Markets May Soon Call Trump’s Tariff Bluff, Analyst Predicts

Markets are increasingly ignoring U.S. President Donald Trump’s trade theatrics: his latest tariff escalation barely moved equity prices.

The administration has repeatedly backed down from its initial threats—a pattern so consistent it has earned the acronym TACO: “Trump Always Chickens Out.” I Photo: Joe Flood Flickr

But if investors become desensitized to these threats, they may no longer serve as an effective check on potentially harmful policies, warns Pinelopi Koujianou Goldberg in an analysis for Project Syndicate.

Three months after Trump announced sweeping new tariffs on most countries, the U.S. economy appears surprisingly resilient.

The stock market has rebounded from its initial slump, inflation remains under control, and fears of a recession have receded—or at least they had before Trump announced a new 30% tariff on imports from Mexico and the European Union (EU), two of America’s largest trading partners.

In the months since Trump’s initial announcement, several countries have entered negotiations with the U.S., offering concessions they had long resisted.

Many observers see this as evidence that Trump’s aggressive trade tactics are working and that economists may have overestimated the potential costs. Yet this interpretation overlooks a critical detail: many of the tariffs announced over the past few months have not been fully implemented.

In fact, the administration has repeatedly backed down from its initial threats—a pattern so consistent it has earned the acronym TACO: “Trump Always Chickens Out.”

Despite its outspoken distrust of experts—particularly economists, scientists, and health professionals—the Trump administration has remained highly attuned to financial markets.

Since early April, announcements of new or increased duties have repeatedly triggered stock-market declines.

In response, the administration has often softened its stance by issuing exemptions, delaying some tariffs, and renegotiating others, leading to quick rebounds in equity prices.

Announcements of bilateral deals have been met with investor optimism, while renewed threats of escalation have triggered sell-offs.