Trump Backs Argentina’s Crisis-Stricken President. A Bailout May Be Next.

President Donald Trump endorsed Argentine President Javier Milei on Tuesday following a meeting on the sidelines of the United Nations. (Chip Somodevilla/Getty Images)

A potential U.S. bailout may not permanently arrest Argentina’s currency crisis, but that may not matter for President Donald Trump and Treasury Secretary Scott Bessent. They are likely to be satisfied with merely helping their political ally, President Javier Milei, muddle through until after elections next month.

On Tuesday, Trump and Milei met on the sidelines of the United Nations General Assembly in New York. Bessent said Monday that details of U.S. support for Argentina’s economy would shortly follow that meeting. No specifics have been announced yet, but the aid may include direct purchases of currency by the Treasury’s $219.5 billion Exchange Stabilization Fund.

In a social media post midday Tuesday, Trump wrote that Milei “inherited a ‘total mess; with horrible Inflation caused by the previous Radical Left President” and that he looks forward to continuing working closely” with Milei.

“We’re gonna help them but I don’t think they need a bailout. He’s doing a fantastic job,” Trump told reporters as he met with Milei. A White House spokesperson told reporters there would be announcements related to Argentina’s financial situation after the meeting.

U.S. Treasury Secretary Scott Bessent in a post on X on Monday pledged to support Argentina through the ESF, calling the country a “systemically important U.S. ally.”

“We remain confident that President @JMilei’s support for fiscal discipline and pro-growth reforms are necessary to break Argentina’s long history of decline,” Bessent wrote.

One dollar bought 1,356 Argentinian pesos as of midday on Tuesday, down from 1,474 last Friday. That is still well above the 1,075 pesos a dollar bought in mid-April, when Argentina struck a deal with the International Monetary Fund to undo large parts of its currency and capital controls in exchange for a $20 billion loan program.

A previous conservative government imposed Argentina’s capital controls in 2019 to stem investor flight. Investors saw undoing them as a necessary step to normalizing Argentina’s economy. Milei won the 2023 election with a promise to undertake drastic economic reforms, lower inflation and cut government spending. Trump and his conservative allies, including Elon Musk, cheered Milei’s plans.

Because of Argentina’s long-term problem with inflation, many locals try to protect their money with U.S.-dollar-denominated assets. One goal of Milei’s reforms was to bring that money back into Argentina.

However, Milei’s support locally is waning. Earlier this month, his party was trounced in a local legislative election, which could bode poorly for his party’s prospects for the next national midterm election in October. In addition to the economic squeeze, Milei’s party has been rocked by corruption allegations against his sister, Karina. Against that backdrop, Milei is under pressure to shore up Argentina’s economy and currency at least until the midterm vote.

There’s at least some risk that investors use the U.S. support as a selling opportunity.

“The question is whether people scared that Milei is going to be a one-term President use the bailout to exit faster at a more favorable exchange rate,” said Karthik Sankaran, a senior research fellow at the Quincy Institute for Responsible Statecraft.

Some Democrats say Bessent and Trump’s support of Milei is a waste of taxpayer resources.

“I understand why President Milei, careening from crisis to crisis and unable to effectively manage the Argentinian economy, wants the American people to finance a bailout. I do not understand why it is in the interest of the United States to provide one, nor how one would be designed to ensure the best outcomes for the Argentinian people, instead of hedge fund investors,” wrote Sen. Elizabeth Warren (D., Mass.) in a letter to Bessent on Monday.

In an X post on Tuesday, Bessent said Warren’s policies “rival the failed leftist agenda of the Argentine opposition” and said the recent move upward in Argentina’s currency hurt some hedge funds while helping long-term investors.

—Matt Peterson contributed to this article.

Write to Joe Light at joe.light@barrons.com