Peter Schiff Gives Trump's 30% Tariff Threat On Mexico, EU A Reality Check: America Relies On Deficits To Make Up For Excess Debt And Consumption

President Donald Trump’s latest threats to impose a 30% tariff on all imports from Mexico and the European Union are drawing criticism from prominent economist Peter Schiff.

What Happened: On Sunday, in a post on X, Schiff warned against Trump’s justification for the move, which is to reduce trade deficits with these regions, which he believes are a sign of unfair economic arrangements.

Schiff disagrees with this, saying that the trade deficits are the result of deeper structural issues within the American economy and have little to do with bad or unfair trade deals. “He blames unfair trade for our deficits,” Schiff says, adding that they are instead the result of excessive debt and consumption, alongside inadequate savings and investment.

See Also: Private Credit Market Sees Opportunity Amid Donald Trump’s Tariff Policies, Moody’s Reports

He also states that the U.S. relies on this trade deficit to compensate for these other, deeper structural issues, in a warning against Trump’s trade policies.

Why It Matters: This comes amid Trump’s latest letters on Friday, addressed to Mexico and the European Union, notifying both regions of a 30% tariff on all imports, starting August 1. In his letter, Trump cited unresolved trade imbalances, alongside issues with narcotics trafficking, for this decision.

Schiff has repeatedly warned that only a major decline in the U.S. Dollar or “very high tariffs” can help reduce trade deficits in the country.

Without this, he says, tariffs only serve to make the trade deficit larger, with additional inflationary and interest rate pressures.

Former Treasury Secretary Lawrence Summers held a similar view a couple of months ago, at the very onset of Trump’s “Liberation Day” tariffs, when he rejected the narrative that China was cheating at trade, saying that “if China wants to sell us things at really low prices,” they should be allowed to, since “it’s a good deal for us.”

Image by Rokas Tenys via Shutterstock

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