“April 2, 2025, will forever be remembered as the day American industry was reborn, the day America’s destiny was reclaimed, and the day that we began to make America wealthy again.”
President Donald Trump spoke those words as he imposed historic tariffs on countries all over the world. One year on, the tariffs have led to massive changes in international relations, disruptions in global trade, a momentous Supreme Court ruling, and many other far-reaching effects. The full legacy of the tariffs is yet to be known, but this Washington Examiner series will take stock of the first year. The second installment looks at the “TACO” phenomenon born out of the pushback to tariffs. For Part 1 on manufacturing struggles, click here.
A market pattern born out of President Donald Trump’s tariff fights has taken on a life of its own, shaping how investors respond to his policy threats and leaving him with a label that has proven harder to shake.
The dynamic became known as the “TACO” trade, short for “Trump Always Chickens Out,” a term coined by market watchers to describe a cycle in which Trump escalates threats before ultimately pulling back, prompting sharp swings followed by recoveries.
Trump has rejected the “TACO” label since it first emerged. “I chicken out? Oh, I’ve never heard that,” he said last year, arguing his tariff adjustments were strategic moves rather than retreats.
Democrats have leaned into the phrase to mock Trump’s approach. The Democratic National Committee parked a taco truck near Republican headquarters in Washington last July, featuring imagery of Trump in a chicken suit.
“Take Trump seriously, but not literally, that’s always been the key to understanding how he negotiates,” a GOP strategist said, speaking on the condition of anonymity. “What looks like backing down is often just part of the playbook.”
The approach has defined Trump’s tariff strategy, with aggressive threats often followed by delays, exemptions, or reversals that softened their immediate impact.
A separate Republican operative, granted anonymity to discuss internal dynamics, said that pattern is intentional.
“Trump has always used aggressive opening positions as leverage, whether on trade or foreign policy, and then adjusted based on evolving conditions,” the source said.
MANUFACTURING HAS STRUGGLED SINCE LIBERATION DAY
The approach became clear as Trump rolled out a series of aggressive trade threats that initially rattled markets before being scaled back.
When Trump introduced his reciprocal tariff push in early 2025, he framed it bluntly: “Whatever countries charge the United States… we will charge them.” Markets reacted with immediate volatility as investors braced for a renewed trade conflict.
Days later, he escalated, declaring “RECIPROCAL TARIFFS!!!” and warning trading partners would face equal treatment. By late February, tariffs on Canada, Mexico, and China, tied in part to fentanyl flows, sent markets lower as fears of retaliation mounted.
The biggest shock came on April 2, when Trump dubbed “Liberation Day,” and sweeping tariffs and a national emergency declaration triggered a sharp selloff. Within days, however, key portions of the tariffs were paused for 90 days to allow negotiations, helping stabilize markets and reinforcing a now-familiar cycle of escalation followed by retreat.
That cycle, the source said, reflects a broader approach in which markets are only one factor.
“Markets are one input, but not the only driver,” the GOP source said. “All presidents pay attention to market signals, but Trump tends to weigh them alongside political, strategic, and geopolitical considerations.”
In early summer, that pattern became more pronounced. In June 2025, the administration signaled new tariffs targeting technology products and industrial inputs, including semiconductors and machinery, moves that earlier in the year might have triggered a broader selloff. Instead, markets reacted more modestly, as investors weighed not just the policy itself but the likelihood it would be delayed or narrowed.
Trump maintained a firm public posture, saying the U.S. was “looking at a lot of different options” on trade. But as timelines slipped and exemptions expanded, particularly for key manufacturing inputs and electronics, the market response remained contained.
By mid- to late summer, additional tariff threats on sectors such as furniture, cabinets, and select consumer goods produced only muted volatility. Investors had begun to internalize a familiar cycle: sharp rhetoric followed by negotiation, delay, or adjustment.
By the end of 2025, the shift was clear. Tariffs on technology products, including electronics inputs, were repeatedly pushed back, while earlier sector-specific measures were delayed or left in limbo. Markets barely flinched, treating announcements as provisional rather than immediate.
That dynamic now faces a new test in the courts. In a 6-3 decision, the Supreme Court ruled that Trump did not have authority under a 1977 emergency economic powers law to impose broad tariffs on most U.S. trading partners, prompting the administration to pivot and use a separate statute to implement a 10 percent across-the-board tariff.
The ruling adds a legal dimension to a strategy that has largely played out through markets and negotiations. The White House, however, pushed back on the broader critique of Trump’s approach.
“This eggheaded analysis is disconnected from the plain reality that the President has consistently and skillfully used tariffs, diplomacy, and overwhelming military action to safeguard the national and economic security of the American people, from historic peace deals to unprecedented trade deals,” White House spokesman Kush Desai said in a statement provided to the Washington Examiner.
The pattern has carried into this year, with new tariff ideas tied to autos and strategic industries producing only brief, sector-specific dips, as investors focused less on the rhetoric and more on the odds any policy would actually take effect.
That shift in expectations may itself carry risks.
“If markets start assuming de-escalation is inevitable, that could actually reduce immediate pressure, but it also risks misreading his intentions,” the GOP source said, adding that Trump’s unpredictability is “part of the leverage.”
But the label has stuck, and recent developments involving Iran have brought it back into focus.
Trump said on Truth Social earlier this month that the U.S. would pause “any and all military strikes” targeting Iran’s energy infrastructure after what he described as “very good and productive conversations.” The announcement initially sent markets sharply higher, before gains faded as uncertainty set in.
Speaking to reporters, Trump described the talks as “very, very strong,” pointing to “major points of agreement” and a “very serious chance” of a deal. But Iranian officials denied that direct negotiations had taken place, casting doubt on how substantive any progress actually is.
Trump has dismissed the discrepancy as a messaging issue, while reports indicate communication has continued through intermediaries, with Iran’s nuclear program still a central sticking point. On Monday, he again said the U.S. was in “serious discussions with A NEW, AND MORE REASONABLE, REGIME” to end the conflict, but he subsequently threatened to blow up all Iranian energy infrastructure if no deal emerges.
For some investors, these episodes look familiar. For others, it underscored the limits of applying a market-tested pattern to a geopolitical crisis.
Marko Kolanovic, JPMorgan’s former quant lead, warned the latest swings are a “net negative for markets,” arguing that “manipulation will cause liquidity to disappear and real problems will stay.” He added that with conflicting signals from both Washington and Tehran, investors are left to focus on hard indicators, particularly whether oil continues flowing through the Strait of Hormuz.
TRUMP TARIFFS THREAT GOP 2026 ELECTION CHANCES
For now, whether that flow remains uninterrupted is a key question for markets. Unlike tariffs, which can ease economic pressure through delays and carve-outs, the consequences of military escalation are far less predictable and harder to unwind.
The political impact is also likely to hinge less on the negotiating style itself and more on the outcome.
“MAGA supporters see a president willing to push hard and rethink tactics that can read as strength,” the GOP source said. “Critics frame it as inconsistency, but the bigger impact will depend on results.”