Argentina: Trading Places

Call it a case of Trading Places. The libertarian president of Argentina, Javier Milei, is pushing the once-moribund nation to shed tariffs, subsidies, price controls, and a weak currency. The idea is to move away from the dysfunctional mix of statism and nationalism known as Perónism. Under President Trump, though, America appears to be moving in the opposite direction. Will these policies work better for America than they have for Argentina? We have our doubts. Feature Mr. Trump’s campaign to use tariffs as a vehicle to restore America’s manufacturing sector. Acting unilaterally, Mr. Trump has ratcheted up import levies to some 23 percent, 10 times the level of a year ago. Mr. Milei, by contrast, has been moving in reverse, “wrenching open Argentina’s protectionist economy,” per the Financial Times, and “slashing tariffs in a bid to beat down high prices on everything from air fryers to electronics.”Mr. Milei’s anti-tariff moves are proving popular with Argentines, with imports surging some 30 percent over the same period the prior year. And no wonder, with Argentine prices inflated by the import levies. Before the tariffs were reduced, an air fryer made by Black & Decker costing $100 in America was selling for $289 in Argentina, the FT said. A slip dress by Zara priced at $25 in America retailed for $67 in Argentina. Mr. Milei crowed in October that “we are lowering tariffs that underpin the disastrous scheme to replace imports” with domestic manufacturing. He argued that Argentina’s tariff regime “has punished the whole of society with goods and services of worse quality at a higher price, for the benefit of a privileged few.” Are the architects at Washington of Mr. Trump’s “Liberation Day” tariffs paying attention?Argentina’s tariffs, after all, were one of the self-inflicted wounds that turned the once-prosperous nation — whose name is another word for money — into an economic basket case. In the early 20th century, Argentina was one of the world’s richest countries. Even in the 1950s, its per capita output was double that of Spain and triple that of Japan. Yet the nationalist attempts by Juan Perón and his successors to make Argentina self-sufficient backfired.In the 1960s, while much of the world had embraced the logic of low tariffs and expanded global trade, Argentina’s tariffs stood at 84 percent on average. In an attempt to boost domestic manufacturing, Argentina even taxed exports — a démarche that Mr. Trump has so far yet to consider. Argentina withered, falling to one of the world’s most closed economies from one of its most open in the late 19th century.As recently as 2009, Argentina imposed a 35 percent on “computers, tablets and other electronics,” CNN reports, in an attempt “to shield its manufacturing workers.” Yet this attempt to protect domestic industry failed, while also helping to fuel inflation. Mr. Milei’s campaign to reduce the levies, along with other reforms, is already yielding dividends, with the poverty rate falling to some 38 percent by late last year from 53 percent.Mr. Milei’s agenda is also leading to a reduction in the country’s ruinously high inflation rate to less than 3 percent over the prior month, even if the chainsaw-wielding self-described anarcho-capitalist has yet to make headway on this campaign vow to replace the peso with the American dollar. To his credit, he has removed controls on the currency, which has waxed, but better yet if Mr. Milei embraces the cause of monetary reform to make the peso as good as gold. The “stronger peso could fuel optimism among Argentines about the economic outlook,” Bloomberg today reports, with midterms looming in October. That marks another contrast for Washington policymakers weighing a weaker dollar as a way to make American exports more attractive. Considering Argentina’s disastrous track record with protective tariffs and a weak currency, why would America want to pursue similar policies as a path to prosperity?____________Correction: Less than 3 percent was the inflation rate over the prior month in Argentina. An earlier version misstated the period of comparison.

Argentina: Trading Places

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