Investors are adjusting to a new normal on Wall Street as President Donald Trump continues to shift positions on trade policy, frequently threatening tariffs only to walk them back — a pattern that has now earned its own acronym: TACO, short for “Trump Always Chickens Out.”
Coined by Financial Times commentator Robert Armstrong, the term reflects a growing investor strategy to ignore initial tariff threats, anticipating that Trump will eventually reverse course. The approach proved useful again last week when Trump floated the idea of a 50% tariff on European Union goods starting June 1. Markets dipped at the time, only to rebound days later after the president postponed the plan to July 9 following what he called “promising talks” with EU leaders.
Trump, responding to a reporter Wednesday who asked about the TACO theory, pushed back. “You call that chickening out? It’s called negotiation,” he said, referencing recent tariff rate changes on Chinese imports — first raised to 145%, then scaled back to 30%.
The president defended his approach, saying he often proposes high tariffs as a bargaining chip to pressure foreign governments into talks. “You set a ridiculous high number and if they respond, you go down,” he explained. Trump bristled when asked if this tactic amounted to backing down, calling it “the nastiest question.”
The EU move followed a similar pattern to earlier shifts in China trade policy. On April 2, Trump imposed broad tariffs on dozens of countries, only to announce a 90-day pause the next day — excluding China — after markets reacted sharply. Stocks had tumbled and bond yields surged, but after Trump softened the blow, the S&P 500 logged its biggest daily gain since 2008.
As a result, some analysts argue Trump’s tariff threats now trigger more short-term trading plays than long-term fears. The new playbook: wait out the rhetoric, buy the dip, and ride the recovery.
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