Counsel at the Table

U.S. soybean farmers have depended on China as their top export market, selling about $16 billion worth of soybeans annually prior to the escalating trade tensions. When Trump’s trade war with China shut off much of that demand, farmers suffered huge losses. China redirected purchases to cheaper suppliers like Brazil and Argentina, leaving American producers without comparable buyers. This new Trump-Milei deal worsened the situation for U.S. soybean farmers. Following the bailout, Argentina removed export tariffs on grains, which lowered prices and allowed them to sell more soybeans to China. Before the bailout, Argentina had long imposed export taxes on grains, with soybeans taxed around 26% and corn and wheat about 9.5%. These “retenciones” were in place since 2002 and were briefly suspended by Milei’s government in September 2025 to attract foreign currency and boost agricultural exports. China, looking to diversify away from U.S. suppliers, increased purchases from Argentina. That created political pressure at home, since U.S. farmers saw their prices drop further while watching their government provide financial relief to a foreign competitor at the same time.

The financial mechanism behind Trump’s support for Argentina follows a model with precedent but key differences. In the 1990s, Treasury Secretary Robert Rubin used the Exchange Stabilization Fund (ESF) to bail out Mexico during the “Tequila Crisis.” The ESF was created under the Gold Reserve Act of 1934, provides the Treasury with the authority to conduct foreign exchange operations without congressional approval. Rubin used $12 billion from the ESF to lend to Mexico, which then repaid U.S. banks such as Citibank, stabilizing both the peso and U.S. financial institutions. That deal was structured as a loan, had conditions, and was tied to International Monetary Fund (IMF) oversight. The U.S. was repaid in full and even profited on the transaction, allowing officials to frame the intervention as both a legal and financial success.

Trump’s $20 billion agreement with Argentina also relies on the ESF but uses it in a less traditional way. Instead of an IMF-style conditional rescue or a loan to protect U.S. financial institutions, this deal was structured as a currency swap line. Under this format, the U.S. Treasury provides dollars to Argentina in exchange for pesos, and promises to reverse the exchange later. Normally, such swap lines occur between central banks, as the Federal Reserve did with its G7 counterparts during the 2008 financial crisis. In this case, though, the Treasury executed the swap directly from ESF funds, not the Fed. That makes it essentially a short-term loan disguised as a currency exchange, one with financial and political risk. The Fed refused to participate because of the clear political nature of the agreement and the high probability of loss if the peso continues to depreciate.

Legally, the structure bypasses congressional oversight by operating under the ESF’s statutory authority. Politically, it assigns the U.S. the role of lender of last resort to an ally rather than to protect domestic financial stability. The swap allows Argentina’s central bank to use borrowed U.S. dollars to buy pesos and slow their collapse. This helps President Milei stabilize his currency and maintain public confidence ahead of the October 26 elections. Investors and citizens in Argentina are selling pesos for dollars. That leaves the central bank as the only buyer of pesos, but it lacks enough dollar reserves to keep supporting its own currency. By using dollars from the swap, Argentina can temporarily buy back pesos and manage the exchange rate.

Unlike Mexico’s 1995 rescue, the Trump-Milei arrangement includes no reform conditions, bypasses IMF governance, and serves an overtly political purpose. Milei’s platform centers on creating a stable, dollar-linked economy and eventually replacing the peso, in line with his broader libertarian and Trump-aligned agenda. While this move may provide temporary relief to Argentina’s markets, it exposes U.S. taxpayers to risk and weakens the credibility of the ESF as a nonpartisan financial tool.