Wall Street traders have playfully coined the term “TACO”—Trump Always Chickens Out—to describe President Trump’s wavering stance on tariffs. In the past, he would often impose high import taxes but then relent when markets dove. Recently, however, Trump has called the market’s bluff.
With a new round of tariffs recently taking effect, the average tax on US imports has reached levels not seen since the 1930s. Surprisingly, markets have absorbed this news well, with stocks climbing and the Nasdaq reaching an all-time high. This marks a stark contrast to early April when initial tariff announcements caused global stocks to crash.
While investors once feared the impact of tariffs, Ethan Harris, the former head of global economics at Bank of America, pointed out that Trump seems to be succeeding in implementing these tariffs without causing chaos in the stock market. “He’s surprising,” he noted, indicating that this could be seen as an accomplishment for those in favor of tariffs.
But has anyone really won? Economists warn that the full effects of the tariffs could take time to manifest. Harris added that while the stock market appears stable, real economic damage could follow, leaving many wondering how long investors will stay calm.
Interestingly, the “TACO” trend now seems to imply that Trump might just “always try again.” Recent import taxes show that he’s pushing forward with tariff rates almost as steep as those in early April. This brings us to the crucial question: How long can the stock market maintain its current optimism?
Investors seem oddly assured, gravitating towards a “Trump put,” a belief that if markets drop dramatically, the president will adjust his strategy. Harris elaborated that this isn’t merely about backing down; it’s about managing the markets without deep-rooted consequences.
Amidst all this, there’s a broader focus on the tech boom in the US, drawing attention away from tariff worries. Big tech companies like Nvidia have reported impressive earnings, helping offset concerns stemming from trade tensions. The lack of retaliation from trading partners has also helped in avoiding a full-blown trade war, which could worsen the economic situation dramatically.
As tariffs shape the economic landscape, investors remain cautious. Arun Sai from Pictet Asset Management believes that while markets are showing resilience, they might be overly complacent. With upcoming inflation and labor market data, many are watching closely how these tariffs will truly impact the economy. He warned, “We are priced for nothing to go wrong,” emphasizing that the situation could still shift drastically.
