The Trump administration pressed Argentina on Wednesday to dismantle its currency swap arrangement with China, tying future financial support to President Javier Milei's willingness to distance his government from Beijing during a week of high-stakes diplomacy at the United Nations General Assembly.

The demand, first reported by the local newspaper Clarin and confirmed by the Post on Thursday, was delivered in meetings between the two delegations in New York, where senior US officials made clear that Washington expected Buenos Aires to reduce reliance on Chinese credit lines.

They argued that the swap, renewed last year and currently worth about US$18 billion, represented a long-term risk to Argentine sovereignty and created opportunities for China to expand its influence in South America.

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The Post has reached out to China's embassy in Buenos Aires for comment.

US officials had long raised the issue of the swap agreements between the South American nation and Beijing.

In April, US President Donald Trump's Latin America envoy Mauricio Claver-Carone described the swap as "extortionate" and warned that Washington would withhold support for Argentina's loan request to the International Monetary Fund if the agreement with Beijing remained in place.

US President Donald Trump during a meeting with Milei (not pictured) at the UN General Assembly on Tuesday. Photo: Reuters alt=US President Donald Trump during a meeting with Milei (not pictured) at the UN General Assembly on Tuesday. Photo: Reuters>

That same month, Treasury Secretary Scott Bessent praised Milei's reforms during a visit to Buenos Aires but said the US was not considering direct credit lines.

He added that Argentina should be able to pay off the US$5 billion it had already activated from the swap, signalling Washington's preference that the deal with China be wound down.

The swap had been central to Argentina's finances, allowing the central bank to tap emergency liquidity to shore up reserves and pay for imports.

The facility proved vital to covering debt payments and settling trade with China amid a shortage of hard currency. Argentina has defended its use again last year when Beijing extended the agreement through 2026.

Milei had once described China as an "assassin" state during his campaign, but in an interview in October, he called it a "very interesting commercial partner" and said he was "positively surprised" after Beijing renewed the swap, showing a more pragmatic approach once in office.

Domestic instability increased the urgency of Argentina's request. In recent weeks, leaked audio recordings implicated the president's sister, Karina Milei, his secretary general and a key adviser, in alleged kickbacks tied to pharmaceutical contracts, prompting federal raids and a court-ordered ban on publishing further materials.

At the same time, the peso plunged sharply, forcing Argentina's central bank to sell over US$1 billion in reserves in a matter of days to defend its exchange rate band.

Milei's party also suffered a crushing defeat in a provincial election earlier in the month, sparking capital flight and forcing the central bank to intervene heavily in currency markets.

Investors questioned whether the president could sustain his austerity programme and deregulation agenda without stronger political backing in Congress, where midterm elections scheduled for October loomed as a referendum on his reforms.

Trump officials said US assistance could replace the Chinese line. One option under discussion involved a Treasury-backed loan programme that would give Buenos Aires liquidity to meet obligations coming due in 2026 while signalling a clear realignment with Washington.

The push came amid a closely watched meeting between Milei and Trump on the sidelines of the UN. The American president offered warm praise for his Argentine counterpart, calling him a "great friend", and endorsing his bid for re-election next month.

"We are going to help them," Trump told reporters, while stressing he did not believe a full bailout was necessary. The Argentine president responded by thanking Trump for what he described as an "extraordinary gesture", holding up a printout of Trump's endorsement on Truth Social before the cameras.

Bessent told Fox News earlier this week that Washington planned to establish a US$20 billion swap line for Argentina and stood ready to purchase its bonds if needed. He described the programme as a "bridge to the election".

Markets rallied on the announcement, with the peso strengthening and bonds climbing, while the World Bank accelerated US$4 billion of investment financing in parallel.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.