A FEW WEEKS ago a Financial Times journalist coined a phrase which was duly taken up by Wall Street traders, and has since sparked fury from the US President: ‘Taco trade’ – with ‘Taco’ meaning Trump Always Chickens Out. 

When a reporter asked Trump (politely, mind you) what he thought about the phrase, which has found popularity amongst online finance bros, it would be an understatement to say he shot her down. 

“Don’t ever say what you said. That’s a nasty question, to me that’s the nastiest question,” he told her. 

The new trading jargon refers to Trump’s now well-established pattern of setting high tariffs on imports from other countries, and then eventually lowering them, or putting a pause on them altogether. 

In Trump’s view, he has never backed down on tariffs.

He told the reporter who asked him the question: “It’s called negotiation. If I set a number, if I set a ridiculous high number and I go down a little bit – a little bit…” 

Basically, he’s arguing that his high tariff announcements have put the US in an empowered starting position at the negotiating table with other world powers (and, at one stage, a mostly barren, uninhabited islands home to a group of penguins near the Antartica). 

It sounds a bit like telling poker opponents your strategy in-depth directly before the game. But has it been working? 

Most recently the Trump administration’s tariff agenda suffered a blow when a federal court in New York ruled that Trump had acted outside the authority of the presidency when he used the 1977 International Emergency Powers Act to impose sweeping tariffs – which are taxes on imports – that applied to goods from almost every country in the world. 

However, an appeals court then temporarily paused the ruling, giving Trump a short-term win, and it’s expected that he will take the case to the Supreme Court if he loses this round. 

So that’s not really an example of Trump chickening out, though there are other precedents.

Either way, ‘Taco trade’ is not actually meant as an insult by those using it, though the markets soared when Trump’s sweeping tariffs were paused by the courts.

Stock market investors are looking at Trump’s strategy to try and turn a profit on tariff talk. 

It works pretty simply: Trump announces tariffs on a country or a bloc, such as the EU; the market dips; investors buy stocks at a cheaper rate; Trump ditches or pauses or lowers the tariffs; the market recovers, and investors sell at a higher price. 

It worked that way earlier this month when Trump threatened and then, three days later, agreed to delay a 50% tariff on the European Union.

After markets fell considerably in reaction to the initial threat, Wall Street rallied on news of Trump’s change of hearts.

The same thing happened at the start of April, when Trump announced reciprocal tariffs on virtually all of the US’s trading partners, and then a week later announced a delay. 

Market rollercoaster

Yesterday, Trump accused China’s President Xi Jinping of violating a truce on raised tariffs agreed between the countries two weeks ago, without elaborating on how China had done so. 

The markets’ tariff rollercoaster has even led to Democrats raising concerns about potential insider trading within the Trump administration. 

“Who in the administration knew about Trump’s latest tariff flipflop ahead of time? Did anyone buy or sell stocks, and profit at the public’s expense?” Senator Adam Schiff asked back in April, when the initial delay on reciprocal tariffs was announced. 

The thing is, all the available polling has shown that Trump’s base is unfazed by his moves on tariffs, and that his 2024 voters feel confident about how he is handling the economy. 

However, voters may be less sanguine if prices rise. Walmart, America’s biggest retailer, has warned that it may have to increase prices in response to even the softer tariffs on China agreed this month.

Though Trump objects to the ‘Taco’ acronym, his explanation of what he is doing with tariffs doesn’t contradict it. Maybe he’s just annoyed because it’s catchy.