Trade deficits are irrelevant to trade policy, but for President Trump they seem like the only thing that matters. A speech last week by Peter Navarro, director of the White House’s Office of Trade and Manufacturing Policy, helps explain why. The author of “Death By China” invoked a real-estate analogy to justify his protectionism.

“Running up a trade deficit every year . . . of over half a trillion dollars,” Mr. Navarro said, is “a pure transfer of wealth abroad: jobs, factories, money. That’s like a reverse mortgage on this...