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The tongue-in-cheek term adopted by some analysts and commentators describes how markets tumble on President Trump’s tariff threats, only to rebound when he relents.
May 27, 2025Updated 2:20 p.m. ET
Stock markets jumped on Tuesday, with the S&P 500 posting its biggest gain in weeks.
The index rose 2 percent in afternoon trading, which analysts attributed to President Trump’s delaying a proposed 50 percent tariff on the European Union that he had threatened only a few days earlier.
They also talked about tacos.
Or rather, the “TACO” trade, which is short for Trump Always Chickens Out. The tongue-in-cheek term, coined by a Financial Times columnist, has been adopted by some to describe the pattern in which markets tumble after Mr. Trump makes tariff threats, only to rebound just as sharply when he relents and gives countries more time to negotiate deals.
The market dropped on Friday, when Mr. Trump threatened to ratchet up tariffs to 50 percent on goods from the European Union, a move that could have done severe economic damage to Europe and the United States. But at the time, some analysts like Salomon Fiedler of Berenberg, a German bank, said it wouldn’t last.
“Wild threats by Trump are not unusual,” he wrote in a note that day. “Given the damage the U.S. would do to itself with this tariff, he will probably not follow through.”
Late Sunday, Mr. Trump said that the E.U. tariffs would be delayed to July, which led to a global market rally the next day. “These retreats are so frequent that investors should rationally expect them,” Paul Donovan of UBS Wealth Management wrote as stocks in Europe jumped Monday morning.
And as U.S. markets, which were closed on Monday for Memorial Day, joined the rally on Tuesday, Chris Beauchamp of IG Group summed it up with “TACO trade triumphs once again.”
Mr. Trump posted on social media on Tuesday that E.U. officials had been in touch with their American counterparts to “quickly establish meeting dates,” as the two sides tried to square their priorities.
Stocks have also veered up and down as Mr. Trump delayed his most severe tariffs on China as well as a sweeping round of levies that he had announced on goods from virtually every U.S. trading partner. Still, many blanket tariffs remain in place, and they are significantly higher and broader than anything the United States has tried in more than 90 years.
The S&P 500 is slightly higher than it was before Mr. Trump’s initial barrage of tariffs in early April sent markets into a tailspin, and about 4 percent below the index’s record high, set in February.
Jason Karaian is the business news director, based in London. He was previously the editor of DealBook.
