Trump says ‘we’re gone’ if Milei loses vote, rattling market

US President Donald Trump suggested the US$20-billion lifeline the United States is planning for Argentina could be contingent on libertarian leader Javier Milei’s success in the midterm elections, sending fresh jitters through the currency market.

“If he wins we’re staying with him, and if he doesn’t win we’re gone,” Trump told reporters Tuesday, adding that the governments also planned to discuss a potential free-trade agreement.

Short-term peso interest rates jumped back into the triple digits as neither the US nor Argentina intervened in the currency market for a second straight trading day. Argentina’s bonds dropped across the curve, reversing earlier gains. 

While Trump at other points batted away suggestions that US assistance was intended to boost Milei politically, he also repeatedly emphasised that the US$20–billion currency swap – meant to help shore up Argentina’s peso and calm financial markets in the South American nation – was intended as a signal of support for the Argentine leader’s economic philosophy.

“We want to help Argentina,” Trump said, touting trade as a way to bolster the country. “They have great product, and we used to do a lot of trade.”

Milei is less than two weeks out from a pivotal midterm election that is set to decide the future of his reform efforts. A libertarian economist, Argentina's president has brandished a chainsaw to champion cuts to government spending and a series of austerity measures that proved unpopular with voters, helping drive higher disapproval ratings. 

Extraordinary financial assistance from the United States, meanwhile, is also doing little to boost Milei’s standing with voters. Should his libertarian party get between 35 percent and 40 percent of the congressional vote on October 26, investors would consider that a victory. Anything less than 30 percent, however, would likely trigger a large sell-off.

“Conditioning the support of the US administration to a Milei victory in an explicit way could actually be a political blow to the libertarians’ campaign,” Ramiro Blazquez, a strategist at StoneX in Buenos Aires, said by email.

The country’s dollar notes maturing in 2035 fell by 2.4 cents on the dollar to trade around 57 cents, according to indicative pricing data compiled by Bloomberg. That’s the biggest drop since Sept. 30.

The lack of intervention in the currency market by either government also weighed on trading. The overnight collateralised peso repo rate – known as caución in Argentina – surged to 115 percent from 77.5 percent on Monday. The Argentine peso spot rate dropped almost one percent to 1,360 per dollar Tuesday, and peso futures also fell.

While this month’s vote will refresh almost half of Congress, Argentina’s next presidential election is in 2027. Milei’s spokesman, Manuel Adorni, pointed toward that future vote as the turning point for the country.

“Today in Argentina there is a government that defends the correct ideas,” he said in a post on X. “If Argentina were to follow the path of socialism or backslide in 2027, none of this would happen and we would go back.”

Trump was also asked about China’s purchase of soybeans from Argentina and plans to charge port fees for US ships, but brushed the questions aside. “I guess it’s natural, it’s China, and it’s natural,” Trump said. “It’s not going to mean anything in the end.”

The US president did suggest he would be unhappy if Argentina was otherwise deepening its ties with Beijing. “Can do some trade, but you certainly shouldn’t be doing beyond that,” Trump said. “Certainly shouldn’t be doing anything having to do with the military with China.”

Treasury Secretary Scott Bessent interjected to say that the US assistance wasn’t predicated on Argentina ending its US$18-billion currency swap with China. “Any reporting to that effect is incorrect,” he said. “This aid is predicated on robust policies, and going back to the failed Peronist policies, would cause a US rethink.”

Asked what comments about Argentina minimising Chinese influence referred to, Bessent responded: “I was referring more to ports, military bases, observation facilities that have been created in Argentina.”

Trump was also asked if Milei should dollarise Argentina’s economy, as he pledged to do during his 2023 campaign. Trump deferred the question to Bessent, who said the US was “very happy with the current currency arrangement.”

Since April, Argentina has let the peso float within a range as part of its agreement with the International Monetary Fund. However, authorities have intervened multiple times within the range, which expands in either direction each day. 

The US Treasury directly purchased pesos last week after unsuccessful efforts by Argentine authorities to stem the currency’s slide. Washington is willing to continue purchasing pesos and bonds, Economy Minister Luis Caputo said Sunday in a local television interview.

Milei’s deregulation czar, Federico Sturzenegger, told the Bloomberg Global Regulatory Forum on Tuesday that Argentina was “going to a floating exchange rate pretty soon.” He later clarified his remarks to say the trading bands would “widen over time allowing, eventually, to transition to a floating exchange rate.”

It remains unclear how much the United States spent in Argentina’s currency market and additional details of the financial lifeline have yet to be announced. Neither the White House nor the Treasury immediately responded to a request for comment.

‘Some pain’

Trump broadly offered support for Milei’s economic approach, saying his counterpart was “really on the verge of tremendous economic success” in the crisis-prone nation that has repeatedly defaulted on its sovereign debt. 

“It’s a very big election being watched by the world because he’s done an incredible job. But with that comes some pain, and they have some pain, and now they’re coming out of it. I think the victory is very important,” Trump said.

The financial lifeline, announced by Bessent last week, represents an extraordinary US intervention into foreign markets – one that critics have said conflicts with Trump’s “America First” agenda and imperils taxpayer dollars.

Some Democrats have called the arrangement politically motivated, aimed at shoring up a leader seen as an ideological ally of Trump’s, and have questioned the influence of potential beneficiaries, including hedge funds and asset managers suspected of lobbying for the deal. 

US farming interests also have taken affront, since the currency swap follows Argentina’s sale of millions of tons of soybeans to China – which has paused purchases of the US commodity amid trade tensions. 

Nevertheless, supporters have cast the currency swap as a bid to buy time for Argentina’s stabilisation and Milei’s reforms. Bessent also has defended the deal, describing a strong, stable Argentina as in the US strategic interest.