Instead of antagonizing world leaders, perhaps President Donald Trump should consider emulating some of them. There are few better role models today than Javier Milei, Argentinas colorful president.
President Trumps counterproductive trade wars, and the erratic nature in which hes pursuing them, already have destabilized financial markets and pose a serious threat to the administrations supposed economic-growth agenda. Markets would improve if Trump focused on deregulation, cutting government spending, and lowering taxes. Thats the successful formula that Milei, who assumed the Argentine presidency in December 2023, has pursued.
The Biden presidency was notable for an unnecessary surge in government spending, which helped create the highest inflation levels in 40 years, and a barrage of new regulations that limited consumer choices and slowed economic growth. In Bidens first year alone, the average price of gasoline jumped from about $2.32 per gallon (January 2021) to $3.30 a gallon (January 2022), according to the U.S. Energy Information Agency, peaking at nearly $4.65 a gallon later in 2022.
President Trump ran on a pro-growth agenda of cutting government spending, extending his 2017 tax cuts, and reducing regulation, while pursuing more affordable energy by enabling energy producers to drill baby drill. The week he was elected the S&P 500 market index surged 5%; it rose another 1.7% by inauguration day. The markets believed that President Trumps policies would reignite the economy.
President Trump also campaigned on promises to implement tariffs, but he had done that in 2016 as well. His first term policies included a costly trade war with China, tariffs on steel and aluminum, and a trade dustup with the European Union (EU), but for the most part his trade rhetoric was worse than his policies.
He claimed trade with Canada and Mexico was unfair and that hed repeal the North American Free Trade Agreement (NAFTA). Instead, he renegotiated NAFTA, producing the United States Mexico Canada Agreement (USMCA), which changed in name more than substance. Almost all the pro-trade aspects of NAFTA remained.
This time is different. President Trump is threatening, or has imposed, tariffs on virtually all of Americas major trading partners: Canada and Mexico (despite the USMCA still being in force), China, and the EU, among others.
Markets have plunged steadily. Many U.S. companies already are hurting. The Economic Policy Uncertainty index has spiked to its highest level since the early months of the COVID-19 pandemic. In short, President Trumps trade wars are undermining both confidence in the U.S. economy and the potential benefits of the rest of his economic agenda.
President Milei ran on a similar platform, promising to reduce regulation and slash government spending to get Argentinas high-inflation, low-growth economy turned around. But theres been no talk of trade wars. Milei even appeared on stage recently with Elon Musk, President Trumps designated bureaucracy cutter, presenting Musk with one of his trademark chainsaws for bureaucracy, which Milei uses to show how hes slashing government spending, waste, and inefficiency.
President Milei delivered on his promises in his first year in office. He abolished entire government departments, reduced the government bureaucracy by more than 30,000, and cut overall government spending by 28%. Inflation plummeted, the stock market surgedmore than doubling in value in a single yearand for the first time in 14 years Argentina last year had a budget surplus.
Milei understands the benefits of international trade and hasnt let protectionist interest groups undermine his policies. Milei outlined the need for free trade in a recent speech, saying, We need to give back to Argentines the freedom to trade with whomever they wish, so that goods and services can enter the local market and everyone can freely buy better quality products at a better price. Protectionist policies, he warned, are nothing more than a scam between politicians and rent-seeking businessmen.
Lets hope that President Trump learns from President Milei that protectionist policies and a growing economy are at odds with each other.