Looking at their hairstyles, social media and tactics against opponents, US President Donald Trump and Argentina's President Javier Milei seem to be cut from the same cloth. But style and substance are two different things.
The South American leader — with a chainsaw on his desk — has demonstrated an almost monomaniacal resolve to cutting spending, chewing into the social safety net at great risk to his political popularity. Thus far, the US president-elect has avoided talk of deficit-reducing actions that would move the needle, like revising Social Security, Medicare or defence spending.
Instead, Trump has appointed Elon Musk and Vivek Ramaswamy to find ways to save money. Their Department of Government Efficiency, or DOGE, is mostly focusing on departments that could be shuttered or scaled back, though experts say serious deficit reduction would require much more draconian moves.
Both Trump and Milei aim to deregulate and cut government bureaucracy, and Ramaswamy boasted on X that he has “a reasonable formula to fix the US government: Milei-style cuts, on steroids.” But DOGE is unlikely to truly mimic Milei’s across-the-board austerity, in part because the United States and Argentina are in very different economic places.
“People make a lazy analogy with Milei and Trump,” said Alejo Czerwonko, UBS AG’s chief investment officer for Americas emerging markets. “On the surface they may have similarities. But in reality, under the hood, the specifics each of them propose are diametrically opposed.”
In Milei’s 10 months in office, the chainsaw translated into his administration halting almost 79 percent of spending on public works and cutting pension expenditures by 21.4 percent, according to local brokerage PPI. He downsized 12 ministries, cut more than 30,000 government jobs and slashed funds for public hospitals and schools. On the revenue side, Milei increased some taxes to close the fiscal deficit.
Trump, who held an “infrastructure week” during his first term, hasn’t proposed any spending cuts to pensions, public works or healthcare. As Milei hacks away at Argentina’s fiscal deficit, Trump’s proposals — including tax cuts — are expected to boost the US federal deficit by US$3 trillion over 10 years, according to an October analysis by the Tax Foundation.
“In Milei’s case, there’s an obsession with eliminating the fiscal deficit,” said Alberto Ades, a director at investment advisory firm NWI Management LP In the US, “Republicans have a different attitude: Cut taxes first and ask questions later.”
While Milei claims he’s implementing the biggest austerity campaign in the history of mankind, Trump continued to overspend during his first term in office. The US fiscal deficit grew to 4.7 percent of gross domestic product at the end of 2019, up from 3.05 percent during Trump’s first two years in office, just a short time before pandemic spending sent the deficit spiraling out of control to 15.2 percent at the end of 2020. Milei inherited a deficit of 2.7 percent in 2023 and turned it a surplus of more than 1 percent so far this year.
Trump is already threatening to impose steep tariffs on goods from Mexico, Canada and China, which economists warn could provoke a fresh wave of US inflation. Meanwhile, Milei is cutting tariffs in one of the world’s most protectionist countries to reign in triple-digit inflation. On Monday, Argentine authorities removed tariffs on imports worth up to US$400 for individual consumers. He’s also seeking free-trade deals with the US and the European Union.
“Trump is naturally and ideologically protectionist,” Ades said. “Milei isn’t.”
One major difference between the two will be the amount of legislative support they can count on. “Milei has a slim representation in Congress and was forced to negotiate every single initiative with other political parties,” said Fernando Losada, a managing director at Oppenheimer & Co. In the US, the Republican Party “will have full control of both houses of Congress,” which means Trump will likely face fewer obstacles than Milei.
Some economists point out that Trump and Milei’s economic plans are bound to diverge given the different paths the US and Argentina are on. Trump is set to take office with low unemployment, consistent growth and inflation cooling after its post-pandemic surge. Milei, on the other hand, inherited a full blown economic crisis that required drastic policy changes to avoid hyperinflation.
Politics, not policy, will keep Milei and Trump aligned, according to Pilar Tavella, head of research at Buenos Aires-based brokerage Balanz Capital Valores SA.
Maybe not surprisingly, Milei is set to host an event in Buenos Aires on Wednesday where speakers include Republican National Committee co-chair Lara Trump, the president-elect’s daughter-in-law.
“There’s differences in fiscal and trade policies but they’re also very different countries responding to very different economic contexts,” Tavella said. “Milei wants to align himself with the Western world like Trump. And that’s the most relevant.”
by Ignacio Olivera Doll, Bloomberg
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