Schiff vs. Morrison: Tariffs Will Hurt Americans, Not China

In a recent debate hosted by Zero Hedge and George Gammon, Peter Schiff engages in a pointed discussion on tariffs, trade deficits, and their implications for the American economy. Facing off against the pro-tariff Spencer Morrison, Peter highlights the misguided nature of tariffs, the detrimental impact they have on domestic manufacturing, and warns of severe consequences if current trade policies persist. He also provides insight into China’s strategic interest in unloading US debt in favor of gold, and issues a stark warning on potential social turmoil in America due to economic hardship.

Peter starts by characterizing America’s current trade policy as self-inflicted economic harm, comparing April 2nd— “Liberation Day” —to a day of national economic reckoning:

Well, first of all, I do think that we may remember April 2nd kind of the way we remember Pearl Harbor Day, except we bombed ourselves instead of the Japanese. Look, Spencer, I share your concern over the trade deficits. I’ve been talking about the trade deficits for over 20 years. I mean, they were a big part of my 2007 book, Crash Proof. So I get what you’re saying there. But the trade deficits themselves are not the problem. They’re the symptom of the problem.

Peter clarifies the misconception around tariffs. Despite political rhetoric suggesting tariffs target foreign nations, the reality, he argues, is that American consumers foot the bill:

Tariffs are consumption taxes that are paid by Americans. So when Donald Trump says, ‘I’m taxing China, I’m taxing Mexico or Canada,’ he’s not. He’s taxing Americans if they buy Chinese goods, if they buy Canadian goods. It’s the Americans that pay the tax. Now, yes, early on in America, we ran on tariffs, but tariffs didn’t build America. Free market capitalism built America. The first tariffs came in the Tariff Act in 1789, right when we started the country, because we established the federal government with a taxing power, which it had no taxing power under the Articles of Confederation. So we just won the Revolutionary War. We had very little infrastructure. The government needed money. … It wasn’t about protecting American industry.

Further emphasizing this point, Peter stresses the importance of free trade as the essential engine for American manufacturing recovery. Manufacturers depend heavily on affordable imported components in their supply chains:

We need free trade to help us because the only way we can revive our manufacturing is if our manufacturers have access to the best products at the lowest cost. We don’t have no manufacturers. Why do you think so many U.S. companies that manufacture are opposed to these tariffs? Because so much of what goes into our production process is imported right now. I mean, like Callaway Golf, we make these golf clubs, but we import the grip, the head, and the shaft. So if Callaway Golf can’t import those components, no more Callaway.

Turning his attention toward China, Peter highlights China’s strategic opportunity in abandoning US treasuries and the dollar. Through accumulation of gold rather than dollars, China could dramatically benefit its own economy, boosting real wages and domestic consumption:

But you know what, China would be much better off if they just let the dollar crash, because they’ve spent a lot of time accumulating dollars and treasuries to keep the dollar high so they can keep selling us stuff that we really can’t afford. The best thing that China can do for its own economy is sell every treasury they own, dump their dollars, buy more gold. … Then a billion Chinese are going to see the real value of their wages skyrocket. 

Peter concludes with a disturbing warning about the potential social consequences of prolonged economic deterioration in America. He expresses skepticism about the resilience of contemporary American society compared with past generations, predicting that shortages and economic distress could trigger widespread social unrest:

Look, I think you overestimate a lot of the American public. They’ve been coddled for a long time. There’s a lot of Americans that think the country owes them something. I think what’s probably going to happen, rather than taking jobs, they’re going to take to the streets. We might see riots in this country maybe before the end of the year, because the products are not going to be there. Right? So even if you have your welfare, your food stamps, and you go to the store and the shelves are empty, what are you going to do? … We don’t have the type of society we had during the Great Depression, where people were rugged individuals. They had respect for other people’s property. … Now, everybody tries to cheat the government to get as much as they can.

Trump’s tariff pause was preceded by a record-breaking day for gold. Check out Peter’s analysis here.