The United States and Argentina signed a trade and investment liberalization agreement last week aimed squarely at market distortions. The pact would cut tariff and non-tariff barriers, while targeting entrenched Argentine government-sponsored anticompetitive practices.
The agreement offers a template for future Trump administration trade deals that focus on such distortions. More broadly, initiatives of this kind could boost growth across participating economies by removing artificial constraints on voluntary exchange.
ACMDs and the Economics of Playing Favorites
Anticompetitive market distortions (ACMDs) are government-imposed restrictions that skew market competition, whether domestic or cross-border. They typically allow favored private interests to secure or preserve artificial advantages over rivals, foreign or domestic.
A growing empirical literature documents their economic costs. A 2019 Centre for Economics and Business Research study estimated ACMDs reduced global output by roughly 14%. A 2016 analysis by Growth Commission Chairman Shanker Singham and other scholars projected that eliminating all ACMDs in India would increase the country’s gross domestic product fourfold.
An August 2025 white paper by Singham, “Trade Policy in the Trump Administration: Advancing Reduction of Anti-Competitive Market Distortions,” offers a concise account of the problem:
[ACMDs,] in the form of entrenched protectionism, anti-competitive regulation, market barriers, or state-sponsored monopolies, absorb productive effort, divert capital, and suppress innovation. They do not merely slow the system; they bend it inward, distorting incentives, collapsing feedback loops, and eventually shutting off the escape routes for competitive pressure. . . . [A]n ACMD emerges when rent-seeking interests overpower market signals: when price mechanisms, consumer choice, and innovation incentives are subordinated to regulatory capture or political discretion. At a certain point, the distortion becomes self-sustaining. Market actors adapt to it, institutional structures reinforce it, and an economic “event horizon” forms beyond which recovery is increasingly difficult. Left unchecked, these distortions concentrate economic power, degrade productivity, and create systemic drag. . . .
ACMDs have a profound effect on trading partners, but they also impact the countries which engage in the distortions. Not all government actions are ACMDs, however. In order to qualify the government action, intervention or toleration of private sector practice must have an anti-competitive effect in a relevant market. In other words, it must distort the ordinary voluntary exchange between willing buyer and willing seller. The benchmark for how this is measured is the effect of the government action on productive and allocative efficiency.
The white paper also presents an econometric model linking reductions in ACMDs to gains in per-capita GDP across three pillars: trade openness, domestic competition (inside-the-border regulatory reform), and property rights. Using data from 2010–2019 across 118 countries, the model’s predictions closely matched observed outcomes, with statistically significant correlations across all three pillars. Countries identified as suffering large distortion-driven losses experienced weaker growth, while those with fewer distortions posted stronger gains.
Using Trade Leverage to Discipline ACMDs
Because countries gain from curbing their own ACMDs, foreign ACMD reduction has become a central objective of the Trump administration’s trade policy.
The administration frames ACMDs as obstacles to fair trade and U.S. growth. The president’s 2025 Trade Policy Agenda instructs the U.S. trade representative to review economic relationships with all trading partners and identify “unfair trade practices,” including nonreciprocal trade. The agenda explains that acting against such practices would help open foreign markets to U.S. exports and encourage the return of lost production. The United States also points to domestic reforms, citing President Trump’s April 2025 executive order directing agencies to identify and dismantle anticompetitive federal regulations.
U.S. policy accordingly targets foreign subsidies, preferential treatment for state-owned enterprises, and regulatory barriers that suppress competition. The president’s 2025 Trade Barriers Report catalogs these practices and highlights China’s nonmarket industrial plans and related policies aimed at securing global dominance in targeted industries.
The recent U.S.-Argentina agreement offers the clearest example to date of using tariff leverage to secure substantial reductions in a trading partner’s ACMDs.
ARTI and the Mechanics of Anti-ACMD Trade Policy
The United States–Argentina Agreement on Reciprocal Trade and Investment (ARTI), signed Feb. 5, eliminates or reduces tariffs on hundreds of goods traded between the two countries. More significantly, it targets Argentine ACMDs. The agreement stops short of eliminating every distortion, but it requires structural reforms designed to curb Argentine government interference in trade-related markets and foreign investment. It also commits Argentina to cooperate in addressing ACMDs originating in third-party jurisdictions.
The United States’ substantial tariff reductions on major Argentine imports likely provided the leverage for these commitments. ARTI may thus offer a template for future U.S. trade negotiations aimed at reducing foreign ACMDs that undermine U.S. trade and investment. Key provisions appear below.
ARTI’s Core Anti-ACMD Commitments
- State-Owned Enterprises and Subsidies: Argentina commits to address “distortionary actions” by state-owned enterprises and industrial subsidies that harm the bilateral trading relationship.
- Combating Third-Country Practices: The agreement provides for joint action against “unfair trade practices” by third countries, particularly nonmarket policies associated with countries such as China. The parties will share intelligence and market data on firms owned or controlled by third-country governments that engage in duty evasion or unfair competition.
- Regulatory Alignment: ARTI targets distortions created by burdensome regulatory divergence. Argentina will accept U.S. Federal Motor Vehicle Safety Standards, as well as international standards for medical devices and chemicals, without requiring duplicative conformity assessments.
- Digital-Trade Fairness: Argentina agrees not to impose digital-services taxes or customs duties on electronic transmissions, limiting discriminatory treatment of U.S. technology firms.
- Intellectual-Property Enforcement: To curb distortions caused by pirated or counterfeit goods, Argentina commits to stronger intellectual-property protection, especially in digital markets, and to reforms addressing structural weaknesses in its patent system.
Removing the Classic Obstacles to Trade
To further level the playing field, ARTI also removes several traditional barriers.
- Tariff Elimination: Argentina will remove tariffs on more than 200 categories of U.S. goods, including machinery, medical devices, and chemicals. The United States, in turn, will eliminate tariffs on 1,675 Argentine products.
- Non-Tariff Barriers: Argentina has dismantled anticompetitive licensing-permit requirements and will eliminate consular document authentication (consularization) for U.S. exports, streamlining cross-border trade.
- Critical-Minerals Transparency: For sectors such as lithium and copper, ARTI establishes “benchmark pricing frameworks” intended to guard against nonmarket policies and support market-based pricing for U.S. firms.
Can ARTI Scale?
ARTI marks a notable success for U.S. trade diplomacy and promises gains for both economies. Reciprocal tariff reductions should benefit consumers and firms that rely on traded inputs in each country. Argentina’s regulatory reforms, if implemented, could encourage entrepreneurship and growth domestically, while also aiding U.S. exporters, investors, and consumers.
Its scope may prove unusual, perhaps reflecting the policy alignment between Presidents Javier Milei and Donald Trump. Even so, successful implementation—and visible economic benefits, reinforced by tariff leverage—could support similar U.S.-led negotiations elsewhere in the Americas and beyond.
Reciprocal tariff cuts should accompany reductions in ACMDs. See, e.g., this 2025 commentary by Donald J. Boudreaux and former Sen. Phil Gramm (R-Texas) in Café Hayek. Over time, policymakers may even pursue a hemispheric free-trade agreement that phases out major ACMDs alongside tariffs.
That prospect may be overly optimistic. As Yogi Berra (and Nobel Prize-winning physicist Niels Bohr) observed, “it’s tough to make predictions, especially about the future.”
China, moreover, is not Argentina. U.S. leverage will vary with the negotiating partner. Still, securing a major agreement that combines tariff liberalization with ACMD reform represents a meaningful step forward for the Trump administration.
From Buenos Aires to New Delhi
The good news continues. A Feb. 10 White House press release announced an interim trade accord between the United States and India that would open India’s 1.4 billion-person market to U.S. products, with a final agreement expected soon. The release also indicated substantial reductions in ACMDs, along with tariff cuts in both countries.
According to the White House:
President Trump agreed to remove the additional 25% tariff on imports from India in recognition of India’s commitment to stop purchasing Russian Federation oil. Accordingly, the President signed an Executive Order last Friday removing that additional 25% tariff. Given India’s willingness to align with the United States to confront systemic imbalances in the bilateral trade relationship and shared national security challenges, the United States will lower the Reciprocal Tariff on India from 25% to 18%.
Key terms include:
- Tariff Reductions: India will eliminate or reduce tariffs on U.S. industrial goods and a wide range of agricultural products, including dried distillers’ grains, red sorghum, tree nuts, fresh and processed fruit, soybean oil, wine, and spirits.
- Purchasing Commitments: India plans to expand imports of American products and purchase more than $500 billion in U.S. energy, information and communication technology, coal, and related goods.
- Non-Tariff Barriers and Rules of Origin: India will address priority non-tariff barriers, while the parties negotiate rules of origin to ensure the agreement’s benefits accrue primarily to the two countries.
- Digital Trade: India will negotiate bilateral digital-trade rules aimed at discriminatory or burdensome practices and other barriers to digital commerce.
- Economic Security and Supply Chains: Both countries will strengthen economic-security cooperation, including investment review, export controls, and coordinated responses to nonmarket policies of third countries.
- Technology Cooperation: The parties will expand bilateral trade in technology products and deepen joint technology initiatives.
The India accord reinforces the broader theme running through ARTI: tariff liberalization paired with efforts to reduce ACMDs. Whether this approach scales across partners with different economic systems remains uncertain. Still, combining tariff leverage with market-oriented reforms appears to be emerging as a central feature of U.S. trade policy.
If replicated across additional partners, the strategy could promote wider market access, encourage domestic reform abroad, and reduce the prevalence of government-sponsored market distortions. Predictions about trade politics remain hazardous, but recent agreements suggest the United States is testing a model that links trade liberalization to competition-enhancing reform.
