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What does the acronym “Maga” represent? Most US voters, if asked, would cite the “Make America Great Again” movement championed by President Donald Trump. But this week Treasury secretary Scott Bessent gave the tag a new twist. In a social media post announcing a $20bn swap line for Argentina, he argued that the aid should enable President Javier Milei to “Make Argentina Great Again.”
So will this second version of Maga work? It is unclear, to say the least. With Milei facing make-or-break midterm elections on Sunday, currency markets are already pricing in further falls in the Argentine peso, and the country’s usable currency reserves are perilously low. Meanwhile, the economy is sliding into recession, and some voters are rebelling against Milei’s radical free-market policies, which want to maintain a strong peso to crush inflation.
Indeed, wags are now talking about the acronym “Mada” — or “Make Argentina Default Again” — as doubts surface about whether Milei can really avoid a financial crunch, even with this US support package, and a hefty, frontloaded loan from the IMF.
But as speculation swirls, Bessent faces at least three risks as well. One is rooted in domestic politics: polls suggest that almost half of Trump’s supporters hate the plan. “The base want to support the President, but they are confused — because State and Treasury have not properly explained the strategic importance of Argentina or Milei,” Steve Bannon, former White House chief strategist, tells me. He notes that the unease partly reflects fears that this is more of a bailout of Wall Street than an ally.
The second risk lies with financial geopolitics. For what this deal has underscored is that the Trump administration is not just wedded to a “geoeconomic” playbook that uses trade policies for statecraft — it is also deploying the dollar as a diplomatic weapon.
In some senses, this is unsurprising. As scholars including Edward Fishman and Matteo Maggiori have noted, America’s hegemonic power today does not lie in manufacturing supply chains, since China dominates key chokepoints. Instead it rests on the dollar’s reserve currency status, and US financial dominance. And past administrations have also used this tool. Just look at how the Biden government excluded foes such as Russia from dollar financing, via sanctions.
However, the Trump administration is now using dollar hegemony (ie geofinance) in new ways — not only via sanctions but also by threatening to impose massive tariffs on countries which diversify from the dollar. And this Argentine aid package shows that Bessent is now politicising dollar swap lines too.
After all, when the Federal Reserve offered temporary swap lines to emerging markets in the past — as it did during the 2008 financial crisis — it did so by evaluating their economic strength, not politics. So, too, when the Fed created permanent swap lines for big nations, such as Japan or the UK.
However, Bessent is now using a separate Treasury facility for Argentina, known as the Exchange Stabilization Fund. Trump sees the pro-business, government-slashing Milei as a political ally, and also wants to fend off Chinese influence in Latin America, while gaining access to Argentina’s minerals.
What is going on, in other words, is a naked form of financial imperialism. And this will probably make other nations even more nervous of relying on US aid or counting on the presence of dollar swap line, given the future “price” that Trump could extract. Instead they are likely to keep diversifying into non-dollar assets, including gold, and clubbing together in novel ways. That could eventually reduce rather than enhance the dollar’s hegemonic power.
Then there is a third, more subtle, risk around the credibility of Bessent himself. The goal of this swap line with Argentina — which is being supplemented by novel currency intervention and a putative $20bn package of bank support — is to stop the peso collapsing. However, most metrics suggest the Argentine currency is overvalued, perhaps by 20 per cent, and thus needs to fall. Bessent and Milei are trying to fight financial gravity.
If they succeed, the US Treasury will look omnipotent. But if he fails, that macho image of American power will be undermined — and investors may ask whether Washington can defy other forms of financial gravity, such as the risks posed to the Treasuries market by ever-swelling US debt.
Right now, there is little sign of such risks materialising; Treasury yields have hitherto remained remarkably low. That is partly because the US deficit has recently shrunk (a bit), the Fed has cut rates, Bessent deftly handled bond auctions and the markets are now so awash with liquidity that it has raised the price of almost every asset, including bonds.
But the very same factors that are currently driving asset prices ever higher — excess liquidity and leverage — are also making investors nervous about a future financial crash and the status of fiat currencies, if (or when) all these bubbles burst. Bessent can thus ill-afford to do anything that might undermine investor trust.
To put it another way: if the US aid package fails to halt Argentina’s market crisis, it will not just hurt Milei, but may rebound badly on Washington too. So all eyes are now on Sunday’s vote — and whether this Argentine version of Maga can live with its all-American counterpart, or will tarnish its sheen.
gillian.tett@ft.com
