Milei may be team MAGA, but he’s no fan of tariffs
Javier Milei is not shy about wanting to help make America (and Argentina) great again, and he’s been a vocal supporter (and fan) of US President-elect Donald Trump. The budding relationship has become so close that the Argentine President became the first foreign leader to meet with the incoming American Boss-in-Chief after the November election that handed him a second term.
Trump is reported to have told Milei that the messy-haired economist known for his black leather jacket and zany professor vibes has become his “favorite president,” and the pair share a vision for government reform and slashing spending. But there’s one area where the new besties might have diverging views: tariffs. Trump has called it the most beautiful word in the dictionary and threatened them on friends and foes alike to advance his agenda, but Milei has quietly been moving in the opposite direction and removing the taxes where he can.
Anyone who frequently shops in Argentina knows just how much tariffs can impact prices. While locally produced items and food can seem cheap to international visitors, depending on the current exchange rate, anything imported is frequently much more expensive than similar items abroad. Fashion giant Zara, for example, lists a pair of jeans from its latest collection for $69.90 in the US. In Argentina, the same pair is going for 99,900 pesos. That’s $83.25 at the weakest, informal exchange rate and nearly 20% more expensive than in the US.
The dynamic extends to pretty much everything. An iPhone 15 (not even the latest model) currently goes for nearly 3.6 million pesos in Argentina. That’s almost $3,000. The same phone can be purchased in the US, from Apple (NASDAQ: AAPL), for $729. That’s why Argentines are known to flood shopping malls in Miami whenever they get the chance. Even after paying the expensive airfare from Buenos Aires, the savings can add up.
Economics 101
With battling runaway inflation one of Milei’s centerpiece priorities, ditching tariffs can be an easy way to bring prices down, at least temporarily. And the government is doing just that, cutting tariffs on 89 products key to the economy including tires, motorcycles and small household appliances. It’s also ditching a general 7.5% tax on all imports, although the country is still constrained by tariffs set by the broader Mercosur trade bloc of which it’s a member. Milei last month called the group—which also includes Brazil, Paraguay, Uruguay and Bolivia—a prison.
Removing tariffs can of course be risky, especially when an economy is in recovery mode. After taming inflation, slashing spending and achieving a fiscal surplus, Milei now needs to stimulate local production, create jobs and actually boost economic growth. That’s a much tougher proposition, and getting rid of taxes on imports can actually work against those longer-term goals by making domestically-made products comparatively more expensive. But Milei will of course understand all of that. It’s Economics 101, as they say, and the libertarian leader has so far shown restraint when it comes to moving too quickly on any one front.
Trump, on the other hand, will not have the same constraints. The US prints the world’s reserve currency, and its massive market is one no one wants to lose. At the end of the day, it’s all about leverage, and Argentina just doesn’t have as much. Trump can threaten tariffs because he waves a big stick that can be as much bite as bark, and no country wants a trade war with the US. Argentina, on the other hand, has to work with a much smaller playbook, and for now that’s a delicate mix of cutting spending, reducing tariffs (even at the expense of some local industries), and fostering growth in priority sectors like energy and agriculture.
Most economists don’t like tariffs, and Milei is no exception. While he’s been celebrated in many of the circles now flocking around Mar-a-Lago, angling for the US President-elect’s ear, it remains to be seen if Trump will want to take any notes. The two MAGA leaders may share a populist flair, but their economic realities at home couldn’t be more different. Trump can tout tariffs as a show of power, but Milei knows Argentina’s path to prosperity will require cutting them. For now, the professor’s lesson is simple: survival over showmanship.
