Ray Dalio Warns: The U.S. Won’t Compete with China in Manufacturing – Ever
Billionaire investor Ray Dalio is sounding the alarm: The United States has lost the manufacturing race to China, and there’s no turning back. In a series of recent interviews, Dalio emphasized that while America may lead in AI research and innovation, China’s dominance in manufacturing—especially in semiconductors and AI applications—will keep the U.S. from regaining its competitive edge.
“We’re Not Going to Have Competitive Advantages”
Dalio has been vocal about America’s lack of cost-effective production capabilities, particularly in the AI chip sector. Speaking with Tucker Carlson, he stated:
“We design chips, but we can’t produce chips effectively. By and large, we can’t produce things—any manufactured goods—as cost-effectively.”
He elaborated that while the U.S. continues to lead in AI research due to its world-class universities and ability to attract top global talent, this intellectual dominance won’t be enough to overtake China’s production strength.
“We do not have manufacturing, and we’re not going to go back and be competitive in manufacturing with China in our lifetimes, I don’t believe.”
Dalio’s stance isn’t just about semiconductors—it extends to manufacturing as a whole. He argues that America has become too reliant on innovation while neglecting the industrial base required to turn ideas into mass-produced goods.
Why Dalio Thinks the U.S. Is Falling Behind
Dalio attributes China’s manufacturing advantage to a combination of cost efficiency, government-backed industrial policy, and a relentless focus on scaling AI applications. While U.S. companies like Nvidia continue to push the boundaries of AI chip design, China has positioned itself as the factory of the world.
“The Chinese play is going to be chips, very inexpensive chips embedded into manufactured goods,” he explained.
According to Dalio, China’s ability to integrate these low-cost chips into industries like robotics will give them an edge in AI implementation—an area where the U.S. lags.
Even with Biden’s sweeping export controls aimed at restricting China’s access to advanced chips, Dalio believes these measures won’t be enough to stop China’s momentum. The country has already begun investing heavily in homegrown AI infrastructure, with firms like DeepSeek developing low-cost alternatives to U.S. models.
The Consequences of Falling Behind
Dalio paints a stark picture of the future if the U.S. cannot close the manufacturing gap. In his view, AI is a “war no country can lose”—but America is fighting with one hand tied behind its back.
“Winning [the AI race] is more important than profits,” he said.
This sentiment is already reflected in financial markets. After DeepSeek unveiled its latest AI model, U.S. tech stocks took a massive hit, with Nvidia’s market cap plummeting by nearly $600 billion. Investors fear that China’s low-cost approach could undercut American AI companies, reducing the demand for high-end chips and infrastructure.
Furthermore, Dalio warns that an over-reliance on AI innovation—without the ability to manufacture key technologies at scale—could lead to economic instability. Drawing parallels to the dot-com bubble, he cautioned against blindly investing in overvalued AI companies, suggesting that markets may be in for a painful correction.
Is There a Way Forward?
Despite his grim outlook on manufacturing, Dalio doesn’t believe the U.S. is completely out of the AI race. He acknowledges that America still has advantages in research, legal systems, and capital markets. However, without a strong industrial strategy, those strengths may not be enough.
“We’re not going to have competitive advantages in those things [manufacturing]. What we’re competitive in is that small percentage of the population that is uniquely inventive.”
This suggests that the U.S. must rethink its approach—not just in AI but in broader industrial policy. If America continues to outsource production while focusing only on innovation, it risks losing ground not just to China, but to any country that can turn research into real-world applications more efficiently.
Dalio’s message is clear: The U.S. is at a crossroads. If it wants to remain a global superpower in AI and technology, it must find a way to bridge the gap between research and production. Otherwise, the future of manufacturing—and possibly the future of AI itself—will belong to China.
ACZ Editor: China has waged this war for 3 decades. They have stolen technology, they have taken advantage of our markets by subsidizing and dumping products and they have aggressively put American companies out of business.
And we have been oblivious.
And here I was thinking Ray Dalio was smart when all he’s done is chug the banker’s KoolAid.
He’d do well to review history, specifically in regards to why the Sun Set on the British Empire, what happened to the German Miracle, Japan Inc, and why the USA won all those wars (by building one airplane every 63 minutes.)
My dad always said, “The only true store of value lies in what man creates.” Nobody gives a crap about a deal Dalio did ten years ago, or, for matter, last week. Nor will they.
But a DaVinci painting is priceless.
To say “we can’t win” is both defeatist and slam wrong.
My offices are in an old brownfield site. The neighborhoods around me have a bunch of older, now-million-dollar homes that get more affordable the farther away they are. These are the houses that the factory that was here built for its executives, and farther out, the lower managers. Across the small creek is a beautiful mansion.
I don’t see any of the Banker’s doing that for their employees. Manufacturing builds communities, Ray.
Last Point: When I started my second company, I was told I’d have to go build the company, and its defense related product, IN CHINA!
Why? Simply because I am a manufacturer and all manufacturing is done in China.
I don’t want to go to China. I don’t want to learn Mandarin. Nor do I want to stay here and do programming. Or banking/finance. I could do those things. I don’t want to. I build stuff.
WHY CAN’T I STAY HERE and build the neat things I want to build?
Hell, the word is London is THE place to be for finance.
Ray: Leave Westport and go to London.
Bob M: we usually don’t agree on too much, we sort of agree on Ray; I like where you are coming from. I also feel today’s journalists really suck at investigative reporting seemingly willing to take top of wave without caring what’s underneath. I agree with you, a Da Vinci is priceless, we not only can win, but we can do better than win, we can win-win. We can win without manufacturing and let China take the low pay to build our cool stuff. Sun set on the British empire though? Are you sure? Maybe they don’t own colonies, but in our case they have an FDI of $630B, our fourth largest foreign investor. The others are Japan, Canada, and the Netherlands, so dumping on Canada a really good idea…. UK is a financial giant in the world. That said, yes, the US invented the industrial age, WWII was the pinnacle of success, and we kept going.
I agree with your dad. Much of our true value is in what we do and what we make. But do we have to manufacture it to make it? I do care about the past as a guidepost, a learning, for the future, but not the only way. You can’t go back, you can’t live in the past, and Dalio nailed that sentiment when he said, manufacturing will never come back in huge numbers. Nor should it. It’s well past time to turn the page if we want to do better and be happier in what we do and what we get for it.
And that’s where I agree with you that we can win, just not in manufacturing, but we can win at the bottom line, and that’s the most important part of economics. And that’s what Ray said too; it’s just our young journalists cut n paste the last guy and forgot to see what Ray actually said to FORBES in the first place.
I like what you said about your company and think that’s great. And people like you, with will, with a better idea, will succeed at built-in-USA. It can be and is done all the time. Just won’t return the US as the manufacturing leader. AT&T went through a whole phase where we pushed “made in the USofA like no tomorrow and let’s face it, we had American in the name, factories in Illinois, Louisiana, Colorado and other US locations. But it didn’t matter much to sales, good product at great prices did, not manufacturing location. I applaud what you have done, but suggest that it’s the product you created, what your company is, that’s’ more important. WeatherTech pulls it off and many others do to. It can be done.
Great products and services rise above country of origin, can even rise above low price. Gillette is my role model. Here’s a UK company, talk about high-cost labor, that sells technology in a commodity market —- razors and blades. And expensive. If there was ever a market for takeover…. Japan couldn’t do it. South Korea didn’t. China, nope. Now they are facing US internet kids, some saying made in US, and we will see if Gillette can do it again.
One last point: he’s out of New York moving to Greenwich Connecticut. Trust me, they rival London for money up there.
Here’s what Dalio really said in FORBES:
“We’re not going to have competitive advantages in those things,” the billionaire told Tucker Carlson last month. (as in manufacturing specifically) “However, the U.S. will likely hold the edge in the AI development race in innovation and research, Dalio said.
“The U.S. may have the brains in leading AI chip development globally, but China will continue to have the brawn to manufacture applications for those chips, and that won’t change anytime soon,” billionaire investor Ray Dalio says.
“We design chips, but we can’t produce chips effectively. By and large, we can’t produce things—any manufactured goods—as cost effectively,” Dalio said.
“Instead, the U.S. advantage in AI chip development rests in its continued investment in higher education and research, which has attracted a global workforce,” he argued.
“If we could work well together in that inventiveness—with rule of law working and all of that working—we have those things that are our competitive advantage,” Dalio added. “We do not have manufacturing, and we’re not going to go back and be competitive in manufacturing with China in our lifetimes, I don’t believe.”
I think you might agree with that but certainly agree that’s different than what Daniel, and others, have cherry-picked from the entire interview because China-bashing is cool now. Fact is if you erased China today, magically, just replace it with Vietnam, I think they may be next in the search for lower cost labor.
So here we are. We really don’t want low paying factory jobs, many factory jobs require college now anyway, and to get a good paying job needs college, our service workers and factory workers can’t keep up, get pissed, want to go back to the past. That’s not to say service techs can’t make a buck, many do. But on average, high school returns less pay than degrees, and each degree pays more than the last one. On average, not all the time.