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Peter Schiff Talks Trade War and Politics

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The trade war between the US and China escalated again this week. The US slapped an additional $200 billion in tariffs on Chinese goods. The tax starts at 10% and will increase to 25% by the end of the year. China retaliated by announcing another $60 billion in tariffs on US goods.

As Peter Schiff noted in his most recent podcast, people still think the US will win this trade war. 

They still believe there is some type of method to the madness in that all of these tariffs are simply a down payment on a future where all the tariffs are gone … In order to get to free trade, we have to make trade less free first.”

Peter said it’s a lot like politicians claiming that deficits are a down payment toward surpluses. According to this reasoning, larger deficits now will grow the economy and lead to surpluses down the road. Peter called this “BS.” The promised surpluses never happen. If the politicians really wanted surpluses, they would just cut spending. Likewise…

If Donald Trump really wanted freer trade, he would just start cutting our own barriers to free trade, removing our own tariffs, opening up our own markets to more foreign competition and challenging the rest of the world to emulate the United States and take down their barriers as well.”

Even if the rest of the world didn’t follow suit, Americans would still benefit from more freedom of choice, more competition and lower prices.

As Mike Maharrey has said a number of times on the SchiffGold Friday Gold Wrap podcast, whenever you hear the word tariff, you should think “tax.” Peter said it’s ironic that everybody is all excited about the benefits of the Trump tax cuts and completely unconcerned about the tax hikes in the form of tariffs – taxes that will disproportionately fall on the backs of the poor and middle class.

In fact, most of the mainstream seems pretty blasé about that whole trade war. Even with the announcement of more tariffs, stock markets went up Tuesday. So, everybody is fine with the new US tariffs and with the Chinese retaliation … nobody seems to be worried.

And as Peter noted, not only are they unconcerned about the trade war, they also aren’t worried about rising interest rates. The yield on the 10-year Treasury is back about 3%. Not only that, we’re just below a key resistance level for yields and just above a key support level for bond prices. The only thing that could stop a continued rise in interest rates is a stock market selloff.

Trump claims the US is winning the trade war because the US stock markets are up and Chinese markets are down. But there is certainly no guarantee this trend will continue as the trade war escalates.

If you look at what’s happening with interest rates — again, interest rates are going to keep going up until they matter. See, right now, the stock market doesn’t care. OK. So rates are going to keep rising until the market does care. It’s the only thing I can think of that is going to stop this upward move in race is going to be a big downward move in the stock market, which is pretty much ensured because otherwise, rates are going to keep going up.”

Of course, rising interest rates create a problem in and of itself in an economy drowning in debt.

Peter went on to talk some politics, specifically the furor surrounding the confirmation of Brett Cavanaugh to the Supreme Court. Listen to the entire podcast to get Peter’s take on the allegations against the SCOTUS nominee and what it means politically going forward.

Get Peter Schiff’s latest gold market analysis – click here for a free subscription to his exclusive monthly Gold Videocast.
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