American Thinker
Kaya Forest and Sierra Rayne
July 1, 2018
Peter Navarro's views, along with those of Wilbur Ross, that reducing the U.S. trade deficit would increase economic growth have created a firestorm that continues to burn. They have been attacked from all portions of the political spectrum for their position that a reduction in the trade deficit as a percentage of GDP would lead to increased GDP growth.
Supporters of Navarro's position have appeared, but there has been an overwhelming onslaught of opinion pieces against them. Effectively, Navarro is opposing the mainstream academic economic view. For that, he has been accused (wrongly, we argue) of making rookie-level mistakes in interpreting the fundamentals of his discipline.
The arguments against Navarro can be summarized as follows: (1) the equation for GDP (GDP = G + C + I + NX; where G is government purchases, C is consumption, I is investment, and NX is net exports) only subtracts the trade deficit (a negative NX) because imports are already included in G, C, and I, and thus, it is just an accounting trick that in no way implies that a trade deficit is bad for economic growth; and (2) reducing the trade deficit by curtailing imports and promoting increased consumption of domestic goods and services will only drive up the costs for consumers, thereby harming economic growth.
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https://www.americanthinker.com/blog/2018/07/are_trade_deficits_good_ask_60_years_worth_of_data.html
