Peter Schiff: Tariffs Reveal a Weak Economy

In the latest episode of the Peter Schiff Show, Peter dives into an eventful and troubling week for the U.S. economy, marked by tumbling stocks, a weakening dollar, and escalating global market tensions. Peter explains why Trump’s tough talk on NATO and increased tariffs may be exacerbating underlying structural weaknesses in the U.S. economy. He also highlights the surprising strength in precious metals and reiterates his call for investors to move into dividend-paying foreign equities as a viable countermeasure to domestic economic turmoil.

Peter starts by surveying the damage suffered last week by Wall Street, emphasizing the significance of the sell-off across indexes:

First of all, the stock market in the U.S. had its worst week in six months. The Dow Jones was down 2.7 percent on the week, and it’s now barely up on the year. It’s up about one percent in calendar 2025. The S&P 500 dropped three and a half percent. That’s down 1.7 on the year. The NASDAQ was down 4 percent on the week, 5.6 percent on the year. And the Russell 2000, the weakest of the major indexes, is down four and a half percent on the week, 7 percent on the year.

He then turns his attention to the dollar, noting a sharp weakening against other major currencies and linking it directly to recent geopolitical shifts and Trump’s rhetoric around NATO spending:

The big news is the huge spike in yields in Germany and the rise in the euro and other currencies. The dollar had its weakest week since sometime in 2022. The dollar index was down 3.5 percent on the week. It dropped from 107.6 to close at 103.8. Now, I have been calling for a weak dollar on my last several podcasts, saying I thought the dollar had topped, that it was going down.

Peter elaborates on the geopolitical context that’s sending tremors through currency markets, specifically Trump’s vocal displeasure regarding NATO and Germany’s resulting defense spending spree:

Now, what’s going on? Basically Donald Trump told Europe and Germany, ‘You guys are on your own for defense. You’re not spending enough on defense. We don’t know that we want to defend you. Maybe we’re going to pull out of NATO,’ which, you know, I think NATO shouldn’t even exist. But in response to this, Germany said, ‘Okay, well, we’re going to spend a lot of euros, I forget exactly how many, hundreds of billions, building up our defenses.’

This German commitment to ramping up military spending, Peter argues, is helping drive yields higher in Europe, making the euro more attractive compared to the dollar. The declining dollar has severe consequences for American investors, potentially disrupting large-scale capital flows:

Look at what’s going on with the dollar. If the dollar really starts to fall against the euro, that’s another reason not to own U.S. government bonds. In fact, it’s a reason not to own U.S. stocks. A lot of Europeans have been buying U.S. stocks because U.S. stocks have been the only game in town. U.S. stocks have been going up. Well, now they’re going down, but they’re not just going down in dollars; they’re going down in euros.

Adding insult to injury, Peter highlights the burgeoning U.S. trade deficit already reaching record levels. He points to this as concrete proof that the economy is fundamentally flawed and unsustainable:

They are not looking at the enormity of these trade deficits. We got a record trade deficit. I mentioned on the last podcast, a merchandise trade deficit. The unified trade deficit in goods and services came out for January minus $131.4 billion, the worst in history. There are some factors, maybe some tariff front running. We did import a bunch of gold, but still, it’s an enormous number, and it’s indicative of an economy that is completely screwed up.

Further evidence of economic weakness emerged last week when employment numbers badly disappointed expectations, underscoring stagnation in job creation within the private sector:

It started off on Wednesday with the ADP jobs report. That’s the private sector payroll number, and that was a huge miss. They were expecting 162,000 jobs, and we got 77,000, so a big decline from the previous month’s 186 and way below even the lowest estimate, which was 140,000. The high estimate was 300,000. We were nowhere near that. There were people thinking maybe we’re going to create 300,000 jobs, and we only got 77,000.

Finally, Peter warns against believing that Trump’s tariffs and protectionist measures could ever realistically revive American industry and productivity. The uncomfortable truth, he reveals, is that the American economy no longer has the productive capacity to compete, tariff or no tariff:

But the other problem that nobody is talking about, let’s assume that Donald Trump puts a tariff on imports that is high enough to actually result in U.S. production being cheaper. Right? The tariff is now so high, I’m not going to buy the Canadian product, I’m going to buy an American product. But without the tariffs, I would buy the import. Right? Let’s assume that happens. Well, where are we going to get the productive capacity? We don’t have it.

If you missed it, be sure to check out last week’s Friday Gold Wrap!