What is TACO trade? A term that ruffled Donald Trump

As Wall Street weathers several waves of tariff threats from US President Donald Trump, a new trading mantra is catching on among investors: TACO, short for Trump Always Chickens Out.Coined by Financial Times commentator Robert Armstrong, the term refers to a market pattern that has emerged during Trump’s volatile tariff policy swings.

The idea is simple: when Trump threatens massive tariffs, don’t panic, wait for him to walk it back, then ride the relief rally.

Like clockwork, the pattern has repeated itself, prompting traders to take his threats with “a grain of salt — and a bit of salsa.”The president acknowledged the term on Wednesday when asked about it by a reporter. “I chicken out? Oh, I’ve never heard that,” Trump said with a smirk during an Oval Office event, before defending his record. “You mean because I reduced China from 145% that I set down to 100 and then to another number?”

Markets were roiled last month after Trump raised tariffs on Chinese imports to 145%, only to later lower them to 30% after diplomatic pressure and investor backlash.

Just last week, Trump threatened 50% tariffs on goods from the European Union, only to delay the move after EU leaders reportedly requested urgent talks.“You call that chickening out?” Trump shot back. “It’s called negotiation.”According to the president, setting an “absurdly high” initial tariff rate is part of a broader strategy to force concessions. “If I get them to give in, I lower the number,” he said.Investors, however, are increasingly decoding the pattern and profiting from it. After Trump delayed the EU tariffs to July 9, citing promising talks, the USmarkets rallied sharply following the Memorial Day holiday.“The TACO trade is real,” said one trader on Wall Street who spoke on background. “Every time there’s a threat, you wait for the reversal — it’s like Trump’s tell at the poker table.”