Taco vs Tina: which acronym will win out when traders have a taste for both?

US President Donald Trump’s tariff threats, with some reaching what he considers to be “a ridiculous high” level before being drastically lowered or suspended, have given rise to an acronymic market trend that Trump lashed out at a reporter for mentioning: Taco trades.

But despite Trump’s back-and-forth tariff whiplash that has roiled markets and left many investors scrambling to keep up, many still believe “there is no alternative”. So, when it comes to putting their money in US assets, it’s in “Tina” they trust.

What is a Taco trade, and what does it mean for investment?

“Taco” stands for “Trump always chickens out” – a term coined by Financial Times columnist Robert Armstrong – and it reflects a growing awareness of Trump’s strategy among shrewd investors who have taken to selling at-risk assets when he threatens ridiculously high tariffs, then rebuying those depreciated assets when he expectedly backs down, causing their value to shoot back up.

The president’s repeated use of his “negotiation” tactic and subsequent market reaction have created a recognisable pattern on Wall Street, hammering home the Taco mentality.

The S&P 500 – a stock market index tracking the stock performance of 500 leading companies listed on stock exchanges – sharply declined in April after Trump imposed high tariffs on most countries on “Liberation Day”. Then the index rebounded after Trump paused most of those import duties for 90 days, saying he would make bilateral deals with trade partners.

Why does the market have an appetite for Taco trades?

Wall Street loves a catchy acronym. And it sees that the Taco-trade narrative has continued to play out in other cases, as well. Trump ratcheted up levies on China to a punitive 145 per cent, only to reduce them to 30 per cent after negotiations in Switzerland. He also threatened to raise tariffs on the EU to 50 per cent, before delaying the move until July 9.

  

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