MANCHESTER — November 15, 2025 — Economists warn that President Donald Trump’s foreign economic policy is increasingly under strain, as missteps in both Argentina’s bailout and the ongoing US-China trade confrontation highlight the growing risks of his administration’s interventionist approach.
According to Professor Barry Eichengreen of the University of California, Berkeley, the Trump administration now faces twin challenges—one in South America and another in Asia—both of which stem from its own aggressive but inconsistent strategy.
U.S. Faces Trouble Over Argentina’s Currency Support
In South America, Trump officials are deeply entangled in efforts to stabilize Argentina’s peso, having committed more than $20 billion in support of President Javier Milei’s government. Milei’s austerity reforms, aimed at curbing inflation, have backfired by slowing exports and driving unemployment higher.
Eichengreen cautioned that Argentina’s fixed exchange rate strategy could end in failure, noting that the country has a long history of collapsed stabilization programs. “Argentina is a graveyard of unsuccessful exchange-rate-based stabilizations,” he said. “Political fatigue and social unrest could derail the current plan before 2027.”
Growing Risks of U.S. Treasury Exposure
Analysts fear that the U.S. Treasury’s intervention may never yield repayment. Senior creditors like the International Monetary Fund (IMF) are first in line for Argentina’s limited foreign reserves, meaning Washington’s funds could leak back to hedge funds that purchased distressed Argentine debt.
If Milei’s policies collapse before the next election, Treasury Secretary Scott Bessent—who made the bailout official U.S. policy—could face political backlash at home. Critics argue that the administration should have demanded a flexible peso exchange rate to allow for export recovery and more sustainable disinflation.
Trade Confrontation With China Intensifies
At the same time, Trump’s on-again, off-again trade war with China continues to unsettle global markets. The president’s belief that U.S. import dominance gives him leverage has proven flawed, as China adapts through alternative markets and supply chains.
Beijing has diversified its exports, sourced semiconductors from third parties, and leveraged control of rare earth minerals—critical to U.S. electronics and defense industries—as a powerful countermeasure.
Trump’s Strategic Retreat After Xi Talks
Following his recent meeting with President Xi Jinping, Trump scaled back several punitive measures. Xi agreed to purchase more U.S. soybeans and temporarily lifted his rare-earth embargo, while Trump suspended port fees and delayed expanding the U.S. Entity List targeting Chinese firms.
Eichengreen said the pattern is clear: “Each time Trump escalates tariffs or export controls, Xi counters with rare-earth threats, and Trump retreats.” Analysts expect this cycle to continue, with Beijing retaining leverage through resource dependency.
Economic and Political Repercussions
Trump’s diplomatic retreat underscores a growing imbalance in U.S. global trade influence. China’s rare-earth monopoly, though not permanent, is expected to outlast Trump’s term. Meanwhile, his intervention in Argentina may turn into a political liability if repayment fails or economic turmoil worsens.
Eichengreen argues that both cases illustrate a lack of coherent foreign economic strategy. “The U.S. is creating its own international financial messes,” he wrote. “It should focus on sustainable diplomacy, not short-term spectacle.”
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Policy Recommendations and Global Response
Experts urge Washington to reassess its reliance on economic coercion as a foreign policy tool. They suggest restoring confidence through multilateral cooperation, currency flexibility, and transparent trade negotiations.
In Argentina’s case, letting the peso depreciate and float freely would aid exporters and improve repayment prospects. For China, analysts advocate a measured approach focused on technology-sharing standards and regional partnerships, rather than unilateral tariffs.
Outlook for U.S. Global Influence
As 2026 approaches, economists say America’s credibility as a stable global partner is at stake. Trump’s “America First” policies have delivered short-term gains but left allies wary and rivals emboldened.
“If Washington continues to act impulsively,” Eichengreen warned, “the next crisis won’t just be economic—it will be geopolitical.”
