Latest news with #TacoTrade
South China Morning Post
06-06-2025
- Business
- South China Morning Post
May's Taco market lull may well be the calm before the storm
The final classic of England's horse racing season is the St Leger's Day race at Doncaster, on September 13 – made famous by the stockbroker's mantra, 'Sell in May and go away, come again St Leger's Day'. This referred to well-heeled brokers taking long summer holidays when trading was subdued and left in the hands of junior dealers. Mantras like these recognise that markets show a definite seasonality, with quiet summers giving way to an often-exciting October as money movers return to work. These indicators can be combined with more traditional forecasts of the near-term future, made by looking at the near-term past and assisted by our experiences. The near term says markets have had a pretty good May. Pretty much anything sounded good after the shock of April 2 , when US President Donald Trump announced his swinging tariffs on friend and foe alike. Indeed, a cut in additional tariffs on China to a mere 30 per cent is surely good news after the 145 per cent rate. In some ways, Trump's extreme negotiating technique sounds smart in making us think 30 per cent is good – when it still essentially hurts all but the highest added-value trade. May was a calming month that saw most of the economic metrics announced, such as US employment, inflation and interest rates, being largely supportive. Each small piece of 'good news' saw equity markets ticking up. Investors were starting to believe in what has been described as Trump's Taco trade – Taco being short for 'Trump always chickens out' – meaning whatever he says is soon reversed. Yet we should remember the massive tariffs have only been postponed , not cancelled. 03:53 China, US slash most tariffs on each other after first round of trade talks China, US slash most tariffs on each other after first round of trade talks To gain a little insight into what the summer might hold for investors, one indicator is the wisdom of the crowd, of which the best illustration is the late US economist Jack Treynor's bean jar experiments. In one, the professor filled a jar with 810 beans and asked his class to estimate the number – the mean estimate was 841, and only two of the 46 guesses were closer to the true value. The conclusion? The crowd is better at estimating a value than an individual.
Irish Times
05-06-2025
- Business
- Irish Times
Trump's Taco trade is a major headache for ECB rate setters
The so-called '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. READ MORE [ Irish exports surged ahead of Trump's 'liberation day' tariffs Opens in new window ] 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.
South China Morning Post
05-06-2025
- Business
- South China Morning Post
Why Taco trade is no laughing matter for the global economy
Everyone loves a catchy acronym. In financial markets, investment analysts spend a lot of time trying to come up with initialisms that encapsulate a popular theme or trend. A good example is FOMO, or fear of missing out , especially when it comes to stock market rallies. Another one is Brics, first coined in 2001 by former Goldman Sachs economist Jim O'Neill to draw attention to opportunities in Brazil, Russia, India and China. However, it is not often that a journalist coins an acronym that takes markets by storm. Last month, Financial Times commentator Robert Armstrong came up with Taco – which stands for ' Trump always chickens out ' – to describe the recent rally in global markets. He attributed the rally to investors 'realising that [US President Donald Trump] does not have a very high tolerance for market and economic pressure and will be quick to back off when [his trade] tariffs cause pain'. The Taco trade took hold on April 9, the day Trump suspended the 'reciprocal' tariffs he imposed on nearly all America's trading partners a week earlier. Since then, Trump has made a series of partial climbdowns that have convinced many investors that his bark is worse than his bite. Having threatened to fire US Federal Reserve chair Jerome Powell, Trump backed down and said he had no intention of seeking his ouster despite continuing to pressure the Fed to lower interest rates.
Daily Mail
02-06-2025
- Business
- Daily Mail
What is the Taco Trade and how is it linked to President Trump's tariffs?
Many on Wall Street see the president's mercurial behaviour as a way to capitalise on the 'Taco Trade.' This involves buying stocks after markets go down due to President Donald Trump imposing or threatening tariffs, then selling them as their value recovers when the president declares a pause or retreat. Coined by Financial Times journalist Robert Armstrong, Taco stands for 'Trump Always Chickens Out.' It essentially means Trump will reverse course if the economic fallout from his tariff policies becomes too severe and obvious. Near the end of May, President Donald Trump warned that he would slap a 50 per cent tariff on goods imported from the European Union starting from the beginning of June. He said negotiations were 'going nowhere' with the trading bloc, which sold more than $600billion of goods to the US last year. Yet after shares spiralled and the EU said it would not make a deal based on 'mutual respect, not threats,' Trump backed down just two days later. He said the tariffs would instead be imposed from 9 July. US stocks subsequently soared the following Tuesday. It was not the first time Trump has backtracked on tariffs; he agreed to lower taxes on imported Chinese goods from 145 per cent to 30 per cent last month for 90 days after China raised their own levies on US products to 125 per cent. And on 9 April, the US president suspended 'reciprocal' tariffs - higher import taxes on dozens of nations - announced in his 'Liberation Day' speech the previous week. As Armstrong wrote: 'The US administration does not have a very high tolerance for market and economic pressure, and will be quick to back off when tariffs cause pain.' Trump unsurprisingly reacted badly when asked about the acronym by a reporter, calling her question 'nasty.' He remarked: 'I think we really helped China tremendously because, you know, they were having great difficulty because we were basically going cold turkey with China. 'We were doing no business because of the tariff because it was so high. But I knew that.' More recently, the president reignited uncertainty into the global trading system as he warned of his intentions to double tariffs on steel and aluminium imports to 50 per cent. And on Monday, China accused the US Government of 'seriously violating' the trade deal agreed last month in Geneva, Switzerland. Tom Hibbert, multi-asset strategist at Canaccord Wealth, said 'there is an element of negotiating strategy' in Trump's approach to tariff policy, 'although it relies more on blunt force than measured diplomacy, which has introduced huge uncertainty.'
Irish Times
31-05-2025
- Business
- Irish Times
Trump and the ‘nasty' Taco trade
The bad news: even if the appeals court had not overturned the recent US trade court ruling declaring most of Donald Trump 's tariffs illegal, Goldman Sachs expects the White House would find new ways to impose duties anyway. The good news: investors seem unfazed either way. The Taco trade – short for Trump Always Chickens Out – has become Wall Street's shorthand for profiting off presidential tariff tantrums. Trump announces sky-high levies, markets plunge, then he backs off and stocks soar. Repeat. April's 'liberation day' tariffs sent the S&P 500 tumbling 12 per cent. Spooked by market turbulence, Trump paused the plan, sparking the index's best day in 17 years. A May trade truce with China lifted stocks again. READ MORE And the sell-off that followed Trump's recent 50 per cent tariff threat on the EU was reversed within days when Trump delayed the levy. A sensitive soul who prides himself on being the world's great dealmaker, Trump predictably took offence about what he deemed to be a 'nasty' question about the Taco trade at a White House press conference, insisting it's just 'negotiation'. It's tempting to mock Trump's tariff theatrics, but doing so too freely carries risks – pushing him could harden his stance and unsettle markets in ways the Taco trade doesn't fully anticipate. As BCA Research's Peter Berezin tweeted: 'The first rule of the Taco trade is that you don't tell Trump about the Taco trade.'
