“[W]e urge the US side to detoxify its mind. Instead of devoting its time and energy to… attacking China, it would be much more productive to make real contributions to the development of the countries of the region.”
If Panama was the first point of contention between the US and China on the American continent since Trump 2.0 took over and began pushing its weight around, Argentina is clearly the second.
Like Panama, Argentina has immense geostrategic value given its position on the doorstep of Antarctica, with its vast wealth of unexplored and unexploited natural resources, as well as the “Triple Frontier” it shares with Brazil and Paraguay, a key border in South America in terms of population, movement of people and international relations.
Like Panama, Argentina has developed very close economic and trade ties with China, particularly since the signing of a currency swap between the two countries in 2009 during the presidency of Cristina Fernández. Since then, China has not only become a key source of external financing for the Argentine government but also a major trade partner, second only to Argentina’s direct neighbour Brazil, and source of investment.
But the US is determined to change all of that. Last Friday, US Treasury Secretary Scott Bessent paid a rare visit to Buenos Aires to meet with Javier Milei and his economy minister, Luis Caputo, to discuss future relations between the two countries. By no coincidence, the meeting came just three days after Milei signed a $20 billion IMF bailout, most of which funds Caputo will probably have burnt through by Argentina’s mid-term elections in October. From our article on the topic:
In an interview with Bloomberg, Bessent praised Milei for working to bring down barriers towards reciprocal trade with the United States. He also admitted that the US is seeking to prevent Latin American countries from giving up their mining rights to China in return for aid. The unsaid part: those rights would be much better used in the hands of US, Canadian, European and Australian companies.
“China has signed a number of these rapacious deals marked as aid, where … they’ve taken mineral rights. They’ve added huge amounts of debt onto these countries balance sheets,” he said. “They’re guaranteeing that future generations are going to be poor and without resources. And we don’t want that to happen any more than already has in Latin America.”
This is all part of the collective West’s China debt trap lie that won’t die, as Conor documented in 2023:
While Beijing certainly seeks influence in countries where it lends, it also usually builds infrastructure. And while those roads, train tracks, ports and more are also usually beneficial to Chinese operations, their construction also helps the host country. It’s also way more than the West offers in terms of infrastructure…
Meanwhile, for Washington the IMF continues to serve as a handy tool for pursuing its geopolitical goals, not only in its own “backyard” but far beyond it. As more and more of the Global South’s stagnating and heavily indebted countries succumb to the whipsawing effects of Trump’s global trade war and enter into default, the use of that tool could be about to increase significantly.
The question is: how will China respond?
China just responded — with a firm message on international trade and development that I believe was intended for a much wider audience than just Argentina and the US — namely the other 76 countries of the G77+China (otherwise known, however imprecisely, as the “Global South”). Beijing knows that in the coming weeks the US will be trying to pressure dozens of other nations in Latin America and Africa to cut, or at least loosen, their commercial and economic ties with China, just as it is doing with Argentina, using the IMF as its main leverage.
Here are the most important sections of the one-page text (machine translated from Spanish):
The Embassy of China in Argentina expresses its deep discontent and categorical rejection of the malicious defamation and slander made by the Secretary of the Treasury of the United States, Scott Bessent, during his visit to the Argentine Republic on April 14, and makes the following statement:
I. The claim about the agreements described as predatory and the alleged large amounts of debt incurred by the People’s Republic of China is false. What is true is that some people with covert motives are trying to sow discord in Sino-Argentine and Sino-African relations. We remind them that to the best of its ability, China accompanies developing countries on their path to development – including those in Latin America and Africa – without imposing any political conditionalities. The intention of these partnerships has been to contribute to socio-economic development and the improvement of the well-being of the peoples, which have been very well received by the governments and beneficiary populations.
If the United States prefers not to go down this path, it should at least refrain from deliberately obstructing or sabotaging other countries’ assistance to developing nations and the Global South. Nor should it sacrifice the well-being of the peoples of these nations to serve its selfish geopolitical interests in defence of its own hegemony…
II. China has always carried out practical cooperation with Argentina in various fields, including the currency swap, on the basis of mutual respect, equality and mutual benefit. Over time, Sino-Argentina cooperation with the swap has played an important role in maintaining Argentina’s economic and financial stability, which has been welcomed and highly valued by the Argentine side. In addition, it should be noted that the renewal of the swap has also played an important role in obtaining relevant financing from the International Monetary Fund (IMF).
China’s cooperation with Latin American countries – including Argentina – is a South-South collaboration that always adheres to the principles of equal treatment.
By contrast, the tariffs imposed by Donald Trump earlier this month threaten to deal a particularly heavy blow to developing and emerging economies if they come into force after the 90-day grace pause the US president later announced. These countries, particularly in South East Asia and Latin America, many of them facing debt crises, now find themselves trapped between the world’s two economic superpowers – China, a large source of manufactured goods and a key trading partner, and the US, a crucial export market.
They include Argentina, whose government is heavily dependent on both the Washington-based IMF and the government of China for external financing. The country also depends heavily on China as its second largest trade partner, accounting for 7.8% of Argentina’s exports (exactly the same proportion as the US) and 20% of its imports (almost 10 percentage points higher than the US).
On April 10, the Milei government renewed a $5 billion activated swap line with China for another year. A week later, it signed a $20 billion emergency loan agreement with the IMF, taking its total debt obligations to the fund to over $60 billion. It is also in line for a further $22 billion in debt from the World Bank and the Washington-based Inter-American Bank (IAB).
The goal is clear: to pull Argentina away from China and back into the US’ orbit. As mentioned at the start of the post, the US Treasury Secretary Scott Bessent already launched a tirade against China’s currency swap agreement with Argentina during his visit to Buenos Aires, repeating the oft-used falsehood that Beijing is engaging in debt trap diplomacy, while using the IMF in exactly that way, as it has done for decades.
The Risks of Shaking Down the World
Apparently one of the main goals of Trump’s tariff threats is to push US economic partners to curb trade with China and rein in Beijing’s manufacturing dominance. That’s according to a recent article in the Wall Street Journal. Bloomberg has also reported that Bessent is working to isolate China from some of its closest neighbours — Japan, South Korea, Vietnam and India — in what’s been called a “grand encirclement” strategy.
It remains to be seen how successful this attempt to shake down the entire world will prove to be. The EU, as Conor noted this week, will probably end up falling into line while “making noise about cosying up to China as a counterweight to the Trump’s hardball negotiation tactics.” The US’ USMCA partners, Mexico and Canada, are simply too dependent on the US economy to walk away and will probably end up reducing their trade with China.
There was also news yesterday that India has agreed to impose a 12% tariff on Chinese steel, suggesting that Bessent’s “grand encirclement” strategy is already yielding dividends wrt the BRICS’ weakest link. In a bid to placate Trump, India’s Modi government has also announced big import duty cuts on Harley-Davidson motorbikes and American-made bourbon whiskey while also pledging to buy more US energy and defence products.
But in the “Global South” as a whole, including large parts of its so-called “backyard”, Washington has a major problem: it has little to offer many countries, besides the constant threat of double-digit tariffs on their exported goods entering the US and the occasionally dangled carrot of the tariffs’ (presumably temporary) suspension — provided they do everything the Trump administration demands, including distancing themselves from China…
Read the full article on Naked Capitalism
Nick Corbishley 