Trump's Gamble in Milei's Argentina

The unparalleled financial support that the Trump Administration gave to Argentine President Javier Milei represents one of those moments where global finance and politics meet. This was delivered not through multilateral agencies but directly via the U.S. Treasury. This support instantly calmed jittery markets, showing how (underwritten by American dollars) political will can temporarily override structural economic realities. This article examines the market consequences of the aid and how U.S. financial backing acted as a direct guarantee for the survival of Milei’s radical economic project. 

Milei is an anarcho-capitalist who inherited an economy plagued by chronic crises that include high debt, and inflation of more than 200%, with the risk of heading toward hyperinflation. His "shock therapy" plan included massive spending cuts, a sharp peso devaluation, and a zero-deficit target that cut month-on-month inflation. However, this was at the cost of increasing unemployment and declining real wages, feeding political fragility. Market confidence, ever fragile in Argentina, deteriorated after reversals in September 2025 that included an important electoral loss in the Buenos Aires province and emerging corruption allegations. Fears of the interventionist Peronist opposition returning to power led to a capital flight that took the country closer to a currency crisis, at the cost of the already-thin foreign reserves at the Central Bank.   

At this tipping point, the Trump Administration acted decisively and unconventionally. Rather than channeling aid through the IMF or multilateral institutions, the U.S. Treasury (under Secretary Scott Bessent) launched a $20 billion currency swap with Argentina's Central Bank to stabilize the nation's dollar supply. The Treasury went further in the unexpected step of buying pesos directly in the open market to support the local currency and set a floor for market expectations. 

In a more geopolitical light, Washington explicitly backed Milei's government by putting the U.S. balance sheet behind the peso. The effort was later supplemented with a commitment to facilitate another $20 billion in private U.S. bank credit, bringing total support to $40 billion. Beyond stabilization, this manoeuvre reflected a strategic aim: to secure a regional ally and counter growing Chinese influence in South America, prioritizing geopolitics over conventional economic principles.

The intervention was as political as it was financial. In advance of the October 2025 legislative midterms, President Trump met with Milei and publicly linked continued U.S. aid to a strong electoral performance. The message was clear: support for Milei equalled continued U.S. backing; electoral defeat could end the lifeline. Markets reacted with immediate relief. The Argentine peso, in freefall, partially recovered—black-market rates fell from 1,500 to around 1,300 per dollar. Distressed dollar-denominated bonds surged up to 4%, and the S&P Merval index leaped. Investors treated the capital injection less as a solution to structural fiscal issues and more as a de-risking guarantee of political stability that would provide Milei's government with a runway to pursue aggressive austerity and market-friendly policies. 

Crucially, market optimism was driven not by fiscal fundamentals but by a reduction of political risk. A U.S. commitment was interpreted as shielding Milei's administration from domestic pressures that had previously undermined reform efforts. When Milei's party achieved a landslide victory, the result illustrated the power of this strategy: billions in aid functioned as political currency, influencing voter behavior by linking economic stability to continued U.S. support. 

This episode points to a new paradigm in American foreign economic policy. In a manner previously unseen, the rapid and unprecedented scale of bilateral financial support sidestepped traditional conditionality and directly intervened in the political outcome of a partner nation. The Trump Administration deployed dollars to stabilize Argentina's volatile economy in return for securing important ideological and electoral objectives. The case suggests that targeted financial intervention may be used as an instrument to achieve geopolitical objectives and that, within modern international finance, stability could well be an instrument of political leverage.