Milei caught in Trump-China spat over US$18-billion FX swap line

Javier Milei is suddenly caught between US President Donald Trump and China’s communist government as the Argentine leader nears the finish line on a new rescue package from the International Monetary Fund.

Beyond an escalating trade war keeping markets on edge, China hit back Tuesday against a top Trump official who criticised its US$18-billion currency swap line with Argentina. Mauricio Claver-Carone, the administration’s special envoy to Latin America, called the financial lifeline extortionary and said he wanted it to end.

“Fair-minded people are able to tell who is extorting and coercing others and making trouble,” Chinese Foreign Ministry spokesman Lin Jian said at a regular press briefing in Beijing. “We call on the US to get its perspective right and make more tangible contributions to the development of Latin American and Caribbean countries, rather than make an effort to drive a wedge.”

The swap line with the People’s Bank of China is the Milei government’s largest source of foreign reserves. Argentina’s Central bank renewed a roughly US$5-billion portion of it for another two years last June. The crisis-prone nation is negotiating a new US$20-billion programme with the IMF to bolster its reserves so that it can eventually lift capital controls. Milei has been pushing to secure firm political support from the US, the fund’s largest shareholder.

“While that credit line is maintained, China will always be able to extort. So for us the goal with the Fund programme is that it not reinforce China’s position in that credit line,” Claver-Carone told Uruguayan newspaper El Observador.

Argentina’s Central Bank declined to comment, and Milei’s spokesman didn’t immediately reply to a request about the Chinese government’s remarks.

For China, the Argentina credit has become its biggest yuan swap line in the world. President Xi Jingping has been offering financial lifelines to several countries in a bid expand the Asian powerhouse’s global influence.

Created in 2009, the Argentine swap agreement means that the People’s Bank of China has an account in yuan at the Argentine Central Bank, and the latter has an account in pesos in China.

Before taking office, Milei had slammed Beijing as “assassins.” But now the leader of South America’s second biggest economy describes Argentina and China as “great trade partners” and says he plans to deepen the commercial relationship.

When asked about his pivot in a January interview with Bloomberg News in Davos, Switzerland, the libertarian president struck a pragmatic tone. “Well, sometimes one has to learn,” Milei said. “Don’t you learn every day? Well, if I don’t learn, I hurt Argentines. I have extra pressure to learn fast.”