Dalio, the billionaire founder of the world's biggest hedge fund, said China will be able to manage its economy even with a "few bumps" in the short term. China is likely more concerned about the nature of its relationship with the United States going forward, he said.
"Is this going to be a relationship in which there's a sort of give-and-take or is this going to be an antagonistic relationship?" Dalio, of Bridgewater Associates, said in a "Squawk Box" interview. "I don't think they like the term 'trade war' as to trade negotiations or disputes."
The Trump administration is attacking what it sees as unfair trade on a number of fronts. A new round of U.S. tariffs on $16 billion worth of Chinese imports kicked in last month, prompting an equivalent retaliation from Beijing.
Trump warned Friday that he was ready to hit China with an additional $267 billion worth of tariffs. On Monday, China's Foreign Ministry vowed it would respond if the United States takes any new steps on trade.
Dalio said the "warlike" trade talks have probably gotten to a point that is "discomforting" for the Chinese. He said he hopes the U.S.-China relationship doesn't follow a path that is very similar to the one with Japan.
"Where the economic tensions — competing for trade routes, competing for influence in different countries — leads to an antagonism," he said.
Separately, Dalio told CNBC on Tuesday that the current economic cycle is in the seventh inning, predicting it has about two years left to run. To help keep the economy and stocks moving forward, the Federal Reserve should not increase interest rates faster than the market expects, he said.
Bridgewater Associates, with $150 billion in assets under management, was started by Dalio in his two-bedroom apartment in New York City in 1975. Dailo, according to Forbes, has an estimated net worth of $18.1 billion.