The TACO trade is the latest buzzword making waves on Wall Street — and no, it’s not about food. “TACO” is a cheeky acronym that stands for “Trump Always Chickens Out,” and it’s being used to describe a recurring market pattern under former President Trump’s tariff announcements.
The term TACO trade was first coined by journalist Robert Armstrong in a Financial Times column on May 2. He observed that whenever Trump announced steep tariffs, markets would plunge. But shortly after, when he backed off or delayed those tariffs, stocks would rebound. This push-pull pattern between tariff threats and market reactions has now earned the label “TACO theory.”
Let’s take a look at some recent examples:
- On May 12, Trump put a 90-day hold on a proposed 145% tariff on Chinese goods.
- On May 26, he postponed a 50% tariff on European imports until July.
In both cases, the markets reacted positively after the announcements were softened. It seems investors have started to expect that Trump’s tough trade talk will often be followed by a retreat.
At a White House press briefing on Wednesday, when a reporter asked Trump about the TACO theory, he dismissed it as a “nasty question.”
“It’s called negotiation,” he replied. “They wouldn’t even be here today if I hadn’t put a 50% tariff on Europe.”
Then with a touch of humor, he added:
“They say I chicken out — unbelievable. Usually the complaint is that I’m too tough!”
Market analysts say investors are now more comfortable with the idea that the Trump administration talks tough initially but tends to ease off when the pressure mounts.
Adam Crisafulli, a market expert, wrote in his May 28 research note:
“The TACO mindset is gaining popularity. Investors are feeling more optimistic, and companies are handling the tariffs better than expected. The impact on earnings hasn’t been as bad as feared.”
Still, Crisafulli warns that markets might be getting too relaxed. Big companies like Walmart have already signaled that tariffs could force them to raise prices, and the U.S. debt situation is also becoming more unstable.
Let’s not forget — July will be a crucial month. That’s when both the China and EU tariff freezes are set to expire. Until then, the TACO theory might keep markets in a hopeful mood — but come July, things could get spicy.
So next time you hear the word “TACO” on Wall Street, know that it’s not just a snack anymore — it’s part of the financial world’s latest running joke about Trump’s trade strategy.
