Hedge fund billionaire Paul Tudor Jones believes the market is underestimating the economic impact of tariffs.

"We'll really have to see the impact they are going to have and if the next round of tariffs gets implemented. It's a huge deal. I would say if they get implemented and we go to the $500 billion, I think certainly it's possible it could tip us into recession," Tudor Jones said in an interview Wednesday on Bloomberg TV.

"We haven't seen anything like this in 75 years right? ... There's no playbook for this. You got this interconnected global economy that now all of a sudden for the first time in 75 years we are seeing free trade not being expanded but being diminished ... I think it would have a bigger impact economically than what the market thinks," he added.

President Donald Trump had threatened to put duties on another $300 billion in Chinese goods if a trade agreement is not reached soon. The U.S. increased tariffs last month on $200 billion worth of goods the U.S. imports from China.

Despite this threat, the S&P 500 is up 15% so far this year and less than 3% from a record.

Trump told CNBC on Monday that if Chinese leader Xi Jinping doesn't attend the G-20 summit later this month, the additional China tariffs will go into effect immediately.

Tudor Jones also told Bloomberg TV that rate cuts are coming soon, and investors should bet on stocks, fixed income and gold "at least initially," while also wagering against the dollar.

"That's what you do into the first rate cut. ... All those trades are already in process. The question is how much further they are going to go into and pass the first rate cut. I think they are all going to keep going a long way," the Tudor Investment founder said.

When asked how much the Federal Reserve will cut interest rates this year, the billionaire said "so much of it" depends on how far the U.S. goes with the tariffs.

The fed funds futures market is pointing to a nearly 80% chance of a rate cut in July and about a 60% probability of three rate cuts this year, according to the CME FedWatch tool.