‘TACO Trade’ sparks furore: What does it mean and why is Donald Trump angry about it?

As the world navigates through the several waves of tariff threats from US President Donald Trump, the Wall Street has a new word for the leader that has him rattled.

The new buzzword in question is ‘TACO Trade’ – a term that Donald Trump has been fuming about. The word TACO stands for ‘Trump Always Chickens Out’.

Here is what TACO Trade really means.

What is TACO Trade?

The term TACO (Trump Always Chickens Out) was coined by Robert Armstrong, a columnist at The Financial Times. He first used the word to describe a recurring pattern in the trade strategy of the US President.

TACO Trade refers to Trump's signature cycle of threatening to impose sweeping tariffs and then ‘chickening out’ to scale them back or delay their implementation.

For example, on April 2, Donald Trump threatened to impose sweeping new tariffs on almost every country in the world, including a 26 per cent levy on Indian imports. However, seven days later, he decided to pause these tariffs for 90 days to instead work on trade deals after markets crashed severely and the Republican President faced severe backlash.

How does TACO Trade work?

TACO Trade typically works in this cycle:

• Tariff Threat: As the first step, Donald Trump threatens with high tariffs or aggressive trade policies, sparking worldwide reaction.
• Market Reaction: Investors react to the uncertainty of the threat and markets tumble, especially stocks tied to global trade.

• Trump Backtracks: Donald Trump talks with the country or company in question and finds a solution to backtrack on the threat or pause it.
• Markets Rebound: Markets go through a rally after investors anticipate the pattern and buy stocks at lower prices.

TACO Trade has Donald Trump fuming

Donald Trump was visibly offended when asked about the phrase Wednesday and rejected the idea that he's “chickening out", terming the reporter's inquiry “nasty".

"You call that chickening out? It's called negotiation,” Trump said, adding that he sets a “ridiculous high number and I go down a little bit, you know, a little bit" until the figure is more reasonable.

Trump defended his approach of jacking up tariff rates to 145 per cent on Chinese goods, only to pull back to 30 per cent for 90 days of negotiations.

Similarly, last week he threatened to impose a 50 per cent tax on goods from the European Union starting June, only to delay the tariff hike until July 9 so that negotiations can occur while the baseline 10 per cent tariff continues to be charged.