"TACO-Trump Always Chickens Out became the defining trade of last year's tariff wars after the shock dip on 'Liberation Day' last April. The term was coined by FT journalist Robert Armstrong to describe the pattern Trump exhibited: Escalate, terrify, then reverse course and claim victory."
"War, however, doesn't so easily toggle back and forth. TACO has a hidden assumption baked in: that your counterparty wants off the roller coaster as much as you do."
"Within hours of Trump's announcement, Iranian state media denied any talks had occurred. The speaker of Iran's parliament wrote on X that it was 'fakenews' designed to 'manipulate financial and oil markets.'"
Trump's recent actions regarding Iran led to a significant market response, with traders familiar with his pattern of escalation and retreat. The term TACO describes this behavior, where Trump creates tension but ultimately backs down, allowing markets to stabilize. However, the situation with Iran is more complex, as the regime may not share the same desire to de-escalate. Iranian officials dismissed Trump's claims of negotiations, indicating that the situation in the Strait of Hormuz remains unchanged despite market reactions.
Read at Fortune
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