Economist Peter Schiff rejected former White House adviser Larry Kudlow’s assertion that the United States is “China’s best customer,” arguing the roles are reversed as ballooning U.S. debt leaves Beijing financing American consumption.
What Happened: “Larry Kudlow said the U.S. is China’s best customer … We have actually been their worst customer, as we can’t pay,” Schiff wrote on X. “Funding us screwed up their economy. They suppressed their own currency and loaned us trillions so we could keep buying.”
China still holds about $1 trillion in U.S. Treasuries, though that stash is declining, reports Reuters. Schiff says those loans swelled a roughly $300 billion trade gap and now leave Beijing vulnerable as Washington turns to punitive duties.
Kudlow, now a Fox Business host, argues tariffs are throttling Chinese exports and forcing factories to close. Schiff counters that outright shortages are unlikely; instead, importers will pass higher costs along — an outcome economists observed after the 2018-19 tariff rounds, which lifted consumer prices without crimping supply, reports Reuters.
See also: Federal Reserve ‘Will Be The Last To Cut’ Rates, Says Expert Who Still Expects Four Cuts In 2025
Why It Matters: Schiff repeated recently that tariffs are chasing foreign capital out of U.S. assets and could spark a deeper financial crisis. The clash with Kudlow revives an old debate — now intensifying ahead of a fresh Trump tariff wave — over who ultimately foots the bill for protectionism.
Schiff argues that China no longer depends on American shoppers to keep its factories humming, noting that the United States accounts for just “4% of the world’s population.” In an X post, the long-time tariff critic rebuffed claims that Beijing has no alternative buyers, pointing instead to a swelling global middle class that can absorb China’s output even as the U.S. raises import duties.
Schiff’s take lands as the U.S. dollar struggles: the greenback sank to a three-year low in mid-April before clawing back a sliver of ground last week. Deutsche Bank analysts called the slide a “simultaneous collapse” across U.S. stocks, bonds and currency, casting the spotlight on broader investor jitters that, in Schiff’s view, tariffs may only deepen.
Image via Shutterstock
