The drama following U.S. President Donald Trump¡¯s ¡°Liberation Day¡± just over a year ago seemed to confirm a simple theory. On April 2, 2025, Trump unveiled sweeping tariffs; markets plunged even as 10-year Treasury yields spiked; then, when tariffs were paused, equities surged in one of the strongest rebounds since the global financial crisis.
For some investors, the lesson was obvious: Trump escalates, markets fall; he backs down, markets rise. A trade ¡ª and a theory ¡ª was born: ¡°Trump Always Chickens Out,¡± better known by the acronym ¡°TACO.¡±
One year later ¡ª and what a year it¡¯s been ¡ª it¡¯s worth asking whether this market-driven TACO narrative describes reality or merely reflects an assumption embedded in a trading strategy. The issue is not whether markets influence Trump (they clearly do) but how that influence operates and shapes his decisions.
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