Archive · 17 Nov 2025
Trump Administration's Economic Policies Criticized for Weakening US Leverage
Imagine the US government is like a parent trying to help two friends who are in trouble.
One friend, Argentina, is trying to fix its money, called the peso, and the US is giving it a lot of money.
But the author thinks this might not work and the US might not get its money back.
The other friend, China, is having a trade fight with the US.
The US thought it had a good advantage, but the author says China has a special 'trump card' – a type of important material called rare earths.
If the US pushes China too hard, China can stop selling these materials, which the US really needs for many things, including its military.
The author feels the US government is making bad decisions that are actually making it weaker in dealing with these friends, instead of stronger.
The author suggests better ways to help Argentina and deal with China that would protect the US more.
The Trump administration's economic policies towards Argentina and China are criticized for creating self-inflicted problems and weakening US leverage.
The US has committed over $20 billion to support Argentina's peso stabilization, but concerns exist about the country's ability to repay due to its exchange rate policy hurting exports.
In its trade war with China, the US underestimated China's leverage, particularly its control over rare earth exports, which the author believes China can use as a counter-threat.
The author argues that the US approach has led to outcomes where China holds the upper hand, citing a recent negotiation that saw the US scale back tariffs and China make empty commitments.
Recommendations are made for the US to condition support for Argentina on currency reform and to re-evaluate its confrontational stance with China, advocating for strategies that do not undermine US economic power.
- Who
- Donald Trump's administration, Argentina's President Javier Milei, Chinese President Xi Jinping, US Treasury Secretary Scott Bessent, International Monetary Fund, hedge funds, and the author (an economics professor).
- What
- Criticism of the Trump administration's foreign economic policies regarding Argentina and China, arguing they weaken US leverage and are self-inflicted problems.
- When
- During Donald Trump's presidency, with specific reference to recent events and potential future scenarios.
- Where
- South America (Argentina) and Asia (China), with a global economic and foreign policy context.
- Why
- The author believes the administration's strategies in Argentina (unconditional support for peso stabilization) and China (trade war based on flawed leverage assumptions) are detrimental to US interests and international standing.
Author's Recommendations
Trump Administration's Approach
Argentina Policy
Author's Recommendations
The US should condition its support for Argentina on allowing the peso to depreciate, eliminating its overvaluation, and then allowing it to float more freely to boost exports and employment. This would make disinflation more politically sustainable.
Trump Administration's Approach
The Trump administration made an unconditional commitment to support Argentina's peso stabilization efforts, which the author argues is a dubious effort that exposes the US to risks of non-repayment and political fallout.
China Trade War
Author's Recommendations
Trump's approach of threats and tariffs against China has been counterproductive, allowing China to leverage its monopoly on rare earths, which the author believes will outlast the Trump administration.
Trump Administration's Approach
Trump's administration initiated a trade war with China, believing the US had leverage due to its import volume and semiconductor design capabilities, but China retaliated with threats of rare-earth embargoes.
- US Commitment to Argentina
- Over $20 billion
- Argentine President
- Javier Milei
- US Treasury Secretary
- Scott Bessent
- Key US Concern (Argentina)
- Repayment of US Treasury funds
- China's Key Leverage
- Rare earth exports
- Trump's Perceived Leverage (China)
- US buys more from China; US designs cutting-edge semiconductors
- Author's Affiliation
- Professor of economics and political science at the University of California, Berkeley
