Trump's Taco trade is a major headache for ECB rate setters
'Taco trade'
has been a boon for a certain cohort of Wall Street investors but a headache for almost everyone else, businesses and policymakers in particular.
The acronym – short for 'Trump Always Chickens Out' – refers to the US president's habit of making tariff threats, resulting in a drop in markets, before walking back on the threat (in response to market pressure), causing markets to rebound.
It was coined after Trump's so-called
'Liberation Day'
tariff announcement in April which triggered a major market wobble followed by a 90-day pause one week later, followed by a market rally.
The
impact of tariffs
is one thing but Trump's increasingly erratic pronouncements and the general uncertainty surrounding US trade policy poses quite a different proposition, one that can't be planned for.
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Irish exports surged ahead of Trump's 'liberation day' tariffs
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Precedent tells us that uncertainty stops consumers making big purchase decisions and stops businesses investing, hence economic forecasts are being pared back.
But the uncertainty also, from the European Central Bank's (ECB) perspective, complicates the path for interest rates.
There is lag between the monetary policy changes and the effect of these changes on the real economy (days, weeks, months, even years – it is still debated).
So not knowing where consumers and businesses will be in six months makes rate setting something of a stab in the dark.
If ECB policymakers keep rates at relatively restrictive levels and Europe is enveloped in a nasty trade war with the US, they will be caught out.
Conversely, if the ECB lowers rates quickly in response to tariff threats and Brussels and Washington agree a trade deal, they will similarly be caught out, particularly with massive defence spending plans – in Germany and elsewhere – likely to add to inflationary pressure in the coming months.
'While the uncertainty surrounding trade policies is expected to weigh on business investment and exports, especially in the short term, rising government investment in defence and infrastructure will increasingly support growth over the medium term.'
That is how the ECB characterised its current predicament in a statement accompanying its latest rate decision on Thursday.
The central bank reduced its headline deposit rate by a further quarter point to 2 per cent, a move that had been seemingly locked in by the latest inflation data for the bloc, which put headline price growth at 1.9 per cent below the bank's target rate of 2 per cent.
The ECB's latest rate reduction, the eighth in the current cycle, came with a fresh set of forecasts for the euro zone economy.
The ECB now thinks inflation will be below target in 2026, at 1.6 per cent, with the economy expanding at a slower-than-expected rate of 1.1 per cent.
Despite strong labour markets, rising real incomes and easier financing conditions, ECB president Christine Lagarde warned that risks to growth were still skewed to the downside.
'A further escalation in global trade tensions, and associated uncertainties, could lower euro area growth by dampening exports and dragging down investment and consumption,' she said.
Most EU exports currently face a 10 per cent levy in the US, though that risks rising to 50 per cent in July if negotiations fail.
The relationship between Washington and Beijing also remains uncertain even after both sides lowered their tariffs from prohibitive levels.
Even Lagarde's tenure as head of the ECB is now subject to a downside risk.
According to World Economic Forum (WEF) founder Klaus Schwab, arrangements for Lagarde to take over the organisation before her tenure at the ECB ends in 2027 are in train.
Lagarde made something of a feeble attempt to scotch this speculation with an insistence that she was determined 'to deliver' on her mission and complete her term.
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Irish Times
an hour ago
- Irish Times
Letters to the Editor, August 22nd: On college football and climate, fish kills, and wagging the finger
Sir, – Am I the only one horrified at the prospects of two American college football teams, and their supporters, flying to Dublin to open their football season in the Aviva tomorrow? Am I the only one equally horrified that this event is being sponsored by Aer Lingus and facilitated by others? At a time when the scientific evidence of the impact of carbon emissions on the global climate is staring us in the face, and as Ireland continues to live through a self-declared 'climate emergency', we choose not only to allow this madness, but to encourage and facilitate it through our national airline. Have I missed something here? Are my concerns and observations unreasonable or ill-informed? READ MORE I think not. Ireland is already at the bottom of the list on climate action among other EU countries. We are way off our legal targets for reducing carbon emissions by 2030 – and getting further away by the day – and facing a potential fine of €26 billion for missing these targets, and what do we choose to do? Invite thousand of American to Ireland for a match they should play at home, party and have the craic. Every individual in Ireland needs to reflect on our impact on the climate, as does every company, corporation, public service body, charity and sporting organisation, rather than leaving this challenge to others in the mistaken belief that we – individually – are only having a tiny impact on the climate. There are eight billion people on the planet and I think I can safely say that eight billion tiny impacts go to make up one fairly substantial one. I can only call on Aer Linguto take their heads out of the sand, to accept that they have responsibilities to the planet and to future generations, and to cancel this event permanently from 2026 onwards. – Yours,etc, GARY DOYLE, Straffan Co Kildare. Working in Qatar Sir, – We worked in Qatar alongside Dr Paddy Davern for three years as colleagues in the Hamad Medical Corporation Ambulance Service – a GP and paramedic (' He put a gun to my head: An Irish GP on his traumatic years treating Qatar's elite ,' August 16th). Like Paddy, we both cared deeply about the wellbeing of all healthcare providers, and were greatly perturbed by the harms we witnessed and personally experienced in our professional roles. In our senior roles we were daily confronted by colleagues and patients with burnout, depression, PTSD, and substance use problems. There was little attempt to promote wellbeing or support mental health. We are grateful for Paddy's searing honesty and bravery in coming forward and speaking up about some of his experiences and the personal costs. He is fortunate to have a loving family, peer support, a good treating GP and psychologist able to support him not only through the PTSD but also the lengthy medical complaints process. Paddy was liked and respected by all his colleagues. He is an experienced, astute, compassionate and professional GP with a deep understanding of principles and medical ethics. He was well known for standing up for the less powerful, the 'underdog' – perhaps part of his Irish DNA and shared by Australians. His actions stood in contrast to many who believed it was better to be feared than respected. He assisted many of us – fellow doctors; staff; exploited workers in overcrowded housing; housemaids in private homes; female paramedics repeatedly being exposed to sexual abuse or assault. Like many of our colleagues we found it impossible to adapt to the classist hierarchies; bullying; lack of accountability and transparency; homophobia; misogyny; and racism. Add to this a difficult physical environment, poor housing and interminable obscure bureaucracy. Many of our colleagues from countries like Australia left before their contracts were up. We came back to Australia traumatised. For both of us, it has taken years to recover, but it has also given us a greater focus and determination to help colleagues who have their wellbeing compromised by being health professionals. Unlike in more developed democratic countries, Qatar has no legal protections for workers. So before you go, ask yourself: Is the tax-free salary really worth it? Are you happy to be treated as a second-class citizen, and daily witness others being treated as even lower humans? How will it impact your own health and that of your family? And know where to get help if you need it. – Yours, etc, Dr AMEETA PATEL, Chair, Doctor's Health Service NSW, CRAIG CAMPBELL, NSW, Australia. Wagging the finger at Ireland Sir, – How refreshing to finally read a terrific and honest opinion on Ireland's position in the world when it comes to politics, Nato and present day wars (' Ireland is turning into chief 'finger wagger' on the world stage ,' Finn McRedmond, August 20th). She is so bang on when she refers to Michael D Higgins, Micheál Martin et al as finger-waggers. They have absolutely zilch power when it comes to preventing or making peace on the world stage. Outside of the Irish media, their comments do not get as much as a word or a line in any international TV news station or newspaper. Even Conor McGregor made bigger headlines in US newspapers and CNN in March when he met Donald Trump after Mr Martin smiled when chastised and sat motionless and still while Trump berated him. Until such time that Ireland pays its fair share for defending Europe like the rest they should keep their grubby little fingers clenched together. – Yours, etc, SEÁN McPHILLIPS, College Point, New York. Sir, – Bravo Finn McRedmond for calling out the collective delusions of Ireland's (mostly leftist) peaceniks. These delusions are of moral superiority if not grandeur, though the outrage is curiously selective, being absent when human rights abuses are committed by such luminaries as Fidel Castro or Bashar Al-Assad. Here in Malta people are aware of the moral component of foreign policy but have a realistic view of what a small neutral nation can achieve. In today's world, that is 'even less than ever'. Refusing to submit to this collective delusion does not mean that one is 'complicit in genocide' as Ireland's more excitable campaigners maintain – in fact it would be better to reserve one's energy and diplomatic and political capital for modest but achievable results, instead of indulging in the 'ecstasy of sanctimony'. The onslaught in Gaza will not be affected one iota by EU Commission president Ursula von der Leyen or any other Eurocrat; and any national politician who bases a political campaign on such windmill tilting needs a reality and ego check. – Yours, etc, Dr ALEX HARTINGTON, Sliema, Malta. Sir, – Finn Mc Redmond's column is always terrific – but today's was a cracker. A sobering dose of realism. – Yours, etc. DON HORGAN, Dublin. Paper trails Sir, – Following Tony Corcoran's observation that he instinctively avoids taking the top copy from a pile of newspapers, instead rummaging below for a pristine copy, a few correspondents have noted they do the same (Letters, August 19th and 21st). I'm inclined to think this is universal human behaviour, something evident if you ever watch a child selecting bread from a sliced pan. – Yours, etc, BRIAN O'BRIEN, Co Cork. Sir, – As a follow-up to some of your recent correspondents comments on selecting a newspaper, I was reminded of an occasion when I was holidaying in the Lake District. I went into a newsagents to check some sports results. I had only opened the paper slightly when I was advised that the paper cost £1 if I wished to read it. That was me put in my place. – Yours, etc, FERGUS MADDEN, Dublin. Picking a president Sir, – Why are we always looking at the usual political suspects for the role of president? I would rather look outside the usual troupe of political grandees and seek to have someone who has worked to promote charitable works, business interests, or who has been to the forefront of causes that promote common values and integration. Why can't we, as the voting citizens of this State, decide on who we want and not who is imposed upon us? My preference, for example, would be for Fergus Finlay, who has worked tirelessly in the charity sector and who is worldly wise. What better champion could there be for the highest office in this State and who else could, or would, command the respect of everyone, both here and abroad. – Yours, etc, CHRISTY GALLIGAN, Letterkenny, Co Donegal. Sir, – I read with some dismay that, in his analysis of Heather Humphrey's suitability for the presidency, Harry McGee considers it a weakness the fact that the aspirant once requested two reporters outside her constituency office to 'f**k off' (' Strengths and weaknesses of FG's two Áras hopefuls, ' August 21st). I am not entirely sure what the elided letters might be, but if my guess is correct, I would regard her request (in the high modh díreach style) as indicating a distinct strength for the presidency. – Yours, etc, JOHN DUFFY, Foxrock, Dublin 18. Sir, – I am puzzled. In your article by Harry McGee, you tell us early on that Heather Humphreys is a Presbyterian. However, despite reading and rereading the text about the other hopeful, Seán Kelly, I can find no reference to his religious affiliation? Buddhist? Shinto? Or God forbid, he is a Catholic, which brings with it, no merit at all, in your eyes. – Yours, etc, T GERARD BENNETT, Bunbrosna, Co Westmeath. Fish kills and rivers and lakes Sir, – Imagine for a moment if the equivalent scale of poisoning that wiped out fish in Cork's Blackwater River this week instead struck a number of golf courses. Take a minute and picture every green on those courses rotting overnight. The outrage would be immediate, the response urgent, and the calls for accountability deafening. Yet when it is our rivers and lakes – living ecosystems, vital parts of our heritage, and the backbone of local communities – the response, penalties, and corrective action, if any, seems limited, and no real efforts appear to be put in place to prevent recurrence. This is not the first incident of fish being wiped out in a river or lake – and like previous events, it highlights the absence of a real prevention policy or decisive action. During Heritage Week we rightly celebrate our history, traditions, and landscapes. But what does it say about us if, in the same breath, we cannot muster the same urgency to protect the rivers and ecosystems that form the very foundation of that heritage? Heritage is not only about castles, crafts, and stories – it is also about living systems. The salmon, the trout, the rivers themselves: these are threads of heritage too. If we neglect them, then the celebration of Heritage Week rings hollow. As an award-winning landscape photographer, an associate member of the Irish Professional Photographers and Videographers Association (IPPVA) and an avid fly fisher since my teenage years, I have witnessed and photographed both the beauty and fragility of our waterways. They deserve the same respect, protection, and urgency we demand for any other part of our heritage. These repeated incidents put livelihoods, wildlife, and heritage at risk and we should not accept them as inevitable. – Yours, etc, TONY G MURRAY, Naas, Co Kildare. Spot the dog warden Sir, – There is an estimated 520,000 dogs in Ireland and each of those dogs will produce 'droppings' each and every day of their lives. That is an awful lot of dog poo. And yet, according to Kate Byrne's article ('No fines issued for dog fouling in 14 local authority areas last year,' August 20th), there were only 48 fines for dog fouling last year. No fines were issued in Cork and Dublin cities alone. Perhaps dog owners in both these cities are 100 per cent compliant and pick up after their dogs. But, a quick look at the streets of Dublin and Cork shows that this is clearly not the case. I don't know how many dog wardens we have in the country, but I have never seen one. Perhaps like many others they work from home? – Yours, etc, THOMAS G COTTER, Co Cork. A Rose by any other name Sir, – Can the age limit be removed for participants in the Rose of Tralee competition and I can then be a participant in this Lovely Ladies competition. – Yours, etc, GERALDINE GREGAN, Clarecastle, Co Clare. Ragwort and leafy Dublin Sir, – Frank McNally's Irishman's Diary entry on ragwort (An Irishman's Diary, August 21st) brings me back to my childhood in the Dublin suburb of Terenure (which The Irish Times catechism of cliche now requires me to describe as 'leafy'). Leafy or not, the local Garda station (and, if memory serves correctly, the library) used to prominently display a poster warning of the dangers of ragwort, which in the 1950s appeared to rank just below godless communism as a threat to our nation. When I returned to live in Ireland in the 2010s I was struck to see how this once noxious weed had proliferated in rural areas, apparently without destroying the livestock industry, and now it has even appeared in my garden in equally leafy Dundrum. I was delighted to see Frank mentioning the Irish name 'buachallán buí'. There is a jig commonly referred to in music collections and sessions as 'An Buachaillín Buí', but I once heard Séamus Ennis remark that its correct name is 'Na Buachalláin Buí' and explain that it meant ragwort. Maybe fellow musicians will believe me now. – Yours etc. ROGER O'KEEFFE, Dundrum, Dublin.
Irish Times
6 hours ago
- Irish Times
The Irish Times view on the US/EU trade statement: some certainty on tariffs
It is unlikely that for as long as US president Donald Trump is in power the environment for trade will ever be settled. Potential chaos will always be around the corner. However, it is important to recognise the better days, too, and yesterday falls into this category. The agreed EU/US statement on trade – following the handshake deal more than three weeks ago between Trump and European Commission president Ursula von der Leyen – is first of all important in and of itself. Initially expected within days of the meeting in Scotland, its nonappearance had raised fears that both sides were not on the same page. Now, an agreed piece of paper with important details has been signed off in Brussels and Washington. And some of the detail suggests that the EU side may have got more from the deal than some have suggested. Time will tell. In particular, a commitment to cap tariffs on pharmaceuticals and semiconductors at 15 per cent removes some uncertainty. There had been fears of higher tariffs in these areas following special studies being undertaken on them by the Trump administration. READ MORE Presuming the deal sticks, this will not now happen, while some areas of pharma will be excluded altogether. That said, as with other sectors, tariffs impose costs on consumers and producers and are a no-win policy approach. The 15 per cent tariffs on many exports – and the expectation of something similar on pharma – will be a burden on exporters. They will also damage the US economy and push up prices. Trump's tariff agenda is still bad news for Ireland and uncertainties remain about the impact of his wider industrial policy. But the codification of large elements of the US/EU deal at least keeps this process on track and avoids a transatlantic trade war. It also gives some more clarity to key sectors of the economy and raises hopes that the worst can be avoided. More battles and uncertainty remain ahead, but the publication of the joint statement is a positive step.
The Journal
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US court overturns $464m civil fraud penalty against Trump, calling the sum 'excessive'
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