Peter Schiff: Tariffs Trigger Looming Financial Crisis

Peter returned to the mic Friday to examine the latest fallout from Trump’s trade policy. He decodes the so-called “Liberation Day” rhetoric used by the administration, reiterates the unintended economic consequences of protectionist measures, and warns that the United States might soon face an unprecedented financial crisis. Peter also discusses practical financial strategies, urging listeners toward safe haven assets like gold as a critical hedge in these uncertain economic times.

Peter starts off by questioning the surprise expressed by mainstream analysts when confronted with recent market shifts, noting that what seems unexpected to many aligns with his long-standing predictions:

I’m watching in the financial media, and people are talking about all the moves in the market that nobody expected. Everybody is talking about how nobody thought that the dollar would go down or that bonds would go down and rates would go up with tariffs. Everybody was surprised by the markets because everybody’s been saying it’s counterintuitive. Well, it’s only counterintuitive if your intuition is wrong. Everything that has happened since Liberation Day is exactly what I said would happen before Liberation Day as a response to the liberation.

Peter challenges Trump’s triumphant portrayal of reciprocal tariffs, pointing out the hidden realities beneath the surface. Instead of a victorious economic policy, he sees a misguided and harmful tax on the American people:

When Trump announced these reciprocal tariffs, he was so proud. All this fanfare, this is liberation day: ‘Hey, I got great news for you, I’m going to make everything you buy way more expensive. I’m going to hit you with the biggest tax increase ever, but he doesn’t put it in those terms.’ He’s like, ‘This is great, I’m hitting them, America is fighting back, we’ve been screwed over, we’ve been taken advantage of, now we’re fighting back, this is our Independence Day, this is our liberation.’ It was all BS. What I said at the time on my podcast is he’s liberating us from our standard of living, from all of our low-cost goods. He’s liberating us from low interest rates, he’s liberating us from our stock portfolios and our equity in those portfolios.

Furthermore, Peter exposes the deeper strategic failure of Trump’s trade policy. He argues that the president’s leverage has evaporated, noting the credibility damage caused by tariff flip-flopping:

If he actually wanted to use tariffs as a negotiation leverage, he’s lost it. He can’t negotiate anymore with the threat of tariffs because now the world knows that it’s an empty threat. He’s a paper tiger. Because if Trump puts back on those high tariffs, the markets are going to crash. The markets rallied massively because he removed those reciprocal tariffs that aren’t even reciprocal. So how is he going to put them back? Who is he fooling, right? He’s exposed himself.

Peter doesn’t mince words about where the economic situation could lead. He warns we’re standing at the brink of a severe financial crisis—one potentially far worse than the 2008 housing collapse—precisely because the next crisis will lie in sovereign debt and the Treasury market itself:

We are on the precipice of the worst financial crisis that we’ve seen, and there’s not going to be any bailouts because when the financial crisis was about the mortgage market, the government could bail out the mortgage market because the government was able to buy up the toxic assets and replace it with its own credit, so people wanted treasuries. But if the treasuries are the epicenter of the crisis, it’s a sovereign debt crisis. Who’s going to bail out the United States? The only ones that could have are China and Japan, but we’ve alienated them, so they’re not coming to our rescue. All you got is the Fed, but when the Fed bails us out, it’s massive inflation.

With inflation looming large, Peter reiterates his strong conviction in gold and gold mining stocks as reliable protection against the brewing storm within the financial system. He points out that the sector will continue to benefit from central banks adding to their gold reserves for the foreseeable future:

The primary reserve asset all around the world is going to be gold, right? I don’t think the rest of the central banks would be buying European debt. Certainly the European central banks aren’t going to be buying it, so they’re going to be in gold, right? And so these gold mining companies have huge customers. Central banks are going to be great customers, because they’re going to be price takers. Whatever the price is, they’ll buy it, because they need it.

For more analysis on last week’s events and economic figures, listen to the latest episode of the SchiffGold Gold Wrap Podcast.