Peter Schiff Rejects Trump's Interest Rate Cut Idea: “To Shift Production, We Need to Raise Interest Rates”
Washington, April 22, 2025 — Renowned economist Peter Schiff has strongly opposed former President Donald Trump's proposal to cut interest rates to help the US economy return to a manufacturing model. According to Schiff, cutting interest rates would not only not help but could also undermine efforts to restore domestic manufacturing.
Schiff argues that the transition from an import-dependent economy to a manufacturing economy requires a higher interest rate environment – in stark contrast to the popular argument in political circles that low interest rates will stimulate production and investment. “Low interest rates only encourage borrowing and spending, not savings and investment in domestic production. This process requires real capital, and that cannot happen if the cost of borrowing is cheap,” he stressed on the X platform (Twitter).
The statement came just hours after Mr. Trump publicly called on Federal Reserve Chairman Jerome Powell to cut interest rates immediately, warning that maintaining high interest rates could “derail” the economy. Trump has criticized Powell in the past, accusing him of being biased and not supporting the White House’s fiscal policy.
However, Mr. Powell continued to maintain a cautious stance, stating that any interest rate adjustment should be based on specific economic data and warning that cutting rates too soon could lead to higher inflation in the long run. Some experts say Trump’s move is only adding unnecessary political pressure to the Fed, while financial markets are already sensitive to interest rate and tariff policies.
At the same time, Schiff also pointed to a worrying trend: money is gradually flowing out of the US stock market and into international stocks. “April 21 – Easter Monday – was the clearest example. When most foreign stocks rose sharply, while the Dow continued to fall,” he said. According to data from Kobeissi Letter, the Dow is now on track for its worst April performance since 1932 – the height of the Great Depression.
In response to concerns that Trump’s tariff policies have contributed to the end of America’s special status in global trade, Schiff defended him: “It’s not Trump’s fault. He’s just the catalyst for a disaster that’s been decades in the making. The problem lies in the structure of the American economy, not one presidency.”
As the debate over monetary policy and the direction of America’s development heats up, opposing views like Schiff’s are drawing much attention from investors and policymakers. The question now is: can America truly restore its productive capacity without sacrificing financial and market stability?