The United States and Argentina yesterday announced the signing of a reciprocal trade deal that will substantially open both countries’ markets to each other’s goods in a manner not seen in most people’s lifetimes. The U.S. will eliminate barriers on more than 1600 products exported by Argentina, including a quintupling of the beef tariff rate quota to 100,000 tons per year, while the government of President Javier Milei pledged to do the same for over 200 American products including live cattle, machinery, medicines, chemicals and transportation equipment. The announcement followed the conclusion of the trade deal in January between the Mercosur bloc (of which Argentina is a part) and the European Union, which will be a boon to South American agricultural producers. While final GDP growth numbers for Argentina in 2025 are not yet out, it is widely expected that the country under Milei grew by double the rate for Latin America as a whole.
What is underneath?
The two big trade deals signed at the start of this year have capped Milei’s dramatic structural reforms that he put into place last year. He deregulated key sectors of the Argentine economy, lifted a range of unilateral import controls and put capital controls on a pathway to elimination, allowing the peso to float in a targeted exchange rate band which has largely held.
Indeed, even before the U.S. and EU trade deals were signed, imported goods have been flooding into Argentina via e-commerce platforms and new foreign retail shops. Milei tripled the tariff exemption on courier-shipped products, which opened the door for these inflows. High-demand American and European products like laptops and consumer electronics, fashion apparel and other items normally bought on trips abroad are now available to any consumers at reasonable prices that might fall even more.
Since the controls on the forex markets were partially lifted last April, Argentines have bought over US$26 billion on the official exchange market which has marked a re-dollarization of domestic savings. The currency balance for December 2025 had a US$1.5 billion current-account deficit which was largely explained by travel expenses abroad covered by tourists’ own dollars without impact on the money markets.
This means a general balance was achieved between individual and institutional demand for dollars, commodity and merchandise export revenues, rising import outflows and the current stock of commercial debt linked to advances and pre-financing. And it was done in an atmosphere of vanishing state intervention, not the old Peronist hands gripping the various wheels and dials. While only a snapshot, it is an extraordinarily normal looking picture for a country with Argentina’s history of economic insanity.
This situation also comes as Argentina’s growth rate for 2025 looks like it will be about double the general growth rate in Latin America (4.5% vs. 2.1%), coming back from the recessionary headache of 2024 that Milei warned would come when his austerity measures took hold. The creative destruction of the old economy is giving way to the market-driven construction of whatever the new economy will be. It is being helped along by the strong vote of confidence Milei’s party received in the midterm legislative elections last year. But even with an expanded bloc of loyal and allied members of Congress he still doesn’t command majorities and has to continually win debates on every policy move while keeping the public on his side.
This is where the trade deals with Washington and Brussels come in. With much of the ground set after two years of popular reforms, opening two of the world’s biggest trade markets to Argentina’s exports was the next logical step for Milei — and he pulled it off. Argentine consumers will have fuller shelves and more options at reasonable prices, while the dollar is relatively stable and easy to acquire. New businesses have less friction on country risk to obtain investments, and large Argentine companies can invest in increasing output with greater efficiency now that they can access new equipment and compete in more markets abroad. New and old companies alike will now be judged on how well they compete in the global marketplace, not merely on how many government-protected sales they can half-heartedly deliver inside the walls of the domestic economy.
In such a context, should it continue, we can imagine fewer runs on the dollar, fewer asset value swoons and fewer Christmas season outbreaks of looting that used to be an occasional feature of Peronist rule.
Our take:
With the opening of the American and European markets to more Argentine goods, and cheaper access to cutting edge machinery, technology and transport equipment from those markets, Argentina has a shot at modernizing its most competitive strategic industries and rejoining the global economy in a way few thought possible before.
Inflation and job creation usually lag in recovery scenarios like this, and the ultra-pampered uncompetitive relics of the old economy will probably start laying off workers and closing operations with loud, angry complaints and crocodile tears. This is what happened in Britain throughout the 1980s as its economy was forced into being modern and competitive after more than a decade of being “the sick man of Europe”. Even with its post-Brexit challenges, Britain is nothing like it was in 1979 and its likely to never be again in our lifetimes because it made that transition.
So, it is incumbent not only on Milei’s government but on the Argentine industrial and business community alike to leave the old economic model in the trash once and for all. They must invest and strategize on earning their place in the global market through innovation, efficiency and quality. The agricultural sector is already well-capitalized and particularly blessed by the new trade deals. But segments within this sector still lack production capacity and infrastructure to make the most of it immediately. The challenge is on to quickly seize the opportunity and leverage Argentina’s competitive advantages of climate, costs and quality to make the big leap without any more excuses.
The leftists and the old Peronists have never tired of demonizing the United States and Europe while lionizing the Chinese for decades. The lie of this narrative has finally shown itself. The disaster that Milei inherited was not some recent mess on the hands of poor Alberto Fernandez alone. It was a systemic failure of a decades-old economic model that could never have succeeded.
And look now at the dark clouds looming over the new model — it’s not in the shape of Uncle Sam or the Union Jack; it’s Temu and Shein.
Chinese retailers, with the support of Beijing’s own aggressive form of industrial imperialism, are dumping underpriced retail goods into Argentina’s newly opened marketplace to unfairly gain market share at the expense of domestic producers. Temu has already been taken to court over misleading advertising and unfair trade practices, and the case is likely to take on important judicial significance.
Isn’t it ironic how things turn out sometimes?