One day Trump is on Twitter ratcheting up the trade war with China and the next he is pulling back and saying a deal is close.

This back-and-forth has been yo-yo-ing markets for months. Peter Schiff recently appeared on RT Boom Bust to talk about the trade war. He said he doesn’t think there’s much substance to promises of a big trade war win. And even if the trade war is resolved, it’s not going to fix the fundamental problems underlying the US economy.

The interview kicked off with a discussion about how every trade war tweet by the president sends the markets scurrying up or down.

“I think Trump has been dangling the prospects of this great trade deal in front of the markets and he intends to dangle it in front of voters, I think, in November 2020. But I don’t think there’s any substance. I think if you actually look at what’s going on, the trade war is heating up. Both sides are ratcheting up their tariffs. So, to me, Trump is simply trying to do damage control. He’s trying to talk up, or maybe tweet up the markets. I don’t know how much longer the markets are going to buy this. I mean, for now, they continue to trade on every tweet but at some point, they have to realize no progress is being made.”

So, how long could the trade war fight last? Peter said it could last through the election. Even then, it won’t be a US victory.

“I don’t think there’s any way we’re going to win the fight, and I don’t believe that China is paying the tariffs like the president says. I think American consumers pay the tariffs when they buy Chinese goods that are subject to the tariff.”

Peter conceded that the Chinese yuan has lost value since the beginning of the trade war. The question is will it continue to lose value? Or will it actually reverse?

“I think eventually you’re going to see the yuan moving higher against the dollar, because I think the US economy, if you take away all the trade noise, the US economy is already weakening and its heading into a recession, and would be going into recession even if there was no trade war. So, I think the Fed is going back to zero. I think they’re going back to quantitative easing. And all of this is negative for the US dollar.”

Boom Bust host Daniel Brito said Trump has turned bluffing in the trade war into an art form, but he’s talking tough now as if the US has the upper hand. Peter said he’s never thought that was the case.

“I think that China, if you look at the trade relationship between the two countries, America has been benefitting at China’s expense because we get valuable consumer goods that we can’t produce ourselves. They make our lives better. And we get money. The Chinese loan us money to finance our huge deficits. So, that means we don’t have to buy the Treasurys ourselves, so that money is available for other purposes. But all the Chinese get in exchange for the valuable products that they supply us with is dollars that we create out of thin air. And then they use them to buy low-yielding US Treasurys or other dollar-denominated debt. So, I think the relationship is actually hurting and undermining the Chinese economy, and it’s been doing that for years. And I think the sooner they can wean themselves off of that relationship the better.”

Trump announced last week that he has reached a trade deal with Japan, although Prime Minister Shinzō Abe says there are still some details to work out. Peter said he would have to see the deal to know whether it was really going to be beneficial.

“I like free trade. The problem is most of these trade deals don’t give you free trade. They’re all loaded up with all sorts of gimmicks and so I doubt it.”

Peter said we really need to focus on the real problems underlying the US economy.

“None of these trade deals are going to fix it. We have to get to the root cause of these problems, which is excess government spending, excess regulation, and artificially low-interest rates. We need higher interest rates to encourage the savings to have the capital investment that we need to produce stuff ourselves instead of importing it from other countries.”

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