The term “TACO” in relation to Trump is an acronym coined by Financial Times columnist Robert Armstrong, standing for “Trump Always Chickens Out.” It refers to a pattern in President Donald Trump’s tariff policies where he announces aggressive tariffs, causing market volatility, only to later reduce, delay, or retract them, leading to market rebounds. Wall Street traders have adopted the term to describe a trading strategy: buying stocks when they dip after Trump’s tariff announcements and selling when markets recover after he backs off.
For example, Trump imposed a 145% tariff on Chinese goods but later reduced it to 30% within a month, and he delayed a 50% tariff on European goods until July 2025 for negotiations. This pattern led to the “TACO trade” nickname, which gained traction after Armstrong’s May 2, 2025, column. Trump reacted angrily when asked about it on May 28, 2025, calling it a “nasty question” and defending his actions as strategic negotiation, not chickening out. The term has since sparked memes and online commentary, with some praising the reporter who raised it and others mocking Trump’s tariff flip-flops.
TACO Trade: Trump’s Tariff Strategy Shakes Markets
May 31, 2025 — A new Wall Street phenomenon dubbed the “TACO trade” has emerged, capturing the volatile impact of President Donald Trump’s tariff policies on global markets. Coined by Financial Times columnist Robert Armstrong, TACO—standing for “Trump Always Chickens Out”—describes a pattern where Trump’s aggressive tariff announcements trigger market sell-offs, only for stocks to rebound when he scales back or delays these measures. This cycle has created a lucrative trading strategy, sparked online debates, and drawn sharp reactions from the president himself.
Origins of the TACO Trade
The term TACO was introduced by Armstrong in his Financial Times Unhedged newsletter on May 2, 2025, to highlight a recurring trend in Trump’s second term. Armstrong noted that Trump’s tariff threats, often bold and sweeping, consistently unsettle financial markets, but his subsequent retreats—whether through reductions, delays, or negotiations—prompt swift recoveries. “I was just trying different things, and TACO popped into my mind, possibly because I was hungry,” Armstrong quipped in an interview with CBC Radio, adding that the acronym’s catchiness mirrors Trump’s own flair for memorable phrases.
The TACO trade has become a blueprint for investors. The strategy is simple: buy stocks during the dip caused by a tariff announcement and sell when markets rebound after Trump softens his stance. This approach has proven effective amid repeated episodes of market turbulence in 2025.
Key Examples of the TACO Pattern
The TACO trade gained prominence through several high-profile tariff episodes:
- April 2025 “Liberation Day” Tariffs: On April 2, Trump announced sweeping tariffs on over 60 countries, including a 145% tariff on Chinese goods, leading to a $6 trillion drop in the S&P 500’s market capitalization over two days. A week later, on April 9, he paused these tariffs for 90 days to allow negotiations, triggering a dramatic market rebound. Investors who bought the dip and sold during the recovery saw significant gains, with the S&P 500 ending the period up 0.7% year-to-date.
- May 2025 EU Tariff Threat: On May 23, Trump threatened a 50% tariff on European Union imports effective June 1, causing markets to slide. By May 26, after a call with European Commission President Ursula von der Leyen, he delayed the tariffs until July 9, 2025, for negotiations. The S&P 500 rallied 2.1% on May 27, and the Dow Jones climbed 721 points (1.73%) the same day, reinforcing the TACO trade’s profitability.
- China Tariff Reduction: Trump initially imposed a 145% tariff on Chinese goods but reduced it to 30% within a month, citing progress in trade talks. This rollback, announced on May 12, led to another market surge, further cementing the TACO pattern.
These reversals have led analysts to question the credibility of Trump’s tariff threats. As University of Michigan economist Justin Wolfers noted on MSNBC, “There was a time when the president opened his mouth, you thought it meant something… [now] it’s reversed by Monday.”
Trump’s Response and Market Dynamics
On May 28, 2025, during a White House press briefing, a reporter asked Trump about the TACO trade, prompting a fiery response. “That’s a nasty question,” Trump said, rejecting the “chickening out” label. “It’s called negotiation… They wouldn’t be over here today negotiating if I didn’t put a 50% tariff on.” He argued that his high initial tariff rates, like the 145% on China or 50% on the EU, are strategic tools to force concessions, not failures of resolve.
Despite Trump’s defense, markets have adapted to his pattern. Analysts like Adam Crisafulli of Vital Knowledge note that investors are increasingly “comfortable with the severity of the tariff threat,” embracing the TACO mindset as companies absorb tariff costs better than expected. However, some warn of complacency. Crisafulli cautioned that tariff-driven inflation could emerge by July 2025, when the EU tariff pause expires, potentially disrupting the TACO trade’s reliability. Eric Sterner of Apollon Wealth Management added, “If this game continues, it will put the US economy into recession at some point.”
Broader Implications and Criticisms
The TACO trade has sparked broader concerns about Trump’s tariff strategy. Critics argue that his unpredictable reversals damage U.S. credibility and global trade stability. Armstrong himself noted that even when Trump backs off, “a lot of damage has already been done to global trade and growth” due to ongoing uncertainty. Legal challenges have also arisen, with the U.S. Court of International Trade blocking most of Trump’s tariffs on May 28, 2025, ruling that he lacked statutory authority.
On X, the TACO trade has fueled both support and mockery. Some users praise Trump’s tactics as “brutal leverage,” arguing that his threats forced Europe and China to negotiate. Others highlight the economic disruption, with one user noting, “TACO effect—Trump imposes an economically harmful tariff; markets initially don’t take him seriously… then panic.” The term has also inspired memes, with posts like “Taco, Taco Man… I wanna be a Taco Man” circulating online.
What’s Next for the TACO Trade?
As the July 9, 2025, deadline for EU tariffs approaches, investors are watching closely. If Trump follows through without backing down, the TACO trade’s effectiveness could wane, potentially triggering a more severe market downturn. For now, the strategy remains a defining feature of Trump’s second term, with Wall Street capitalizing on his tariff flip-flops. As Armstrong told CBC, his “nightmare” is that Trump, aware of the TACO label, might stick to his tariffs to prove critics wrong, risking economic stability.
The TACO trade underscores a broader truth: Trump’s tariff policies, while disruptive, have yet to deliver definitive trade deals, leaving markets and global relations in a state of flux. For investors, it’s a high-stakes game of timing the dip and the rebound—courtesy of Trump’s unpredictable trade playbook.
