The TACO Presidency

The Atlantic

4 days ago

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One way to trace the past nine years of Donald Trump is the journey from taco bowls to TACO bulls. (Hey, don't click away! This is going somewhere!)
Back in May 2016, the then–GOP presidential candidate posted a picture of himself eating a Trump Tower Tex-Mex entree. 'I love Hispanics!' he wrote. Nearly everyone understood this as an awkward pander.
Now, in May 2025, Wall Street is all over the ' TACO trade,' another instance of people realizing they shouldn't take the president at face value. 'TACO' is short for 'Trump always chickens out.' Markets have tended to go down when Trump announces new tariffs, but investors have recognized that a lot of this is bluffing, so they're buying the dip and then profiting off the inevitable rally.
A reporter asked Trump about the expression on Wednesday, and he was furious. 'I chicken out? I've never heard that,' he said. 'Don't ever say what you said. That's a nasty question. To me, that's the nastiest question.' The reaction demonstrates that the traders are right, because—to mix zoological metaphors— a hit dog will holler. The White House keeps talking tough about levying new tariffs on friends and geopolitical rivals alike, but Trump has frequently gone on to lower the measures or delay them for weeks or months.
Foreign leaders had figured out that Trump was a pushover by May 2017, and a year later, I laid out in detail his pattern of nearly always folding. He's a desirable negotiating foil, despite his unpredictable nature, because he doesn't tend to know his material well, has a short attention span, and can be easily manipulated by flattery. The remarkable thing is that it's taken this long for Wall Street to catch on.
Even though no president has been so purely a businessman as Trump, he and the markets have never really understood each other. That is partly because, as I wrote yesterday, Trump just isn't that good at business. Despite much glitzier ventures over the years, his most effective revenue sources have been rent collection at his legacy properties and rent-seeking as president. His approach to protectionism is premised on a basic misunderstanding of trade.
Yet Wall Street has never seemed to have much better of a grasp on Trump than he has on them, despite having many years to crack the code. (This is worth recalling when market evangelists speak about the supposed omniscience of markets.) Financiers have tried to understand Trump in black-and-white terms, but the task requires the nuanced recognition, for example, that he can be deadly serious about tariffs in the abstract and also extremely prone to folding on specifics.
Although they disdained him during his first term, many titans of industry sought accommodation with Trump during his 2024 campaign, hoping he'd be friendlier to their interests than Joe Biden had been. Once Trump's term began, though, they were taken aback to learn that he really did want tariffs, even though he'd been advocating for them since the 1980s, had levied some in his first term, and had put them at the center of his 2024 campaign.
Trump's commitment to tariffs, however, didn't mean that he had carefully prepared for them or thought through their details. The administration has announced, suspended, reduced, or threatened new tariffs on China, Mexico, Canada, and the European Union. All of this volatility is ostensibly a product of ongoing negotiations, but in many cases, it's also a response to market turmoil or because of a lack of clarity about details. (This week, two federal courts also ruled that the president was overstepping his authority by implementing tariffs under emergency powers.)
This is where the TACO trade comes in. Rather than panicking over every twist and turn, investors have begun to grasp the pattern. But every Wall Street arbitrage eventually loses its power once people get hip to it. In this case, the fact that Trump has learned about the TACO trade could be its downfall. The president may be fainthearted, but his track record shows that he can easily be dared into taking bad options by reporters just asking him about them.
One can imagine a bleak scenario here: Trump feels shamed into following through on an economically harmful tariff; markets initially don't take him seriously, which removes any external pressure for him to reverse course. Once investors realize that he's for real this time, they panic, and the markets tank. If the president stops chickening out, both Wall Street and the American people won't be able to escape the consequences of his worst ideas.
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