Trump set to bail out Argentina, irking some in ‘America First’ camp
The Trump administration is set to provide a $20 billion financial lifeline to Argentina, a move that has sparked controversy among some of his supporters.
President Donald Trump’s decision to give Argentina a $20 billion financial lifeline has stirred anger among some of his most loyal supporters and raised questions about the limits of his “America First” approach to the global economy.
The president’s customary allergy to using taxpayer money to help other nations makes the Argentine rescue especially noteworthy. Since taking office in January, Trump has slashed U.S. foreign aid programs, slow-walked military assistance for Ukraine and demanded that close allies like South Korea and Japan pay for a greater share of their defense.
But the administration last week showed no hesitation about saving Argentina from its latest economic misfortune. It’s not that the Latin American nation is vital to the global economy. Though it was among the world’s richest countries in the early 20th century, today its annual output is roughly equal to Michigan’s.
The U.S. intervention stems from a blend of political and economic considerations. Trump is a fan of Argentine President Javier Milei, a libertarian whose attacks on government spending and red tape have made him a folk hero to the American right. This month, however, Milei’s party was trounced in provincial elections in Buenos Aires, raising doubts about his ability to retain a legislative majority in Oct. 26 midterm elections. Treasury Secretary Scott Bessent says Milei needs “a bridge to the election” so that he can win a renewed mandate for reform.
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“I don't think there's too much doubt that President Trump himself personally has instructed Secretary Bessent and the Treasury Department to come to Argentina's aid and support President Milei because President Trump wants to support President Milei,” said Douglas Rediker, chairman of International Capital Strategies, which advises institutional investors.
By trying to solve his ally’s problem, Trump is creating fresh headaches for himself. American farmers, among the president’s most loyal supporters, were outraged this past week when Argentina suspended its 26 percent export tax to encourage China to place a massive order for soybeans even as Washington was preparing to help Milei.
Amid Trump’s ongoing tariff war with Beijing, American farmers have seen their once-plentiful Chinese orders drop to zero. Argentina’s success in supplanting them in the Chinese market while receiving U.S. financial help has raised questions about the Trump administration’s priorities.
“We are uncompetitive in that China market due to government policy. On the other hand, our government gives that financial bailout to a foreign country who in turn makes their prices more competitive and sells into a market that we’re unable to access,” said Caleb Ragland, who grows soybean, wheat and corn on about 4,500 acres of land in Larue County, Kentucky.
A sprinkler system stands over browning soybean pods as harvest for the crop nears in Centreville, Maryland, on Tuesday. (Jim Watson/AFP/Getty Images)
Farmers have been struggling for months with low crop prices and high costs of operating. Trump’s promise to use some tariff revenue to ease their trade war pain — as he did during his first term — did little to calm tempers.
“A government payment is not the answer to long-term success in our industry,” said Ragland, the volunteer president of the American Soybean Association. “China consumes 61 percent of all soy consumed in the world. It’s not a market where we can just say, oh well, we’ll just sell to somebody else.”
A senior Senate Republican, Chuck Grassley of Iowa, also complained about the administration’s handling of the Argentine situation, posting on X: “Farmers VERY upset abt Argentina selling soybeans to China right after USA bail out … farmers need markets 2 boost farm economy.”
Milei took office in December 2023, vowing an economic revolution. For years, Argentine governments had spent freely even as inflation soared and living standards stagnated.
Inflation peaked at an annual rate of 289 percent four months after he was inaugurated. Known as “El Loco” or “the Madman,” Milei eliminated the government budget deficit, fired nearly 50,000 public sector employees and deregulated swaths of the economy.
His brash rejection of conventional economics drew plaudits from Trump and his allies in the Make America Great Again movement. In February, Milei drew a raucous welcome at the Conservative Political Action Conference in National Harbor, Maryland. He strode onstage and handed a chainsaw to Elon Musk, then-head of the Department of Government Efficiency, symbolizing their shared determination to carve up public agencies.
While Milei’s international profile was rising, his economic overhaul remained a work-in-progress.
In April, Argentina secured a $20 billion package of financial support from the International Monetary Fund designed to support Milei’s efforts to relax currency controls and allow the peso to trade within a floating band.
An initial IMF review this summer delivered a mixed verdict. Argentina failed to meet an early target for rebuilding its foreign currency reserves, which was essential to restore the country to stable financial footing. But Argentina was on course to grow by 5.5 percent this year, the IMF said, and by August, inflation had dropped to an annual rate of 34 percent, its lowest mark since 2018.
But as the provincial elections loomed, Milei was damaged by a corruption scandal involving his sister. His Liberty Advances party won little more than one-third of the vote in an election he had billed as a referendum on his reforms. Coming out on top with 47 percent was the Peronist opposition.
Milei’s electoral weakness sparked investor concern that he would be unable to complete his reforms. Since the Sept. 7 balloting, the Argentine stock market has dropped 10 percent.
A woman walks past a stand of empanadas on sale at a supermarket in Buenos Aires on Sept. 10. (Juan Mabromata/AFP/Getty Images)
Currency is the root of Argentina’s problems. The overvalued peso, which has lifted Argentines’ living standards, has hurt exports and led to a wider trade deficit. That has worked against efforts to rebuild foreign currency reserves, leaving the government short of the dollars it needs to service its $250 billion foreign debt.
Milei squandered a significant amount of dollar reserves to buy pesos in the open market in an effort to sustain its value, fearing a decline would fuel the inflation that he is trying to eradicate.
Bessent, the Treasury chief, who has quarterbacked the administration’s response to the Argentine dilemma, boasts significant private sector experience in turbulent currency markets. As head of Soros Fund Management’s London office, he led a team in 1992 that earned $1 billion by betting against the British pound.
The rescue he has designed has three main pillars.
The Treasury Department is negotiating a swap of $20 billion in dollars for the Argentine peso; will purchase Argentine government dollar-denominated bonds; and, is prepared to provide additional money via a currency stabilization fund, Bessent posted on X.
The treasury secretary said he also has heard from “numerous US companies who intend to make substantial foreign direct investments in Argentina” if Milei’s coalition wins next month, which could boost reserves.
So far, Bessent’s posts on X represent the only details that have been made public about the planned U.S. actions. A key unknown is what Argentina will offer as collateral in return for any U.S. loan.
“I personally think this is an incredibly risky program,” said economist Brad Setser of the Council on Foreign Relations, who served at Treasury in the Obama administration. “There should be questions, not just about why Argentina itself is such a vital interest to the U.S. But also whether the money is being used prudently.”
Bessent calls Argentina “systemically important,” suggesting its problems could damage the global financial system. But for most of the past century, the nation has cycled in and out of crises, including a 2001 sovereign debt default, without causing broader consequences. As talk of a U.S. bailout emerged in recent days, trading on Wall Street was uneventful.
“Bessent said Argentina is systemically important. I just don’t see it,” said Marc Chandler, chief market strategist for Bannockburn Capital Markets in New York.
Argentina’s real importance may lie more in the power of example. If a MAGA-style economic makeover succeeds in pulling the country out of its century-long torpor, other struggling nations could be inspired to follow Milei’s lead and validate his Trumpist assault on the public sector.
“People are concerned. People are skittish. It’s very hard to believe that it’s different this time. But I believe with President Milei, it is,” Bessent told Fox Business on Thursday.
