A term coined by Financial Times columnist Robert Armstrong, the “TACO trade” - short for “Trump Always Chickens Out” - has become a buzzword on Wall Street . It’s a nickname that pokes fun at US President Donald Trump ’s tendency to threaten high tariffs on imported goods, only to later retreat or water them down. For investors and market analysts, this pattern has become a recognized trading playbook: stocks initially plunge when Trump makes tariff threats, then rebound when he backs off - a cycle that has repeated multiple times throughout his presidency.
Here is all you need to know about it
What is the TACO trade?
The acronym TACO-“Trump Always Chickens Out”-is a tongue-in-cheek jab at Trump’s pattern of issuing bold tariff threats but often scaling them back or delaying their implementation. For example, when Trump extended the deadline for a 50% tariff on EU goods from June 1 to July 9, stock futures rose, reinforcing the TACO trade narrative. The term has gained traction among traders and in financial media as a shorthand for this market dynamic.
How does the TACO trade work in practice?
Tariff Threat: Trump announces high tariffs or aggressive trade policies, sparking fears of trade wars or economic disruption.
Market reaction: Stocks, particularly those tied to global trade, drop as investors react to the uncertainty.
Backtracking: Trump delays, modifies, or cancels the tariffs, often citing ongoing negotiations or concessions from trading partners.
Market rebound: Investors, anticipating this pattern, buy stocks at lower prices, leading to a market rally.
This cycle has been observed multiple times, such as with tariff threats against the EU, China, and other trading partners.
As per a Bloomberg report, “The thesis behind the TACO trade is: Buy the Trump tariff dip,” Tom Essaye of the Sevens Report wrote in a note to clients on Wednesday. “Essentially, Trump has proven to investors that he won’t actually follow through with draconian tariffs. As such, any sell-off following a dramatic tariff threat should be bought.”
What’s a recent example of the TACO trade in action?
One key episode happened this month when Trump threatened to impose a 50% tariff on European goods starting June 1, causing a market slump. But soon after, he extended the deadline to July 9 to allow for more negotiations, triggering a rebound in stock futures.
Why do markets react this way?
Markets dislike uncertainty. Trump’s tariff threats create fears of higher costs, disrupted supply chains, and retaliatory trade measures. However, when he backs off, the relief fuels optimism, leading to stock rallies. The TACO trade reflects investors’ growing confidence that Trump’s threats are often a negotiation tactic rather than a firm commitment, allowing them to capitalize on temporary market dips.
How has President Trump reacted to the “TACO trade” label?
Trump has pushed back strongly on the nickname, calling it a “nasty question” and insisting it misrepresents his approach. On Wednesday in the Oval Office, a reporter’s question about the TACO trade sparked a heated response from Trump, who called the question “nasty.”
“They wouldn’t be over here today negotiating if I didn’t put a 50% tariff on,” Trump said. “The sad thing is, now, when I make a deal with them - it’s something much more reasonable - they’ll say, ‘Oh, he was chicken. He was chicken.’ That’s unbelievable.”
Are there criticisms of the TACO trade idea?
Yes. Some argue the TACO trade oversimplifies Trump’s negotiation strategy. Supporters say his tariff threats have led to real wins, like Colombia agreeing to deportees or investment commitments from trade partners. But critics note that the repeated backtracking reduces the credibility of future threats, making trading partners less likely to take them seriously over time
(With inputs from agencies)
Here is all you need to know about it
What is the TACO trade?
The acronym TACO-“Trump Always Chickens Out”-is a tongue-in-cheek jab at Trump’s pattern of issuing bold tariff threats but often scaling them back or delaying their implementation. For example, when Trump extended the deadline for a 50% tariff on EU goods from June 1 to July 9, stock futures rose, reinforcing the TACO trade narrative. The term has gained traction among traders and in financial media as a shorthand for this market dynamic.
How does the TACO trade work in practice?
Tariff Threat: Trump announces high tariffs or aggressive trade policies, sparking fears of trade wars or economic disruption.
Market reaction: Stocks, particularly those tied to global trade, drop as investors react to the uncertainty.
Backtracking: Trump delays, modifies, or cancels the tariffs, often citing ongoing negotiations or concessions from trading partners.
Market rebound: Investors, anticipating this pattern, buy stocks at lower prices, leading to a market rally.
This cycle has been observed multiple times, such as with tariff threats against the EU, China, and other trading partners.
As per a Bloomberg report, “The thesis behind the TACO trade is: Buy the Trump tariff dip,” Tom Essaye of the Sevens Report wrote in a note to clients on Wednesday. “Essentially, Trump has proven to investors that he won’t actually follow through with draconian tariffs. As such, any sell-off following a dramatic tariff threat should be bought.”
What’s a recent example of the TACO trade in action?
One key episode happened this month when Trump threatened to impose a 50% tariff on European goods starting June 1, causing a market slump. But soon after, he extended the deadline to July 9 to allow for more negotiations, triggering a rebound in stock futures.
Why do markets react this way?
Markets dislike uncertainty. Trump’s tariff threats create fears of higher costs, disrupted supply chains, and retaliatory trade measures. However, when he backs off, the relief fuels optimism, leading to stock rallies. The TACO trade reflects investors’ growing confidence that Trump’s threats are often a negotiation tactic rather than a firm commitment, allowing them to capitalize on temporary market dips.
How has President Trump reacted to the “TACO trade” label?
Trump has pushed back strongly on the nickname, calling it a “nasty question” and insisting it misrepresents his approach. On Wednesday in the Oval Office, a reporter’s question about the TACO trade sparked a heated response from Trump, who called the question “nasty.”
“They wouldn’t be over here today negotiating if I didn’t put a 50% tariff on,” Trump said. “The sad thing is, now, when I make a deal with them - it’s something much more reasonable - they’ll say, ‘Oh, he was chicken. He was chicken.’ That’s unbelievable.”
Are there criticisms of the TACO trade idea?
Yes. Some argue the TACO trade oversimplifies Trump’s negotiation strategy. Supporters say his tariff threats have led to real wins, like Colombia agreeing to deportees or investment commitments from trade partners. But critics note that the repeated backtracking reduces the credibility of future threats, making trading partners less likely to take them seriously over time
(With inputs from agencies)
You may also like
Lewisham 'human remains' found - A correction
'When is your dad getting deported?' Vivek Ramaswamy trolled as he posts anniversary photo with Apoorva
Cement makers forecast a concrete comeback in FY26
Baitings Dam update as cops find body in search for missing girl, 3, who fell into water
Congress sets up five committees for Telangana unit
