By Ryan Dubé and Silvina Frydlewsky

Few people shine brighter in the MAGA universe after President Trump than Argentine President Javier Milei, who has enamored U.S. conservatives by slashing spending and berating progressives.

But on trade, Trump and Milei are worlds apart. As Trump places tariffs on allies and foes alike, Milei is moving the other way to unravel a protectionist economy and spark an import boom.

Milei has dismantled tariffs and import restrictions in a free-market overhaul designed to tame inflation and transform one of the world's most closed economies. Since the libertarian economist took office in 2023, Argentina has drawn a surge of imports including German beer, gluten-free Oreos and Chinese-made tractors.

Milei in December eliminated a tax on foreign-currency purchases. He recently removed a requirement for electronics importers to certify their safety. He ended other restrictions for bringing in tires, cement and elevators.

"It's like we're a normal country," said Lino Stefanuto of Beta Motor Argentina, which assembles motorcycles with imported parts.

Imports rose more than 40% in February to nearly $6 billion. Chinese imports more than doubled. Shipments from the U.S., Europe and Brazil rose, too.

A strong peso currency has made it cheaper for Argentines to buy foreign goods. But the import surge has also strained the central bank's depleted reserves because of an increased demand for dollars from companies bringing in the foreign goods. Factory owners say cheaper imports will hurt local manufacturing jobs.

"It's impossible to compete with China," said Daniel Rosato, head of an association of small industrial businesses.

In other areas, Milei has emulated Trump. He has befriended Elon Musk, said he would pull Argentina out of the World Health Organization, made an ill-fated foray into meme coins and restricted medical treatment for transgender children.

But on trade, Argentines say Trump reminds them more of Milei's nemeses: the left-wing politicians of the Peronist movement -- named for the former President Juan Perón -- who have long preferred trade barriers.

"It's very strange to me that Milei is so in favor of Trump," said Juan Gonzalez, a university student in Buenos Aires who supports Milei's trade stance. "Trump's protectionism is more similar to Peronism...and Milei is strongly against Peronist economic policies."

Milei says opening up Argentina will create more productive companies, which will be less dependent on state subsidies and also can export. And he says cheaper imports would bring down inflation, which has fallen to 56% from more than 200% when he took office.

"The only thing this protection has created is an industrial sector addicted to the state," Milei told manufacturers last September.

In 1930, Argentina began walling off much of its economy in reaction to the Great Depression. The country became radically protectionist after World War II when Perón sought to substitute imports to create a self-sufficient economy, said Pablo Gerchunoff, an Argentine economic historian.

Milei's Peronist predecessors this century -- Néstor Kirchner, then his wife, Cristina Kirchner, and later Alberto Fernández -- doubled down on import restrictions to protect high-paying factory jobs and shield central bank reserves amid dollar shortages.

The result was one of the most restrictive trade regimes in Latin America. In 2023, Argentina's imports accounted for 14% of its gross domestic product, less than half of neighboring Chile's, which has one of Latin America's most open economies.

Argentina has restricted imports with tariffs and onerous rules to certify products including steel, toys and shoes. The state created other costs for importers, such as requiring payment of some income tax in advance. Restrictions on accessing dollars led to a backlog of billions in unpaid bills to suppliers abroad.

Many Argentines say they now see the benefit of more trade. Mendoza province in March struck a deal with India to import medicine for diabetics, slashing costs by about half. Farm exporters say fertilizer costs have fallen 30% thanks to lower tariffs. Argentines can now shop on Amazon.

"Chinese cellphones are the new thing right now," said Jonathan Hauman, a salesman in Buenos Aires. "They are really good, and cheaper."

Grocery stores are selling new brands of Italian spaghetti, Brazilian instant coffee, Greek olives and U.S. canned beans. Imported German sauerkraut costs half as much as an Argentine brand.

"If domestic products are more expensive, maybe they should start lowering their prices," said Mariela Manfredi, whose 9-year-old daughter tried Italian pasta and doesn't want to go back.

Argentina still has high tariffs on many goods as a member of South America's Mercosur trade bloc, and it restricts access to dollars. Argentina also taxes agricultural exports.

Milei has played down trade differences with Trump. His administration has framed Trump's 10% tariff on Argentine goods as a positive because that is the lowest rate the U.S. imposed.

But Trump's protectionist moves threaten the recovery Milei has engineered by increasing the risk of a global economic downturn, economists say.

"It's like he was landing a plane on a sunny day and then all of a sudden he hit a storm," Dante Sica, a former production minister, said of the global turbulence. "The landing is going to be rougher."

But it was all smiles Monday when U.S. Treasury Secretary Scott Bessent visited Argentina. At the presidential palace, he commended Milei's economic overhaul.

Milei thanked Bessent for helping Argentina secure a new $20 billion loan from the International Monetary Fund. He reiterated his hopes, however improbable, for a free-trade agreement with the U.S.

"We're ready to sign a deal," Milei said.

Write to Ryan Dubé at ryan.dube@wsj.com

(END) Dow Jones Newswires

April 20, 2025 05:30 ET (09:30 GMT)

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