Will President Milei’s Charm Offensive Towards Trump Yield Trade Benefits?
Argentine President Javier Milei visited Washington seeking favorable trade terms with Trump amidst economic reforms. He achieved significant budget surplus and lower inflation but left without immediate trade benefits. Milei’s relationship with Trump remains strong, potentially paving the way for future trade exemptions and cooperation in key markets like lithium. However, socio-economic challenges persist.
In February 2024, Argentine President Javier Milei visited Washington with hopes of securing favorable trade conditions with U.S. President Donald Trump amid economic challenges in Argentina. Shortly after his inauguration in December 2023, Milei implemented significant reforms to reduce government size, consolidating ministries and cutting the federal workforce, achieving the first budget surplus in over a decade. These actions, alongside improving economic indicators, positioned Milei positively ahead of his meeting with Trump.
Argentina’s economic landscape saw significant improvement, as annual inflation dropped below 100 percent for the first time in five years, and a substantial trade surplus of nearly $19 billion was reported. Despite poverty levels still being high, the World Bank projected a 5 percent GDP growth, indicating Milei’s economic strategies had begun to bear fruit. In early 2024, his prior engagement with Trump at the Conservative Political Action Conference (CPAC) had also built a rapport that could potentially enhance trade relations.
Although Milei managed to meet Trump and received a White House invitation, he did not secure any immediate trade advantages. Experts suggested that while a comprehensive free trade agreement would take considerable time and cooperation, Trump might consider granting Argentina a special exemption from recent tariffs. This potential exemption could be crucial for Argentina’s economy, which relies heavily on the U.S. as a major export market for aluminum and other goods.
As Argentina negotiates a new loan program with the International Monetary Fund (IMF), which could amount to $20 billion, Milei’s economic stability initiatives are poised for further evaluation. Trump, expressing optimism about trade with Argentina, has acknowledged the relationship’s potential while Milei aims to distance Argentina from reliance on China, seeking to enhance trade partnerships instead with the United States.
Milei’s recent policies mimic those of Trump, including moves against “wokeism” and tightening restrictions on social policies. He faces challenges as rising unemployment and public discontent with social spending loom in the background. Notably, Milei promoted a controversial cryptocurrency that faced sharp depreciation, casting a shadow on his reformist image. In an effort to curry favor with U.S. corporations, he has deregulated tariffs on electric vehicles and pitched cooperation in lithium production, a sector of increasing global demand due to the electric vehicle boom.
Amidst his political maneuvers, Milei is open to maximizing Argentina’s negotiating position with the U.S. by proposing reciprocal trade terms. This strategy could align with U.S. interests and illustrate a stronger partnership, despite the complexities posed by Mercosur’s tariff alignment policies. A potential exit from Mercosur could provide Milei with leverage to negotiate unencumbered with the United States, indicating his commitment to balancing Argentina’s international trade relationships while navigating internal pressures before the upcoming elections.
In summary, President Milei’s recent visit to the U.S. served as an opportunity to bolster Argentina’s economic relationship with the Trump administration amid significant domestic reforms and economic struggles. Although immediate trade benefits were not secured, the groundwork for long-term favorable trade conditions appears to be laid, contingent upon ongoing negotiations and potential alignment with U.S. interests, particularly concerning tariffs and economic cooperation in key sectors such as lithium.
Original Source: foreignpolicy.com
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