U.S. President Donald Trump’s vision of how to make America great again has gotten a lot more geographically expansive, with the latest example a multibillion-dollar lifeline to an ideological ally some 5,000 miles away.
The Trump administration, through Treasury Secretary Scott Bessent, has essentially put the full faith and credit of the U.S. government behind Argentina’s embattled president, libertarian Javier Milei, whose drastic economic reforms have only partially worked and who faces a critical congressional election later this month. The United States and Argentina are in talks over the possibility of tapping as much as $20 billion in emergency support to prop up the Argentine peso, buy Argentine bonds, and keep Milei in office.
The question is why. At first, Bessent said Argentina’s fiscal and financial woes were of systemic interest to the United States, which, given the miniscule trade and financial flows between the two, would only be true if Washington lent the country $20 billion. Then it would be.
“I don’t think it is of systemic interest,” said Brad Setser, a senior fellow for international economics at the Council on Foreign Relations and former U.S. Treasury official. “Presumably, he meant Argentina is a model they believe in.”
How Argentina got into trouble is an old story and a familiar one, though only partially Milei’s fault. Milei came into office two years ago vowing to fix all the damage wrought by years of misguided Peronist policies, and he was in some senses successful. He brought inflation down from nearly hyper to something merely annoying: The fact that annualized inflation is only 20 percent is considered a victory by Argentine standards.
But at the same time, a lot of Milei’s shock therapy has been painful. Unemployment is creeping up in part because the stronger peso that Milei championed to slay the dragon of inflation has made the economy less competitive. Most recently, the Argentine central bank spent money it barely had to prop up the peso as worries about the future of the country’s politics, and economic choices, made investors nervous. The capstone was a devastating electoral loss by Milei’s party last month to a Peronist candidate in the populous province of Buenos Aires, suggesting that Milei’s economic reforms could lead disillusioned voters to opt for a return to profligacy.
As Nobel-winning economist Paul Krugman has noted, Argentina’s dilemma is not novel. It resembles previous Latin American financial crises where an overvalued currency meant to fight inflation leads to stagnation, which then leads to a lack of confidence. “Argentina is experiencing a classic currency crisis, with capital fleeing the country because investors fear a peso collapse, and this capital flight [is] pushing the peso ever closer to collapse,” Krugman wrote in his Substack last week.
On the surface, the U.S. bailout plan for Argentina has precedents. The United States came to Mexico’s rescue in 1995 during the “tequilazo” crisis in a similar fashion, backstopping a sliding peso with U.S. dollars. But Mexico, a neighbor and recent signatory of the North American Free Trade Agreement, really was of systemic interest to the United States.
It’s harder to make that case for Argentina—unless Krugman and others, such as Sen. Elizabeth Warren, are right and it is purely political. Milei was a Trump favorite even before he was elected, and his libertarian views of how to fix Argentina’s economy, while at odds with the statism on display in Washington, still strike the right chords.
Or as Bessent himself said last week in presenting Milei with an Atlantic Council Global Citizen Award while preparing a U.S. government-backed bailout: “One man recognized government wasn’t the solution—it was the problem. One man had the courage to stand up for Argentina by standing against the establishment. … Tonight, we recognize President Javier Milei for his tireless efforts to Make Argentina Great Again.”
The contrast between the Trump administration’s approach to Argentina and Brazil is illustrative. Brazil, one of the 10 biggest economies in the world, has a left-leaning president and a court system that prosecutes coup plotters. Both have triggered Trump, leading first to arbitrary 50 percent tariffs on Brazilian exports and most recently to a Treasury Department sanctions designation for Brazilian judges who apply their own country’s laws.
It is not a departure for the Trump administration. Vice President J.D. Vance famously scolded Europeans this year in Munich over “free speech,” and Trump and his delegates have actively promoted right-wing political formations in Europe, including the far-right Alternative for Germany.
But there is still a paradox in Milei’s desperation. Argentina is the largest borrower from the International Monetary Fund, with another $20 billion dollop doled out this year. It does raise the question of how, if ever, any U.S. funds might ever be repaid.
“If Milei wants to be a libertarian, he needs to rely on his own resources, and yet the peso is only sustainable on borrowed money,” Setser said.
There is another irony in the U.S. rush to assist Argentina. To earn hard currency, Milei’s government recently suspended taxes on exports of agricultural goods: While tax revenue is needed to balance the books, real money is needed to rebuild depleted reserves. China promptly swooped in and bought up a lot of Argentina’s soy crop. The losers were U.S. farmers, who have already seen their export markets devastated—twice—by Trump’s trade wars (though he recently vowed to placate them with subsidies, again). Bessent recently said ending that tax holiday, and hobbling Argentine exports, would be part of the bilateral discussions.
But even Washington’s lifeline may not be enough to save the peso, though the promised availability of dollars has already calmed Argentine markets a bit. In a research note, Oxford Economics said even a robust U.S. financial support package may not be enough: “Stabilisation could prove elusive if markets anticipate a government defeat in the 2027 presidential election.”
Unlike other, previous U.S. financial interventions, this may be less of a bridge loan and more of a bridge to nowhere.
“I doubt that this will work even to get Milei to the election without a forced devaluation. If they use the money, how do you get the money back?” Setser said.
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