“Trump always chickens out”: Markets rally as president delays EU tariffs while raging at reporter over TACO theory that predicts his every move

The stock market experienced a significant rally on Tuesday following President Donald Trump’s announcement to delay the implementation of a 50% tariff on the European Union. This development coincided with an unexpected rise in consumer confidence in May, as reported by the Conference Board, marking a positive turn after five consecutive months of decline.

According to MSNBC, the administration’s fluctuating stance on tariffs has created a pattern of market responses, with White House National Economic Council Director Kevin Hassett suggesting that countries providing “good-enough offers” might maintain a 10% tariff rate or possibly lower. However, the specifics of what constitutes an acceptable offer remain undefined.

The market’s behavior has given rise to what Financial Times columnist Robert Armstrong calls the “TACO” trade theory, short for “Trump always chickens out.” This theory has emerged from a consistent pattern: markets decline when Trump announces tariffs and surge when he scales them back.

How businesses and consumers are responding to tariff uncertainty

The unpredictable nature of Trump’s tariff decisions has created significant challenges for businesses, both large and small, making it difficult for them to plan effectively. While investors can adapt their trading strategies around these announcements, businesses face potential paralysis or severe operational difficulties due to the uncertainty.

Consumer sentiment has shown similar volatility, with public confidence closely tied to perceptions of impending tariff decisions. When tariff threats loom, consumer worry increases, and when these threats are withdrawn, confidence typically rebounds.

Sources close to Trump’s team indicate that the president is not concerned about the market’s volatile reactions to his tariff decisions. Instead, he reportedly takes satisfaction in his ability to influence global markets, where a single statement or social media post can result in billions of dollars in market value being created or erased.

When confronted about the “TACO” theory by a reporter, Trump responded defensively, calling the question “nasty” and defending his approach by citing his handling of tariffs with China and the European Union. “I’ve never heard that,” Trump stated, questioning whether his actions in reducing various tariffs and demanding market access could be considered “chickening out.”