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Time of India
29-05-2025
- Business
- Time of India
Trump's TACO trade is no joke: How memes, markets and tariffs collide
Wall Street's nickname for Donald Trump's tariff flip-flops — TACO, short for "Trump Always Chickens Out" — drew a sharp reaction from the president. Questioned about it in the Oval Office, Trump denied backing down and called the label 'a nasty question.' Investors coined the term to reflect a pattern: Trump threatens tariffs, markets drop, then he retreats. Market players now use the pattern to their advantage, triggering rallies once he relents. Trump calls it negotiation, not retreat. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The pattern that shaped a play From Twitter talk to trading tactic Behind the bluff: A high-stakes game Tired of too many ads? Remove Ads When markets don't need TACO—courts intervene The internet reacts: memes, mockery, and criticism In the Oval Office on Wednesday, President Donald Trump was asked about a rising Wall Street phrase: 'TACO trade' short for ' Trump Always Chickens Out.' His response was blunt. 'I chicken out? Oh, I've never heard that,' he said, smirking. Then came a defensive swipe. 'But don't ever say what you said,' Trump told the reporter. 'That's a nasty question. To me, that's the nastiest question.'This term, coined by Financial Times columnist Robert Armstrong , describes a trend investors say they've spotted. When Trump announces aggressive new tariffs, markets often dip. But when he backtracks — sometimes days later — they rally again. It's become a playbook on the trading who pens the FT's Unhedged newsletter, explained how the idea came about. 'I needed a shorthand way in my newsletter to describe this pattern, because it was an important pattern in markets. And perhaps I was hungry, too, and so I came up with the acronym TACO ,' he told Axios. It started as an inside joke but soon turned up in brokers' notes and, eventually, media headlines—and now, even a question to the president have been watching the pattern closely. After Trump's recent threat to slap 50% tariffs on EU imports by 1 June, stocks dipped. But when he delayed the action to 9 July following a call from EU leaders, markets rebounded after the Memorial Day holiday.'The TACO trade is real,' said one Wall Street trader speaking anonymously. 'Every time there's a threat, you wait for the reversal—it's like Trump's tell at the poker table.'Trump's tariff standoffs have grown more frequent and more erratic. Earlier this year, he hiked tariffs on Chinese imports to 145%. After investor pushback and diplomatic overtures, he cut them — first to 100%, then eventually to 30%. Traders now read his opening threats as a bluff, waiting for the climbdown before piling back into the market.'You call that chickening out?' Trump shot back when asked about the TACO label. 'It's called negotiation,' he said. 'If I get them to give in, I lower the number.'He pointed to recent developments with the European Union . Last week, Trump warned of 50% tariffs on EU goods starting June 1. Stocks fell sharply. But within days, he said he'd delay the move until 9 July after what he called 'promising talks.' 'They called up and said, 'Please let's meet right now,'' Trump said. 'So I said, OK.'Trump insists this is part of a strategy to force other nations to the negotiating table. 'If I get them to give in, I lower the number,' he explained TACO term has gained traction fast. What started as a newsletter quip is now appearing in financial notes and major headlines. Armstrong told Axios, 'I needed a shorthand way in my newsletter to describe this pattern, because it was an important pattern in markets. And perhaps I was hungry, too, and so I came up with the acronym TACO.'At first, it didn't stick. 'It was definitely not becoming a thing,' Armstrong said. But it began showing up in brokers' reports and finally found its way into press briefings — all the way to the White House Traders now watch tariff threats closely, seeing them less as policy and more as market signals. 'The TACO trade is real,' said a Wall Street trader speaking anonymously. 'Every time there's a threat, you wait for the reversal — it's like Trump's tell at the poker table.'Trump's defence is simple: it's a tactic. 'Setting a ridiculously high number' is part of the strategy, he claimed, designed to push countries into talks. 'And because I gave the European Union a 50 percent tariff and they called up and said, 'Please let's meet right now'.'Yet this method has rattled financial markets. On April 2, Trump announced broad 'reciprocal' tariffs on dozens of countries. Within hours of them taking effect, he walked them back — offering a 90-day pause for all nations except China. He later explained it was due to 'yippy yappy' markets, hinting at investor markets had reacted swiftly. The S&P 500 teetered near bear territory, and bond yields spiked. Once the pause was in place, the S&P 500 posted its best single-day gain since not all reversals are Trump's own doing. On Wednesday night, a panel of judges at the U.S. Court of International Trade blocked a wide set of tariffs introduced by the administration, ruling Trump lacked the legal authority to implement them. This undercut a central pillar of his trade tactics and highlighted that even the courts can play spoiler to tariff the trading floors, the term TACO has taken off online, spawning memes and jokes. One Reddit user joked, "Tariff time! Tacoflation is about to pop off. Hope you are stocked up on tequila," capturing both humour and economic worry. Others warned of "$10 tacos", mocking the potential inflation tied to tariffs on food everyone's laughing, though. Critics of the administration say the constant flip-flopping weakens economic stability. 'Tariffs aren't actually inflationary, but clearly Trump opponents want them to be so they can have an 'I told you so' moment,' one user wrote, reflecting the growing political friction the trade wars have Armstrong, the man behind the term, the experience is surreal. 'I want to be famous for my dumb joke, definitely,' he told Axios, 'but I also don't want the president to ruin the U.S. economy. And so I'd like to have both of those things, if at all possible.'
Yahoo
28-05-2025
- Business
- Yahoo
Wall Street Investors Mock Trump With A Brutal 4-Letter Code Word
Wall Street investors have cooked up a new term for betting against President Donald Trump ― and some have used it to score big gains at a time when the markets are behaving erratically due to the president's on-again, off-again tariffs. It's called 'TACO,' which is code for 'Trump Always Chickens Out,' and it refers to the president's tendency to announce massive tariffs, causing the markets to plunge, only to back off days later, causing them to rise again. Most credit Financial Times commentator Robert Armstrong for coining the term. The New York Times noted that it happened again in recent days, with Trump's announcement of 50% tariffs on Europe causing major indexes to sink on Friday. But on Sunday he announced that he would delay those tariffs amid a new round of trade talks ― leading to major gains when the markets reopened on Tuesday. Ted Jenkin, president of Exit Stage Left Advisors, told The New York Post there's now a simple strategy on Wall Street based on those shifts. 'Once he delivers bad news, investors are buying those stocks when they are beaten down waiting for him to chicken out and watching those stocks rebound in value,' he explained. Analysts said the situation is unique to Trump. 'Under no previous presidency did we have active markets betting on the president's resolve,' University of Michigan economist Justin Wolfers told Barron's. 'There was no BACO trade, no CACO trade, nothing. It was always taken as a given that when the president spoke on Monday, he would likely still mean it on Tuesday. That's no longer true. But what's really hard is that it's not even obvious when it'll be true, and when it won't be. Madness.' Armstrong, the writer who coined the term, had his own tongue-in-cheek takeaway. 'Acronyms are very powerful, especially when they remind people of foodstuffs,' he said on the Unhedged podcast. 'That is what I've learned from this experience.' Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
28-05-2025
- Business
- Yahoo
Wall Street Investors Mock Trump With A Brutal 4-Letter Code Word
Wall Street investors have cooked up a new term for betting against President Donald Trump ― and some have used it to score big gains at a time when the markets are behaving erratically due to the president's on-again, off-again tariffs. It's called 'TACO,' which is code for 'Trump Always Chickens Out,' and it refers to the president's tendency to announce massive tariffs, causing the markets to plunge, only to back off days later, causing them to rise again. Most credit Financial Times commentator Robert Armstrong for coining the term. The New York Times noted that it happened again in recent days, with Trump's announcement of 50% tariffs on Europe causing major indexes to sink on Friday. But on Sunday he announced that he would delay those tariffs amid a new round of trade talks ― leading to major gains when the markets reopened on Tuesday. Ted Jenkin, president of Exit Stage Left Advisors, told The New York Post there's now a simple strategy on Wall Street based on those shifts. 'Once he delivers bad news, investors are buying those stocks when they are beaten down waiting for him to chicken out and watching those stocks rebound in value,' he explained. Analysts said the situation is unique to Trump. 'Under no previous presidency did we have active markets betting on the president's resolve,' University of Michigan economist Justin Wolfers told Barron's. 'There was no BACO trade, no CACO trade, nothing. It was always taken as a given that when the president spoke on Monday, he would likely still mean it on Tuesday. That's no longer true. But what's really hard is that it's not even obvious when it'll be true, and when it won't be. Madness.' Armstrong, the writer who coined the term, had his own tongue-in-cheek takeaway. 'Acronyms are very powerful, especially when they remind people of foodstuffs,' he said on the Unhedged podcast. 'That is what I've learned from this experience.' Sign in to access your portfolio
Business Mayor
20-05-2025
- Business
- Business Mayor
Treasury jitters and banking regulation
Unlock the Editor's Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. This article is an on-site version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newsletters Good morning. Microsoft announced that it would allow its cloud users to use artificial intelligence models from Elon Musk's xAI on its platforms. It's the latest sign that relations are cooling between the Seattle-based tech giant and xAI competitor OpenAI — which Microsoft owns a 49 per cent stake in. Rob is away, so email us instead: and The Treasury market and the SLR When Moody's downgraded the US's credit rating going into the weekend, there was broad concern that the market would be in crisis on Monday. That appeared to be the case at the open: equities fell, and Treasury yields rose fast. But things settled down just an hour later. The S&P 500 finished the day flat, and yields on benchmark 10-year Treasuries were down by just three basis points. That puts 10 year yields just two basis points higher since Moody's announcement. It appears the market did not much care — or it could be that investors are waiting to see the shape of the Republican budget proposals, which are expected later this week. But there was one concerning outcome: the dollar fell faster than Treasury yields yesterday, suggesting foreign buyers were selling off US assets: This is just the latest in a series of troubling signals in the Treasury market. And we expect there are more to come. US debt is mounting; growth and productivity appear to be slowing, and all else equal, the current path of US trade policy will result in fewer dollars flowing abroad, probably leading to less foreign buying of US assets. As a result, it seems that policymakers are getting more serious about improving Treasury market function this year. Good. There are many proposals on the table, but the one that appears to be getting the most traction so far is to exempt Treasury holdings from the supplementary leverage ratio (SLR). Banks are required to meet a number of capital requirements to ensure that they have sufficient liquidity and capital to support safe lending. The SLR is the broadest capital requirement possible: it divides all of a bank's liquid assets (cash and cash-like things) over all its liabilities, including safe risk-free assets such as Treasuries, reserves held at the Fed and off-the-book derivatives. The broadness of the measure is the point. It's very hard to fiddle with. And, as opposed to the more complex risk-weighted ratios that did not properly gauge banking risks before the 2008 financial crisis, the simplicity of the SLR makes banks easier to regulate. The broadness of the measure, however, can lead to distortions and potential liquidity issues for the Treasury market. The banks themselves have argued that requiring banks to hold cash against risk-free assets such as Treasuries is counter-productive. It disincentives them from holding US debt, they say, and makes it more costly for their trading desks to be active in the Treasury market. We get the banks' argument and are inclined to believe it. But it is unclear if exempting Treasuries or other risk-free assets will actually support Treasury market liquidity in moments of crisis, which is when it is needed most. The Fed exempted various risk-free assets from 2020-21. Some postmortems suggest there was more buying of Treasuries in that period. But other studies suggest the SLR is not a constraint, and exempting Treasuries would not be helpful in moments of Treasury market turmoil. Even if they needed less cash on hand to buy Treasuries, why would banks go charging into an imploding debt market? It's a tough call, but looking at the challenges we expect the Treasury market will face in the coming years, there is a good case for erring on the side of a Treasury exemption. In a market potentially losing buyers and facing higher and more volatile yields, extra liquidity is important. But this should not be a free pass for the banks. As Darrell Duffie, professor of finance at the Stanford Graduate School of Business, argued to Congress last week and noted to Unhedged, any change to the SLR should be offset by changes in risk-based capital requirements: Without an offset, dealer capital levels would decline. Among other concerns, a decline [in] dealer capital would increase the interest rates that dealers pay to finance their inventories and reduce the incentives of dealers to offer liquidity to financial markets. Today, the best-capitalised dealers have lower debt funding costs and lower required returns on equity than less well capitalised dealers. Better capitalised dealers thus provide relatively more liquidity to their customers, especially during a crisis. Reforms such as the proposed SLR exemptions will hopefully help prevent the next Treasury crisis. But it will only really help at the margins. It is far more important for the US to lower the deficit and pursue economic policies that lure foreign Treasury buyers back to auctions. Our attention will be on the budget this week. (Reiter) Coinbase in the S&P 500 Yesterday, the S&P 500 got a new member: Coinbase, the world's largest cryptocurrency exchange and the second-largest stablecoin issuer. Crypto bugs have been calling it 'a watershed moment' for the asset class — a stamp of legitimacy, but without all the messy regulation that the industry has long sought to avoid. And it's clearly been a boon for the company: its shares jumped 24 per cent last week when its inclusion was announced. Unhedged has been wary of crypto broadly, and stablecoins in particular. But it's not worth litigating its inclusion. It's in the index. Whether we like it or not, most 401ks are now exposed to Coinbase and the industry it represents. But we do take issue with its inclusion in the financials grouping of the index. The company is a three-in-one hybrid of cryptocurrency exchange, broker and custodian. There's no other financial company in the S&P 500 that has all those functions, and, crucially, the other members have regulatory oversight from the Securities and Exchange Commission. Compared to the highly regulated services companies in the financials sub-index, Coinbase's revenue is also highly dependent on speculation. Fifty per cent of its revenue comes from fees drawn from coin-crazed retail investors. And 14 per cent of its revenue comes from the interest it reaps on its stablecoin reserves balance, which grows and shrinks in response to speculation, too. Tellingly, Coinbase's stock price has closely mirrored bitcoin over the past few years: All stocks respond to animal spirits and speculation. But we prefer stocks to respond to fundamentals, especially in the financial sector, which underpins the broader market. Thankfully, at its current market weighting, any violent swings in Coinbase's — or bitcoin's — price will not have a meaningful influence on the broader index. At its current market cap it is about 0.1 per cent of the total index and less than 1 per cent of the financials sector. But would Coinbase not have made more sense as a consumer discretionary stock? Specifically, shouldn't it have been within the gaming sub-index? ( Kim) One good read More on wage stagnation. Can't get enough of Unhedged? Listen to our new podcast, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here. Due Diligence — Top stories from the world of corporate finance. Sign up here The Lex Newsletter — Lex, our investment column, breaks down the week's key themes, with analysis by award-winning writers. Sign up here
Business Mayor
13-05-2025
- Business
- Business Mayor
De-escalation and the damage done
This article is an on-site version of our Unhedged newsletter. Premium subscribers can sign up here to get the newsletter delivered every weekday. Standard subscribers can upgrade to Premium here, or explore all FT newsletters Good morning. The ceasefire between India and Pakistan, which looked shaky over the weekend, appears to be holding. Equities in both countries rallied: India's Nifty 50 index by just under 4 per cent, and Pakistan's Karachi Stock Exchange 100 by 9 per cent, in US dollar terms. Let's hope markets are right to be optimistic. Email us: and Taco Monday: a big relief, but The pattern is now unmistakable. Trump announces extreme tariff policies but in the face of a negative political, economic or market response, he backs off. The Taco (for Trump Always Chickens Out) trade notched up its latest win yesterday, after Trump announced that he would cut tariffs on China from 145 per cent to 30 per cent for 90 days, ending what had amounted to an embargo on many Chinese goods (a significant number of products, such as electronics, had already received exemptions). China, for its part, cut its tariffs from 125 per cent to 10 per cent. Markets roared their approval. Yes, a 30 per cent tariff is still high and 90 days is not forever. But the central forecast now has to be that, should 30 per cent tariffs pinch in the US, Trump will bring those down, too. What reason has the administration given for investors to expect anything else? Trump observers love to note that the president has been rambling on about protectionism for 40 years now. But talk is cheap. Judge the man by his actions. Trump's habit of concession is unambiguously good news. But the trade war is not over, and it is worth articulating the risks that remain. Read More Five-year gilt yields drop below 7%, hit 7-month low Most obviously, while we can observe Trump's behaviour, we can't read his mind. While it seems less likely all the time, there may be some territory he will refuse to concede, even under pressure. Andrew Bishop, head of policy research at Signum Global Advisors, agrees that Trump almost always backs off. But he points out that there is something of an escalating, two-steps-forward, one-step-back pattern in his actions. On January 20, Trump proposed tariffs on Canada, Mexico and China, and then did nothing whatsoever about it. In February he threatened those countries again, and actually signed an order, but didn't implement it. In March, he announced, signed and implemented tariffs on Canada and Mexico — then backed down immediately. On 'liberation day', he announced, signed and implemented high tariffs on the world — and then took a month to back off. So there is a sort of advancing pattern amid all the retreats. The Taco view of this pattern is that Trump is feeling around for a position that changes other countries' behaviour significantly without causing significant consumer or market pain in the US. Because there is no such position, the final equilibrium state will be a quite moderate tariff regime. But even hardcore Taco believers like Unhedged have to concede that other outcomes, while unlikely, are possible. Trump is not especially easy to predict. For the time being, tariffs at their current levels are high enough to have a significant impact on corporate profits, and the stock market is still not pricing that in. Joseph Wang, an independent analyst, wrote yesterday that In theory, the impact on tariffs can be blunted by a strengthening currency and substitution towards non-tariffed countries. However, the dollar has been weakening and a global minimum tariff makes substitution less likely as it impacts all imports regardless of origin . . . A very rough estimate based on recent goods import volumes of $3tn suggests that the incremental increase in tariff revenue would easily be over $200bn A $200bn tax increase could carve 4 per cent or 5 per cent out of US corporate profits, and yet earnings estimates and valuations remain elevated. Read More China clears path for foreign investors to $5tn swaps market Foreign investors, meanwhile, may look at the volatility in US policy and asset prices and change their behaviour in significant ways, even after the latest climbdown. Regulated global investors like pension funds and insurance companies will be forced by their risk rules — grounded in backward-facing volatility measures — to reduce their dollar exposure or hedge it more (this helps explain the continued weakness of the dollar index). And many investors may think about diversifying outside of the US, especially given that American assets are so expensive to begin with. For example, Jim Caron, chief investment officer for the Portfolio Solutions Group at Morgan Stanley Investment Management, is looking to regional diversification, and his team's highest conviction overweight is European equities. Also, the China reprieve might not do very much to the fact that inflation risks remain, which means that hedging volatile US equities with long Treasuries might not work. Here's Caron: From a portfolio perspective [higher inflation] means that longer duration fixed income may not be as good of a hedge as in prior cycles. So, I prefer to be underweight duration, holding higher quality shorter duration bonds, because in the event something bad happens, the mechanism for the Fed to cut rates will be deployed. Conversely, if we get positive news, well, that's inflationary too, [so the] back end underperforms. Effectively, we have to understand that longer duration bonds are not the hedge they used to be. The economic scars from back-and-forth US policymaking may be significant and lasting, too. As Bishop points out, policymakers and corporate managers may not take much comfort from the fact that Trump chickens out almost every time. 'You are playing Russian roulette,' he says. 'Yes, [Trump] backs down nine times out of 10, but if you hit the wrong chamber, you blow up your economy' or your company. Investors, politicians and companies still have to take defensive measures when dealing with the US, and defensive measures create economic friction. For example, supply chains will not function as smoothly, as Grace Zwemmer, economist at Oxford Economics, explains: The 90-day pause will probably spur another round of frontloading by importers trying to avoid heavy tariffs [later] . . . A rebound in imports from China would reduce the risks of a supply chain disruption . . . However, it is likely to keep uncertainty around tariff rates high. Future tariff announcements could lead to sharper declines in imports and a bigger risk of supply chain disruptions in anticipation that relief will be forthcoming. Finally, the China de-escalation may not be enough to free the Fed to cut rates. The Fed is looking at firm employment data, inflation a bit above target, and significant tariff uncertainty. Trump has taken the worst-case scenario off the table for three months, but the Fed needs more clarity than that, given the data it has. Several Wall Street economists came out yesterday and reaffirmed their view that the Fed is unlikely to cut this year. Unhedged tends to agree with them. One good read Whipping Post. Can't get enough of Unhedged? Listen to our new podcast, for a 15-minute dive into the latest markets news and financial headlines, twice a week. Catch up on past editions of the newsletter here. Due Diligence — Top stories from the world of corporate finance. Sign up here Free Lunch — Your guide to the global economic policy debate. Sign up here
