Imagine a parallel universe where, with the stroke of a pen, President Trump declares an end to the ill-conceived trade war that, while it intensified sharply in April 2025, started in 2017. Not only are the existing duties on steel, aluminum, semiconductors, consumer goods, and countless other imports rescinded, but the administration also explicitly disavows the threat of future tariffs. In an instant, a fog of uncertainty that hangs over the US economy for years vanishes. For thousands of businesses — from family-owned manufacturers in the Midwest to sprawling multinationals with global supply chains — the abrupt shift is transformative.

A New Horizon of Certainty

The first and most immediate effect is psychological: firms that have been paralyzed by uncertainty suddenly see a clear horizon. Projects that sit mothballed — factory expansions, product launches, acquisitions — spring back to life. Capital expenditure budgets, which are padded with contingencies for unpredictable tariff costs, are redirected into tangible investments. CFOs no longer devote boardroom hours to hedging strategies and pricing contingencies; instead, they plan growth with confidence.

Hiring surges. With the removal of tariff-induced costs, margins fatten, and businesses put idle plans into action. A Texas auto-parts maker, once forced to pay a 20 percent surcharge on imported aluminum, now opens a second plant. A Midwestern agricultural-equipment manufacturer that shelves its design for a next-generation harvester rehires engineers to get the project rolling. Technology companies, once squeezed between tariff costs and price-sensitive consumers, accelerate R&D spending and greenlight acquisitions that consolidate their competitive positions.

Supply Chains Realign

Tariffs force many companies to build inefficient, defensive supply chains. Firms reroute imports through third countries or scramble to find suboptimal domestic substitutes. With tariffs gone, supply chains realign on the basis of cost and quality rather than politics. Container traffic through major ports like Long Beach and Savannah spikes, while logistics companies report volumes reminiscent of pre-tariff highs. Freight forwarders, trucking firms, and rail operators all feel the downstream effects of renewed activity.

Inventory positioning sees rapid restrategizing. Where, starting earlier this year, companies stockpiled vast amounts of goods to hedge against possible tariff hikes or retaliatory duties, now they return to leaner, just-in-time models. This frees up working capital for expansion. The elimination of uncertainty — something businesses value almost more than favorable regulation itself — creates efficiencies across the system.

Consumers Regain Confidence

The parallel-universe tariff rollback quickly reverberates through consumer markets. Prices of goods that quietly creep higher — appliances, apparel, electronics — begin to ease. Retailers, once forced to pass higher import costs along to shoppers, now find breathing room to discount and promote. Households, feeling the combined effect of lower prices and rising job opportunities, loosen their wallets. Consumer confidence indexes register sharp upticks, echoing levels not seen in years. A small measure of deflation, the actual decline of prices rather than their deceleration (disinflation), enters the US economy.

Financial markets respond in kind. Equity analysts upgrade earnings forecasts, citing restored margins and reduced input costs. The stock prices of retailers, automakers, and manufacturers jump, while capital-goods and logistics firms trade at premiums reflecting renewed investment. Bond yields rise modestly, reflecting expectations of stronger growth. Even the dollar firms up, as global investors interpret the tariff withdrawal as a sign of restored policy rationality.

Productivity Growth

Beyond the immediate uplift in spending and hiring, the tariff rollback opens the door to longer-term gains. Tariffs function as a tax on productivity: firms spend time and money dodging duties, redesigning supply chains, and lobbying for exemptions rather than innovating. With those distractions gone, resources flow back into efficiency-enhancing investments.

Higher capital expenditures translate into a more modern capital stock: upgraded machinery, cleaner energy systems, better software. The productivity boost that follows is not dramatic in a single quarter, but over time it compounds. Economists projecting GDP growth see their models nudge upward as capital deepening accelerates and labor markets tighten. The virtuous cycle of investment, hiring, and spending reinforces itself.

Global Ripples

The world economy, too, feels the aftershocks. Exporting nations that see their trade with the US fall off — Vietnam, Mexico, Germany, South Korea, and others — suddenly enjoy revitalized access to the world’s largest consumer market. Supply relationships stabilize, and retaliatory tariffs imposed on American goods quietly drop. Farmers, who are squeezed by trade disputes, find foreign demand returning. Energy exports — oil, gas, coal — regain lost markets.

Global institutions like the WTO, which have drifted to the sidelines, are once again treated as forums for dispute resolution rather than ignored. Investor confidence abroad strengthens, and multinational corporations, no longer deterred by the threat of sudden tariffs, expand their US-based operations.

The Parallel Universe Lesson

Of course, this universe is hypothetical. In reality, tariffs remain a prominent feature of American trade policy, and the uncertainty they generate continues to ripple through the economy. But the exercise demonstrates just how powerful a single act of deregulation can be. By eliminating tariffs and withdrawing threats of new ones, the administration sets off a cascade of positive effects: higher investment, faster hiring, stronger growth, and renewed global confidence in US economic leadership.

It is worth stressing that nothing in this parallel universe is beyond reach. The tools required to unleash this growth spurt already exist, sitting unused in the hands of policymakers. With a single declaration, the administration lifts the burden of tariffs and lets markets, businesses, and consumers do what they do best: allocate resources, generate wealth, and drive prosperity.

Perhaps a better term for this exercise would be a gedankenexperiment — a thought experiment of the sort often undertaken in physics and philosophy. If others indulge the fantasy that government intervention and the suppression of exchange makes everyone richer, I figure I can take my turn too. For now, it remains an exercise in imagination — but it is one well within the capacity of the current administration to make real.

On October 26, half of Argentina’s representatives and one-third of senators will face voters at the ballot box. This is, on its own, fortunately unexceptional. Indeed, Argentina has been a solid democracy since 1983, when the last generals left the presidential palace.

Nonetheless, these midterm elections represent an existential challenge for Argentina. They are, de facto, a referendum on the economic reforms of President Javier Milei. Milei, who was inaugurated on December 10, 2023, had flamboyantly promised to take a chainsaw to public spending, to tame an inflation rate nearing 300 percent per year, and to set the economy back on the path of growth. As realistic as he is idealistic, Milei promised 18 months of suffering and austerity measures to fix a country that had been ravaged by Perónism. Where does Argentina stand?

A Bit of History

Before looking at contemporary Argentina, it makes sense to offer a bit of historical context. Argentina was the forgotten backwater of the Spanish empire in the Americas; it lacked gold or a local population to be enslaved. After independence in 1816, Argentina suffered through a half-century of pendulum swings between dictatorships and civil wars — neither of which is favorable to economic growth. In 1860, Argentina adopted an almost verbatim translation of the US Constitution of 1787. Miraculous growth ensued. By 1910, Argentina was the eighth richest country in the world, a living laboratory for the economic theories of Adam Smith, Ludwig von Mises, F.A. Hayek, and Douglass North. Economic liberty, defense of contracts, freedoms of speech and religion — in sum, Argentina thrived under institutions that favored entrepreneurship and industrialization. Alas, Argentina didn’t quite have rule of law, but a ruling oligarchy with weak institutional safeguards. The first military coup came in 1930. There would be another 10 throughout the twentieth century, with a total of six military dictatorships (half the time, the military would simply evict the president and hold fresh elections).

The key factor for understanding the last century in Argentina is Perónism, a corporatism imported from Mussolini’s Italy, and given an Argentine flavor by Colonel (and future president) Juan Domingo Perón. Redistribution of wealth to buy friends and votes, populism, a corporatist balance of the country’s interest groups with an interventionist state as arbiter, five-year economic plans, and heavy regulation — these formed the new constitutional order. The eighth richest country in the world in 1910, Argentina suffered through a century of chronic hyperinflation, routine monetization of budget deficits, and economic crises — and fell to the rank of 68^th richest country in the world today. Argentina has also garnered the dubious honor of being the IMF’s greatest debtor (it now owes $57 billion). Despite the obvious economic damage, the Perónist instinct dies hard; in the decade before Milei’s election, the Perónists doubled down on their policies. Intervention after intervention, regulation, redistribution, all took their toll. The poverty rate, which had fallen to 20 percent in 1993, hit a high of 58 percent before settling at 45 percent in 2023. The debt-spending was financed by printing money to feed friends and clients; hyperinflation, which had been tamed in the 1990s, returned, and rose to almost 300 percent per annum by 2023. Worst of all, the Perónists systematically destroyed the country’s institutional checks and balances.

Milei was elected in 2023, with a mandate to solve the economic consequences of Perónism. But the Perónists remain powerful: they hold 108 seats (of 257) in the lower house and 33 (of 72) in the Senate, along with 16 governor’s mansions (out of 23 provinces). This past September, the Perónist candidate won 47 percent of the votes in the Buenos Aires province gubernatorial election (against 33 percent for Milei’s party). To be sure, this province has long been a stronghold of Perónism… but this still represents a challenge to Milei’s reforms.

Halfway Through Milei’s Term, Where Is Argentina?

On December 10, 2023, Javier Milei inherited an economic and institutional disaster. He has — of course! — not been able fully to fix a century of interventionist damage in the span of two short years. But, 22 months into his presidency, where does Argentina stand?

Because he lacks a congressional majority, Milei has had to impose reforms by emergency decree. Such decrees, according to the Argentine constitution, are valid for one year, and must have the consent of one the two legislative chambers.

Milei was thus able to cut public spending, notably by reducing the number of cabinet agencies by half, from 18 to 9. By taking a chainsaw to government spending, Milei eliminated the budget deficit, a chronic feature of Perónist Argentina. Public debt, which had reached 155 percent of GDP in 2023, has now fallen to 83 percent.

Perónism’s fiscal profligacy had dire monetary consequences, because the budget deficit was routinely monetized by the central bank, which had effectively become an arm of the Treasury. Milei inherited an annual inflation rate of 294 percent — which he has reduced to 34 percent (this would be unthinkable in the US, but is quite healthy by Argentine standards).

As a good economist (and economics professor), Milei has not focused exclusively on macroeconomics. He has also attacked microeconomic impediments, by removing the heaps of regulation that blocked growth and suffocated the economy. By emergency decree, Milei removed import controls and price controls. Notably, the real estate market was paralyzed by rent controls, mandatory three-year leases, and the inability to sign a lease using dollars (or any currency but the Argentine peso). One does not need a doctorate in economics to predict that the sad combination of regulation and hyperinflation would erode supply, as landlords faced the very real possibility of evaporated rents. Since Milei suspended rent controls, the price of rental housing in Argentina has fallen by 30 percent, and housing supply has increased by 212 percent.

Argentina’s risk premium has tumbled dramatically, and foreign investment has returned. After years of recession, economic growth is now at an enviable 6.3 percent. The middle class has surged, in two years, from 23 percent to 39 percent of the population. The 45 percent poverty rate Milei inherited from the Perónists temporarily rose to over 50 percent — Milei had indeed promised the pains of austerity — but has already fallen to 31 percent.

This is but a summary of Milei’s success.

There’s One More Thing

Unfortunately, there is one glaring omission in Milei’s reforms. 

He has allowed contracts to be signed in foreign currency and cryptocurrency. He has also imposed an amnesty for depositing the dollars that had been hidden in mattresses because of currency controls and the past freezing of dollar-denominated accounts. These are steps in the right direction. But he has not crossed the last Rubicon: the complete abolition of Argentina’s central bank — even though he had promised to wield his terrible swift chainsaw on it too. Closing the bank would have gotten rid of chronic hyperinflation, and opened the door to dollarization (which already exists de facto), or even currency competition, to replace the monetary cash cow.

Beyond the immediate economic benefit of taming and preventing hyperinflation, shutting down the central bank would represent the final nail in the coffin of Perónism. Indeed, all the good that Milei has brought to Argentina over the past two years could evaporate with one simple law or presidential decree if the Perónists return to power. Argentina would then relapse back into its perennial bad habits, with favors and votes purchased by redistribution, and budget deficits financed by the monetary printing press — in sum, a return to the predatory state of Perónism. Economist Emilio Ocampo (who had offered his services as the last president of Argentina’s central bank) explains that closing the central bank is the only method for Milei to show credible commitment to his reforms, and the only way to end the profligacy of Perónism.

These midterm elections are not merely a political footnote in the history of a troubled country. They are a veritable existential struggle between two forces. On one side, we have intervention, privilege, and a poverty that is as absurd as it is preventable. On the other, there is hope, progress, freedom, and prosperity.