Economists tear apart Peter Navarro's 'national security' argument

Rare Earths, Old ScamsPower Wears a FlagThe source gives away the real story even as it tries to launder it through geopolitics: Trump’s Pentagon is handing public money to rare-earth companies, and Trump’s own orbit is still positioned to profit from the same industrial scramble. Navarro dresses that up as strategic necessity. That is the cover story. The actual institutional power sits with the White House, the Pentagon, and the administration’s network of favored firms.This is not a market discovering a national emergency. It is a government deciding which companies get taxpayer backing and then hiring its own economist to explain why the favor is patriotic.The China Frame Does the WorkNavarro’s argument depends on a familiar trick: take a real global competition, inflate it into permanent siege, and use the panic to excuse domestic patronage. China’s rare-earth leverage is presented as proof that the Pentagon must subsidize selected firms. But the article itself shows the leap. Rare earths exist in many places; the constraint is cost, extraction, and industrial capacity, not magic scarcity.That matters because the frame turns policy into theater. Once “national security” is invoked, scrutiny gets treated like disloyalty, and public spending gets shielded from ordinary questions about who benefits, who decides, and who pockets the upside.This Is Cronyism With a Security BadgeRobert J. Shapiro cuts through the performance: the “national security” claim is the cover story. That is the useful sentence in the whole piece. The administration is not merely supporting industrial capacity; it is defending a model where taxpayers underwrite projects while politically connected actors claim strategic urgency.The Trump family connection around Dominari Securities and a tungsten deal in Kazakhstan is not a side detail. It is the pattern. The government announces the stakes, the administration selects the winners, and the beneficiaries arrive wrapped in the language of industrial revival.Deliberate Harm, Rebranded as StrategyNavarro’s rhetoric also obscures responsibility for the broader conflict he describes. The article notes that the U.S. spent years trying to slow and complicate China’s growth, and that China’s resource leverage is part of its response. That is not a mystery. It is a consequence of hostile statecraft followed by a complaint that the target learned to push back.Wolff is right to reject the fantasy that the solution is to “decouple” harder while pretending the resulting blowback is a surprise. The story is not about a helpless America being bullied by supply chains. It is about a great-power confrontation being managed through escalation, propaganda, and subsidy.The Pentagon as Economic ManagerThe most revealing line in Navarro’s defense is his praise for government identifying a “strategic gap,” removing obstacles, and matching innovators with industrial partners. That is not free-market language. It is state planning for private gain, with the Pentagon acting as venture capital and procurement office at once.That model is not an exception under Trump. It is the point. National security becomes the moral wrapper for industrial favoritism, while public institutions absorb the cost and private actors keep the leverage.The Pattern Beneath the HeadlinesThe larger pattern is simple: militarized economics, elite capture, and a political class that treats public money as a tool for reorganizing markets around loyalists. Navarro’s anti-China sermon is useful because it keeps attention on an external enemy and off the domestic machinery that actually allocates power.The story is not that the United States is finally waking up. It is that the administration is once again using geopolitical fear to normalize corruption, and hoping the language of competition will distract from who gets paid when the alarms go off. Get full access to Systemic Error at paulstsmith.substack.com/subscribe