Bloomberg Businessweek



As he stepped onto the stage at the annual meeting of the National Association for Business Economics, Peter Navarro knew he was facing a tough crowd—or what passes for one in the staid world of the social sciences. It was March 6, Day 46 of Donald Trump’s presidency, and Navarro, then the head of the newly created National Trade Council, was due to make a speech. His positions on trade have led many of his fellow economists to regard him as a traitor to their class. Navarro has a doctorate in economics from Harvard and has taught for more than 30 years at the University of California at Irvine’s Paul Merage School of Business, but he’s far more skeptical of free trade than many of his peers, for whom it’s not just another issue but a foundational principle. “Truly disappointing,” wrote Harvard economist Gregory Mankiw, who was President George W. Bush’s chief economic adviser for two years, in September of a Trump campaign white paper that Navarro co-wrote. It was the economist equivalent of a body slam.

At the NABE event, roughly 500 business economists had gathered at the Capital Hilton, a few blocks from the White House, to hear Navarro talk. “Good morning,” he began, an edge to his voice. The audience barely murmured. “It’s not church. Come on—good morning,” Navarro demanded. More murmurs. Giving up on that, he launched into his speech. The title, Do Trade Deficits Matter?, got right to the reason for the cool reception. Navarro argued that conventional economists think trade deficits don’t matter—and that they’re wrong. Trade is good, he said, but not when trading partners cheat.

Countries that use dollars from trade surpluses to buy up American assets, he said, are pursuing a strategy of “conquest by purchase.” He added, “Most of those in our profession have chosen to ignore the broader national security risks that stem from large and persistent trade deficits and the concomitant decline of our manufacturing and defense industrial base.” Suppose, he told the economists, the acquirer isn’t an ally but “a

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