Navarro vs. Griswold

by Don Boudreaux on March 8, 2017

in Balance of Payments, Myths and Fallacies, Trade

Trump trade advisor Peter Navarro is to economic science what a faith-healer is to medical science: each spews patent nonsense that uninformed people who dislike reality can interpret to be truth.

Navarro recently quoted from a paper on trade deficits written a few years ago by my Mercatus Center colleague Dan Griswold.  Dan’s paper is meant to calm the baseless hysteria over trade deficits, and so Navarro, being a trade-deficit hawk, aimed to discredit Dan’s paper.  Navarro’s aim was off.  Here’s Dan’s response to Navarro’s fallacies.  A slice from Dan’s response:

Navarro’s theory about the U.S. trade deficit is contradicted by recent U.S. economic history. If Navarro is correct, how does he explain the performance of the U.S. economy in the 1990s, when rising trade deficits were accompanied by strong economic growth, a robust increase in industrial output, and full employment? That period was also a time of falling trade barriers abroad, with the implementation of NAFTA and the Uruguay Round Agreements.


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