignore these areas). During the period of cooperation between Trump and Musk, they will become the primary designers and executors of the new American order.
Previously, these entities faced many restrictions on transactions, but in the future, they will be able to free themselves more from government constraints. These changes will bring great benefits to financial intermediaries, banks, and asset managers, as capital controls will be relaxed, and the Federal Reserve will face pressure to make monetary policy more accommodative, thus providing them with more freedom, funds, and credit. These policies will also benefit tech companies that support Trump, as they will be able to develop and operate largely unencumbered. Additionally, these policies will benefit lawyers, as they will be busier. I have seen that these individuals are formulating larger plans to accomplish more under the Trump administration than during the Democratic administration.
Moreover, the regulation of artificial intelligence will be relaxed, and tariffs will be used to simultaneously increase tax revenue and protect domestic producers. If the Federal Reserve continues to insist on lowering interest rates (although I believe this should not be done), it will also shift a significant amount of funds stored in money market funds and other deposits into other markets, thereby stimulating the development of markets and the economy.
Additionally, the U.S. is engaged in an economic war and a geopolitical war, and may face military conflicts with China, as well as with countries like Russia, Iran, and North Korea, which will have significant impacts on domestic security and policy. For example, to ensure that the U.S. has sufficient supplies in all critical technology areas, policies will be introduced requiring these technologies to be produced in the U.S. (e.g., by 2030, 20% of advanced chips must be produced in the U.S.) or in allied countries. This requires the central government to take strong measures and adhere to sound energy and regulatory policies to ensure these goals can be achieved.
Changes in the international order
The international order will shift between the following two forms:
a) The existing broken system created by the U.S. and its allies after World War II, relying on universally recognized behavioral standards, rules, and governance institutions such as the United Nations, WTO, International Court of Justice, IMF, and World Bank;
b) A more fragmented world order, where the U.S. will pursue an 'America First' policy and clearly delineate allies, enemies, and non-aligned countries, as more economic and geopolitical conflicts will arise in the next decade, with a higher likelihood of military wars than ever before.
In other words, the era of American-led multilateral cooperation is coming to an end, during which countries attempted to coordinate their relationships through multilateral organizations and guiding principles and rules. Instead, there will be a more self-interest-based, survival-of-the-fittest order, with the U.S. and the Dragon Country becoming the two main players, and the nature of the struggle will still be the classic 'capitalism vs. communism' confrontation (in contemporary versions).
Thus, the American-led moral and ethical perspectives—what is considered 'moral' and 'ethical'—will become less important as the U.S. will no longer be the global leader advocating and enforcing these principles. The choice of allies and enemies will be more based on strategic considerations, such as what deals can be made. The camp affiliation of various countries will become the most important issue.
The Dragon Country will be seen as the primary enemy, as it is both the strongest and ideologically the most opposed to the U.S.; meanwhile, Russia, North Korea, and Iran are also classified as enemies. In fact, China is widely regarded as the greatest threat to the U.S., even surpassing domestic threats. As for other countries, this article will not elaborate on their specific positions, but it can be said that currently all countries are categorized to some extent as allies or enemies, which will also become the guiding principle for dealing with them.
At the same time, detailed response plans for each major country and significant sectors are being formulated. All countries will face immense pressure and be offered opportunities to adjust their domestic orders to align with Trump's leadership framework; otherwise, they will face negative consequences.
This conflict between the two major powers will also create opportunities for neutral non-aligned countries, especially in the commercial sector.
The dynamic change in this international order will also have a significant impact on developing countries (the so-called 'Global South' today) and the entire world.
The Global South accounts for about 85% of the world's total population and may choose to go its own way, as the U.S. will no longer dominate a globally shared order based on specific ideals, and other countries may not be willing to follow the U.S. The U.S. and the Dragon Country will compete for allies, with the Dragon Country often seen as having a greater advantage in courting non-aligned nations due to China's greater economic importance and better performance in exercising soft power.
Given this change in the international order, non-aligned countries will benefit if they meet the following conditions:
1. Financially sound, meaning having a healthy income statement and balance sheet;
2. Internal order is orderly, and capital markets can promote the productivity of the people and the nation;
3. No involvement in international wars.
More specifically, the following points can be elaborated:
More government influence
To achieve government goals, even at the expense of free markets and profit mechanisms, the government’s influence will increase. This will spark debates between conservatives (who support a top-down direction) and groups that favor a more free market. Along this line, we should expect increased government intervention in the private market to advance its grand plans, including reshaping the economy and preparing for war. Therefore, cost efficiency and national security will become the main objectives of government collaboration with 'national champion' enterprises, not just the pursuit of profits, as profits alone cannot achieve these goals.
We need to pay attention to policy changes that will determine which economic sectors benefit the most, such as the energy and mining sectors supporting artificial intelligence technologies. While there will be winners in the free market, in some apparent cases, America's best companies may not be sufficient to meet national needs (such as in the advanced semiconductor field). Therefore, it is necessary to establish key partnerships with aligned foreign manufacturers (such as Taiwan's TSMC) to produce products in the U.S. to minimize reliance on foreign adversaries.
In addition to needing to produce key technologies domestically, it is also necessary to produce steel, automobiles, and many other essentials. This means more 'reshoring' and 'friend-shoring'. At the same time, there is a need to address potential destructive risks that could cut supply chains in various ways.
Large-scale deregulation
To support cost-effective production, large-scale deregulation policies will be implemented.
Immigration and deportation actions
Immigration policies will be strengthened, initially focusing on closing the borders and deporting undocumented immigrants with criminal records.
Trade and tariff reforms
Challenges of cooperating with American allies
In the geopolitical conflict with the Dragon Country, Japan is the most important ally of the U.S., so the current political dynamics in Japan are crucial. Other allies such as the UK and Australia are important but not great powers. Europe is weak, preoccupied with its own issues, and has no direct interests in this conflict; at the same time, Europe cannot do without the support provided by the U.S. through NATO in the face of the threat from Russia. Most other countries are reluctant to get involved in this conflict because the goals pursued by the U.S. are not as important to them as they are to the U.S., and they are more economically dependent on China than on the U.S. The emerging non-aligned forces of the Global South (which includes members of the BRICS from China and Russia) are a group of countries worthy of attention.
The high economic cost of being a world hegemon
The economic cost required to possess the most important technologies, strong military capabilities, and soft power will exceed what can be provided by profit models alone. Therefore, how to address this economic reality will require further exploration.
The necessity of reducing taxes
To maintain voter satisfaction while keeping funds in the most productive groups, taxes need to be reduced. Trump and his advisors believe that a corporate tax rate below the current level (around 20%) will increase total tax revenue and enhance productivity. This view is positive for the market.
Significant reforms of the healthcare system
Significant adjustments to the current healthcare system are expected to improve efficiency and reduce costs.
Priorities and timeline
Facing this series of daunting tasks, the new government has only a limited time to complete them, especially in the first 100 days and the next two years after taking office. Therefore, priorities must be rigorously filtered. It is currently unclear which objectives will be prioritized, nor is it clear how successful the new government will be when its ambitions encounter entrenched systemic resistance.
Undoubtedly, this will be a challenging and significant time, and we should stay alert and watch closely.