The paradox of the protectionist best friend

The world has taken several turns since Argentina became entrenched in a system of economic protectionism from which it very rarely emerged to seek refuge again in the comfort of its captivity.

Javier Milei believes he has become part of a major global change. In the dizziness of his ascension, he still didn’t realize that it was the latest mutation his friend had intended Donald Trump It’s a turn in the opposite direction. At least by using a tactic that allows the United States to regain ground against China.

The libertarian president made the rejection of government interference in world trade one of his mottos in order to come to power.

When asked in the 2023 presidential candidate debate what he would do about trade and financial ties with China, he said it would be a matter for private businessmen during his term. An answer of impossible applicability, expressed in a mood close to anarchism, with which he attracted the attention of a country fed up with the failure of a politics focused on the hegemonic role of the state.

The ideas of an economy without geographical borders met with a strong reaction at the end of the first year from Trump, with whom Milei had already established a relationship without nuance since the days when the Republican president returned to Washington.

Just two months after taking office, Trump unveiled the most restrictive international trade program in United States history on the White House grounds. He stood next to plaques on which were written the name of each country and a percentage of the tariffs that the respective government would in the future impose as import duties on the products of those countries.

The main recipient of this barrage was Chinawhich Trump and his voters (a solid and disillusioned majority of Americans) claim are the root cause of the United States’ industrial decline.

Second in the order of beliefs was Mexico, where many companies relocated their factories to produce at lower costs and within a short distance to the North American market.

Since Trump already had an explosive record from the time he rose to fame as an aggressive real estate entrepreneur in New York, it became immediately clear, first to China and later to the rest of the world, that he had just created a situation to force a renegotiation of the rules of the commercial game.

Trump has not yet managed to get Xi Jinping to sit at a table where something concrete will emerge. Its Chinese counterpart takes the time that Europe, Mexico or South America do not have.

One way or another, the United States concluded a kind of agreement with the remaining countries based on a reduction in tariffs, which was originally intended to cause fear as a necessary condition for negotiations.

The still partial result is that the United States has made it more complicated to introduce products that compete with and defeat locally manufactured products.

Before striking a new deal with Trump, Xi enabled a policy of greater commercial aggressiveness toward the rest of the world in a currently incomplete attempt to dispose of stocks that can no longer enter the United States.

A more closed world with new barriers should be a good reason for Milei’s excess to be unleashed against the one who caused it. Reality is responsible for finding its own paradoxes, so much so that the Argentine president is among the very few world leaders who turn to Trump to embrace him and promise to follow him in everything he does. Even invade Venezuela.

This adherence to ideology has more to do with style and entitlement to anger as a form of communication than with harmony in the way the economy is run.

Milei’s intensive search for this friendship brought her great results. The Treasury Department’s almost unprecedented intervention in Argentina’s foreign exchange market appeased an electorate deeply angered by the consequences of the run against the peso and the possibility of restoring Kirchnerism as a power option.

This was followed by the announcement of an economic relations agreement, which is no longer called a free trade agreement as it used to be, for the simple reason that the US has brought its barrier-free competition policy under one roof.

The date for this agreement has not been set. Key North American company executives in Argentina knew the signing would occur on December 5, when Milei would travel to Washington for the World Cup draw. But now these negotiations continue to be conducted confidentially and without a specific date.

In parallel, a wave of discontent is growing among industrialists due to the impact of competition with Chinese products entering the market through the Eastern emphasis on expanding markets.

The lament of those who lived for years in favor of the lockdown, producing products above international prices while accepting domestic taxes of all kinds in exchange for this protection, is a repeated story. The industrialists are right when they repeat that in order to open the economy, a large part of the additional tax costs must first be eliminated.

Milei cannot please them so quickly if he wants to raise funds to pay off the debt and not return to the budget deficit. Inland, governors and mayors are resisting the elimination of taxes that allow them to pay their bills.

Argentina has old problems, but cannot resort to the solutions put forward by its best friend to make up for lost ground with China. States have one need and Argentina another, they are different situations and different expectations; This explains that the remedies cannot be the same.

If you want to exchange products with the United States, you also have the disadvantage of a lack of competitiveness, except in some specific areas such as meat and grain production.

For Milei, the overlap of his ideas with Trump’s proposed trade storm is a minor problem next to the complex transition from protection to openness. In Agenda 2026, this will be the biggest dilemma above all others that the president will have to solve celebrity from a harsh, angry and strange world.