Schiff on Soar Financially: Tariffs Spell Economic Pain

On a recent appearance on the Soar Financially YouTube channel, Peter discusses Trump’s tariffs, currency concerns, and the shaky state of the U.S. economy. Peter explains why tariffs won’t revive U.S. manufacturing, warns of worsening damage from a weakening dollar, and advises investors to recognize the ominous signs pointing toward a bear market.

Peter begins by challenging the common narrative that America has been victimized by unfair global trade relationships. He suggests that the reverse is true, with Americans essentially paying for real goods with inflated paper currencies:

It’s the rest of the world that’s being liberated from the burden of subsidizing the American economy. Americans are liberated from all the cheap goods that we used to get and the low interest rates and the bull market in assets. It’s a mistake to think that the world is ripping us off because we get to consume what they produce. We’re ripping them off by not paying for it. They give us real goods, and we just give them pieces of paper.

Tariffs are touted by policymakers as a remedy for America’s industrial struggles, but Peter argues that these policies do nothing to address the real reasons behind the loss of domestic manufacturing. Instead, he prescribes deeper economic reforms:

You have to understand why we lost all those factories in the first place, and putting on tariffs isn’t going to bring them back. But what we need to do to bring them back, they’re not doing. I mean, we need massive cuts to government spending, a lot more deregulation, we need higher interest rates. We need to reform entitlements. We need to cut Social Security, Medicare. We need to cut defense.

The immediacy of tariff impacts can be deceptive, as Peter emphasizes, because American companies anticipating these tariffs have stocked up on inventory ahead of time:

Well, the tariffs hit right away, but the tariffs aren’t paid until the goods are imported. And if you noticed our trade deficits in the US for the past few months have been off the charts. So what I think is that a lot of companies saw the tariffs coming, and they ordered some inventory. So they have to work that inventory off first. So those products can be sold without the tariffs.

Peter also tackles the mistaken predictions by mainstream economists and policymakers who believed tariffs could be mitigated by a strong dollar. He reveals that the weakening dollar has instead amplified the harm:

So many people were predicting that the tariffs would cause the dollar to go up. They thought that would take the sting out of the tariffs because, yes, we’d have to pay the tariffs, but we’d get to buy the foreign goods cheaper with our higher dollar. Well, instead the dollar is falling, and that’s going to augment the damage done by the tariffs. So not only are Americans going to have to pay tariffs on what they import, but what we import is going to cost us more because of the weak dollar. So it’s a double whammy.

Concluding with the issue of rebuilding industrial capacity, Peter argues strongly against the Federal Reserve’s persistent suppression of interest rates. Only genuine savings—encouraged by higher rates—can finance reindustrialization:

Where do the resources come from to make those capital investments? It has to come from savings. Well, what’s going to encourage more savings? Higher interest rates. So unless we get the higher interest rates, we’re not going to get the savings, and without the savings, we’re not going to make the capital investments to reindustrialize. So anything that they do to keep rates down, which discourages the very savings that we need to do what Trump claims he wants us to do, is all counterproductive, and it just makes the problem worse.

For more in-depth tariff analysis, check out the latest episode of Peter’s podcast!