No White House in my lifetime has been a fount of economic wisdom, and the Donald Trump 2.0 version is taking its place in the Pantheon of economic illiteracy. The latest salvo came from President Trump’s so-called trade guru Peter Navarro who said the following about the massive BMW plant located in Spartanburg, South Carolina:

This business model where BMW and Mercedes come into Spartanburg, South Carolina, and have us assemble German engines and Austrian transmissions. That doesn’t work for America. It’s bad for our economics. It’s bad for our national security.

On its face, this is a stunning thing for a presidential adviser to claim, but that is the mentality that seems to have permeated both the White House and much of the so-called MAGA movement. Taking Navarro’s statements at face value, one would have to conclude that any kind of foreign investment in the US is a bad thing that should be outlawed.

However, Navarro’s statements plus explanations about the inflow of foreign capital to the US should be further explained, as he has raised some important issues. While he well may fall victim in the future to Trump’s erratic temperament and be unceremoniously fired, we should take a close look at his way of thinking, as he seems to have Trump’s ear….

Austrian economics emphasizes the development of structures of production that are not distorted by central bank-fueled credit expansions and other financial tricks, creating unsustainable development that ultimately will lead to a crisis and economic downturn. It does not matter if sustainable development is financed via capital inflows from abroad or domestic savings—as long as that development reflects consumer choices.

Given the profitability of the BMW plant in South Carolina, one can say it is a good thing for our economy and Germany’s economy as well. Contra Navarro, foreign economies do not thrive because the US economy is doing poorly or vice versa. Trade is not a negative-sum or even zero-sum activity, despite what one might hear from the White House. As Murray Rothbard has written:

The free market and the free price system make goods from around the world available to consumers. The free market also gives the largest possible scope to entrepreneurs, who risk capital to allocate resources so as to satisfy the future desires of the mass of consumers as efficiently as possible. Saving and investment can then develop capital goods and increase the productivity and wages of workers, thereby increasing their standard of living. The free competitive market also rewards and stimulates technological innovation that allows the innovator to get a head start in satisfying consumer wants in new and creative ways.