Donald Trump’s second run at the presidency of the United States enthuses President Javier Milei’s government due to the ideological alignment and possible assistance with the International Monetary Fund (IMF). But the measures announced by the US president raise a series of questions regarding the future course of the global economy, not to mention the effect this will have on emerging nations like Argentina.
In principle, the personal bond between Trump and Milei and the total alignment of La Libertad Avanza with the United States will facilitate negotiations with the IMF. Argentina will reach a new agreement and fresh funds will arrive, paving the exit route from the ‘cepo’ web of currency controls.
The United States is the leading shareholder at the IMF and, as such, its internal weight within the multilateral organisation should tilt the balance in Argentina’s favour, over and above Managing Director Kristalina Georgieva’s praise for Milei and the results of Economy Minister Luis Caputo’s plan.
There is one problem: despite the ideological affinity exhibited between the Republican and La Libertad Avanza leaders, the protectionist programme of the new US administration, which includes imposing tariffs on the import of goods and services while stimulating US production, clashes with the free market message preached by Milei.
Most analysts agree that the implementation of obstacles to international trade and boosting the dollar worldwide would punish the prices of commodities, including soy, and spur an acceleration of inflation worldwide.
Potential impact
Researcher Maximiliano Gutiérrez, of the Fundación Mediterránea-IERAL, the appreciation of the greenback "plays against commodity prices.”
In his eyes, “when the dollar strengthens, the currencies of emerging countries become more expensive, which reduces the international demand for them,” while amplifying fears that these commercial measures “might decelerate the Chinese economy.”
A recent report by Portfolio Personal Inversiones (PPI) considered that Trump’s policies "could extend peso appreciation even more since they would imply a strong dollar worldwide while pushing the prices for commodities like farm produce and oil downward.”
Regarding oil, the PPI analysis maintains that the negative effect would be a double whammy. Trump’s nominee for secretary of the US Treasury, Scott Bessent, has anticipated that three million additional barrels would be produced daily. US oil output is already at a record 13.6 million barrels a day.
Consultants INVECQ suggest that Trump’s commercial and fiscal policies “could be harmful for Argentina, due to their potential impact on interest rates,” which would affect Argentina’s country risk rate and the possibility of returning to international debt markets.
"Trump has declared that he would apply tariffs of 10 to 20 percent on all imports, a levy which would be much heavier in the case of China. This would translate into higher price levels for the US economy and while the Federal Reserve would be expected to continue cutting its Federal funds rate, the reduction might be more gradual," said the firm’s analysts.
With the probable scenario of a strong dollar, INVECQ economists forecast a series of negative repercussions for our country: a reduced influx of capital, the depreciation of emerging currencies and falling commodity prices.
Wise Capital analyst Ignacio Morales highlighted that the tycoon’s arrival in the White House could imply "increased tariff levels in some countries and the reduction of corporate taxation, with the possibility of a greater fiscal deficit if the necessary adjustments of public spending are not made."
He continued: "Along with deregulation and possibly increased levels of inflation if internal costs are not balanced. As for policies to fight inflation, Trump is betting on his tax cuts helping businessmen to lower prices, pushing them towards entrepreneurship and being more competitive.”
Future US-Argentina trade tries
According to the data from the INDEC national statistics bureau, the United States was the second destination for Argentine exports after Brazil last year: 8.1 percent of sales abroad went to US territory. As for imports, the North American superpower finished in third on 10.2 percent, trailing Brazil (23.6 percent) and China (19.2 percent).
Last year Argentina exported US$6.454 billion to the United States, 14.3 percent up on 2023. Of this total, 35 percent was classified fuels and energy, followed by 32 percent for manufactures of industrial origin.
At the same time imports from the US plunged, falling 27.9 percent year-on-year due, in part, to the contraction of economic activity felt most sharply in the first half of last year. Of the total, 37 percent belonged to the category of intermediate goods, followed by fuel and lubricants (20 percent) and capital goods (15 percent).
Due to the significant increase in exports (14.3 percent) and a plunge in imports (minus 27.9 percent), there was thus a trade surplus of US$229 million with the United States last year in favour of Argentina.
A report by the ABECEB consultancy firm recently highlighted that the United States is the leading foreign investor in Argentina "with U$S30 billion and a share topping 18 percent of the total while our third trade partner behind Brazil and China with a bilateral volume of U$S12 billion, a balance of trade which is structurally in deficit."
"Within the US$30 billion entering from the United States, almost a third went on the extraction of crude oil and natural gas (US$9.278 billion), followed at a lower level by manufacturing industry (US$6.327 billion), telecommunication services (US$3.229 billion) and the auto trade (US$2.515 billions)," concludes the document.
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