Peter Schiff: Tariffs Are a Band-Aid, Not a Cure

In Wednesday’s episode of the Peter Schiff Show, Peter traces a common thread connecting America’s trade deficits, runaway government spending, and the sovereign debt troubles now creeping across the Atlantic. He also takes a detour into history, arguing that many of the country’s deepest economic wounds, from the income tax to the Federal Reserve, trace back further than most people realize.

Peter opens by explaining why Trump’s tariff strategy misdiagnoses the real disease plaguing the American economy. He argues that tariffs treat a symptom while ignoring the underlying cause:

Now the purpose of the tariffs was to lower trade deficits. That’s why they’re there. They’re there because Trump identified these trade deficits as a big problem rather than understanding them as the consequence of the problem. But his solution to the cancer was to put a band-aid on it with tariffs and tariffs were supposed to make imports more expensive and as a result, cause Americans to buy domestic instead or result in businesses onshoring or reshoring, whatever they called it, bringing the manufacturing back, reconstituting our supply chains and our infrastructure.

Peter pivots to what he sees as a missed opportunity for genuine fiscal reform. Rather than leaning on tariffs, he argues Trump had a much more powerful tool sitting right in front of him all along:

But what Trump could have done and what he should have done and what I would do if I ever found myself in his shoes, is he could have vetoed every bill that passed the House and the Senate. All the continuing resolutions, he could have vetoed the increases in the debt ceiling. Then in order to override his veto, the House and the Senate would have to unite to get a two-thirds vote. That means all Trump would need to uphold his veto would be one-third of either body, just one-third of the House or one-third of the Senate, loyal to Trump, and he had a lot of political capital.

From domestic fiscal mismanagement, Peter turns his attention overseas, where he notes a startling shift in how bond markets are pricing sovereign risk. The country once associated with revolution and fiscal chaos is now looking more responsible than Uncle Sam:

Right now, the yield on the French 10-year bond is 4.75%. That’s actually less than the US government is paying because the US government is paying 5.28. So right now, France is a better credit risk than the United States. Maybe not for long. French bond yields could be headed a lot higher.

Peter digs into why the Eurozone’s structure encourages exactly this kind of fiscal recklessness. He explains the perverse incentives baked into a shared currency union where no single member bears the full consequences of its own overspending:

If you’re one country and you think all the other countries are going to be fiscally responsible, then you might as well be reckless. You might as well promise all kinds of goodies to your voters, run up your debt, because who cares? It’s not going to matter because the rest of the Eurozone is being responsible. One country with too much debt, it’s not going to upset the apple cart. You’re not going to have to experience the rise in interest rates that you would normally experience because you’re all part of this big community.

From there, Peter shifts into a broader historical argument, tracing America’s departure from fiscal and monetary restraint back to decisions made more than a century ago. He insists that the United States had no business entering the First World War, and that British maneuvering played a bigger role in dragging America into the conflict than most history books admit:

My beef has always been that America got involved. That was the problem. We had no business getting involved in the First World War. Absolutely none. Now, the UK roped us into this war. It wasn’t just like the Lusitania got leveled by these torpedoes out of the blue. The British had a plan. They wanted America in the war.

Peter closes with a provocative thought experiment about which historical figure, if removed from the timeline, might have spared the country its worst economic institutions. Rather than fixating on stopping a dictator decades later, he points to a much earlier turning point:

And when people say, hey, I wanna go back in time and kill Adolf Hitler, no, just stop Woodrow Wilson. You know, maybe that would have done the whole thing. You don’t have to get Hitler if you could get Woodrow Wilson because when we also got the income tax and the Federal Reserve and all this bad stuff, but you just never know what’s gonna happen. You open up a can of worms, you do not know what’s gonna come out.