Dalio Warns of ‘Capital Wars’ as Markets React to Trump Greenland Push

Billionaire investor Ray Dalio warned Tuesday that escalating tensions over Greenland could trigger what he termed capital wars, with countries potentially dumping US assets as trust in American financial leadership erodes.

Speakingto CNBC at the World Economic Forum, the Bridgewater Associates founder cautioned that geopolitical conflicts increasingly threaten to spill beyond trade disputes into capital flows and currency markets. His comments came as US stocks, bonds, and the dollar tumbled following President Donald Trump’s tariff threats against eight NATO allies opposing his campaign to acquire the Danish territory.

“On the other side of trade deficits and trade wars, there are capital and capital wars,” Dalio told CNBC. “If you take the conflicts, you can’t ignore the possibility of the capital wars. In other words, maybe there’s not the same inclination to buy at US debt and so on.”

Markets reacted sharply to Trump’s weekend announcement that he would impose 10% tariffs on Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland starting February 1, rising to 25% by June 1 unless the US acquires Greenland. The Dow Jones Industrial Average fell between 600 and 680 points, while the S&P 500 and Nasdaq Composite each dropped more than 1%, pushing both benchmarks into negative territory for the year.

The US Dollar Index posted its largest decline since Trump’s April tariff rollout, which he called Liberation Day. Treasury prices tumbled while gold surged to record highs as investors sought safety.

Dalio pointed to historical precedents where economic conflicts escalated beyond trade into capital markets. “When you have conflicts, international geopolitical conflicts, even allies do not want to hold each other’s debt,” he said. “They prefer to go to a hard currency. This is logical, and it’s factual, and it’s repeated throughout the world history.”

The founder of one of the world’s largest hedge funds expressed concern that countries holding substantial US dollars and Treasurys may become less willing to finance American deficits as confidence weakens. The US continues issuing large volumes of debt while foreign holders grow increasingly nervous about geopolitical instability.

“We know that both the holders of US dollars are denominated … and those who need it, the United States, are worried about each other,” Dalio said. “Right? So if you have other countries who are holding it, and they’re worried about each other, and we’re producing a lot of it, that’s a big issue.”

Dalio emphasized what he called the breakdown of the monetary order, noting that central banks no longer hold fiat currencies and debt as stores of wealth in the same manner. Gold posted the largest market move in 2025, outperforming technology stocks and US equities, he noted.

The investor recommended that gold comprise between 5% and 15% of diversified portfolios during periods of financial stress. “It does very well when other assets don’t do well,” Dalio said.

Trump announced the tariffs Saturday via Truth Social after eight NATO members deployed small military contingents to Greenland for a Danish-led Arctic training exercise called Arctic Endurance. The president characterized their actions as playing a “very dangerous game” that threatens global security.

European leaders issued a joint statement Sunday condemning the tariffs as undermining transatlantic relations and risking a “dangerous downward spiral.” They expressed full solidarity with Denmark and Greenland while affirming their commitment to strengthening Arctic security through NATO.

European Commission President Ursula von der Leyen called the proposed tariffs “a mistake” during her Davos appearance on Tuesday. She emphasized that tariffs would harm both European and American economies while benefiting adversaries like Russia and China, who seek to divide Western allies.

The standoff is Trump’s most aggressive push yet to acquire Greenland, which he has repeatedly called imperative for national security. Greenland’s government and Danish officials have consistently maintained the territory is not for sale, while recent polling shows 85% of Greenlanders oppose joining the United States.

NATO Secretary-General Mark Rutte confirmed he arranged meetings in Davos to discuss the Greenland situation, writing to Trump that he is “committed to finding a way forward.”

Krishna Guha, head of global policy and central banking strategy at Evercore ISI, warned that the dollar’s slide and euro’s rise signal global investors are reducing exposure to what they perceive as a volatile and unreliable United States. 

He cautioned that the impact on US assets could prove severe and lasting if Trump does not soften his stance or reach a compromise with European allies.

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