Financial markets in the United States have been extremely volatile in recent weeks, owing to US President Donald Trump’s surprise tariff decisions, rather than changes in the global economy or unanticipated geopolitical developments. Trump has always been unpredictable in politics, but Wall Street has now named the pattern it has grown to expect: TACO, which stands for “Trump Always Chickens Out.”
Robert Armstrong, a journalist for the Financial Times, was the first to bring this term to public attention. It’s soon becoming a popular term in trading circles. It demonstrates the now-familiar pattern of Trump issuing tariff warnings, then immediately retracting them, sending the markets back into a rebound bounce. The most recent response to the TACO phenomenon focuses on both strategic trading and political friction. Trump became enraged when a reporter brought up the remark during a White House press conference.
How Markets Respond to Policy Ping-Pong
Investors are always anticipating what Trump would do next following his recent tariff measures. He issued executive orders on May 23, 2025, targeting imports from foreign countries that he deemed unfair. However, just a few days later, he changed his mind about the high global tariffs and reduced them to a base rate of 10%. The most surprising change occurred in China, where a 145% retaliatory tax was reduced to 30% following a brief agreement.
The European Union has had comparable ups and downs. Trump first stated that a 50% duty would begin on June 1, but after EU leaders contacted him, he shifted the date back to July. He claimed it was part of a bargaining strategy, not a show of surrender. Nonetheless, his warnings do not scare the markets anymore. Instead, traders are banking on a walkback, which means they believe stock indices will eventually rise. The S&P 500 finished slightly higher after a worrisome drop following the announcement of the EU tariff deferral.
Political Sensitivity and Economic Gamesmanship
Trump is clearly angry with the name TACO. At the Oval Office press conference, he referred to it as “the nastiest question” and stated that what he did was not the same as chickening out. Instead, he stated that his tariff movements are part of a deliberate negotiation strategy. He stated that he starts discussions with high tariffs and then reduces them if the opposing party agrees to his terms.
Still, experienced traders and financial analysts have identified a trend. For many people, Trump’s tariff warnings trigger initial sell-offs, followed by bounces when the anticipated pullback occurs. The TACO strategy, a joking term, has a significant impact on global trade and investment thinking.
In the past, unexpected changes in government policy impacted not only equities but also bonds and commodities. Prior to the most recent delay in global tariffs, the bond market reacted sharply, with rates rising as investors liquidated US debt in anticipation of long-term damage. The fast change brought rates back down and equities up, similar to the huge recovery in October 2008.
The Big Picture: Trade Policy is a Political Show
We’re seeing a mix of political turmoil and market dynamics. Some supporters may welcome Trump’s brinkmanship, but investors see it as a sign that things may change soon and that they should adjust their holdings accordingly. There is some debate about whether this is healthy for the economy in the long run. It is clear that Wall Street has embraced uncertainty as a flexible approach.
As the 2024 election season approaches, Trump’s views on tariffs are sure to resurface. Investors, economists, and trade partners throughout the world will need to pay close attention to what is said, how long it lasts, and if it is taco-ed.
Also read: Trump’s Strong Disapproval of Putin’s Escalation During Ukraine Peace Talks Shows Diplomatic Tension
