Throughout his presidency, Donald Trump has frequently announced new tariffs, only to back off soon after. The former action has tended to cause stocks to tumble, while the latter has caused them to rise. And it turns out that Wall Street has noticed.
Investors have been using the acronym “TACO,” which stands for “Trump Always Chickens Out.” The term was coined last month in a Financial Times piece about a pattern that has emerged with Trump’s tariff announcements.
“The recent rally has a lot to do with markets realizing that the US administration does not have a very high tolerance for market and economic pressure and will be quick to back off when tariffs cause pain,” the FT piece by Robert Armstrong said. “This is the Taco theory: Trump Always Chickens Out.”
The ‘Trump always chickens out’ trade is the talk of Wall Street. Here’s one way to play it. – MarketWatch https://t.co/Dav3XTDLi2
— Militant Centrist (@EWCiolko) May 28, 2025
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Now, MarketWatch has reported on a note from Tom Essaye, founder of Sevens Report Research, showing that following that pattern is a good trading strategy.
“So, the returns are somewhat conclusive: The TACO trade has worked, and buying stocks on extreme tariff-related threats has worked,” Essaye wrote. The question is whether that pattern will continue to repeat, as Trump may want to follow through on his threats at some point.
The New Republic, meanwhile, noted that the Trump pattern hasn’t been limited to traders, with Russia observing that Trump tends to back off other threats when he comes under pressure.
“On Tuesday, Russian state propagandists mocked the U.S. president for lacking any follow through, predicting in a tweet that Trump’s “playing with fire” threat would be reversed by a social media post the following morning,” TNR said.
Others have noticed the pattern of Trump’s “TACO” pattern:
TACO Trade stands for “Trump Always Chickens Out”. pic.twitter.com/o9n7NI7UZ9
— Robert Rutledge (@rerutled) May 28, 2025
The so-called TACO trade (Trump Always Chickens Out) is seen in the RCP chart of Trump Approval. It also contains a message that there is a limit to Trump’s ability to enforce his tariff agenda. That limit is U.S. voters, not just trade partners. Chart courtesy of @johnauthers pic.twitter.com/OJXwn60ZP3
— Scarlett’s Grandpa (@KASDad) May 28, 2025
Trump: Was ist der TACO-Trade? Nvidia und Fed im Fokus! Videoausblick #zinsen #trump #china #fed #dax #dax #gold #japan #dollar #nvidia https://t.co/AimgamcdSB
— finanzmarktwelt.de (@finanzmarktwelt) May 28, 2025
Photo courtesy of the Political Tribune media library.
