Let’s talk about a stock market trade gaining traction on Wall Street in 2025: the TACO trade. Sounds funny, perhaps, but no laughing matter for investors—and all about what they think President Trump is going to (or isn’t going to) do about tariffs and trade policy.
TACO: The meme behind the money
TACO means “Trump Always Chickens Out.” This term was coined by The Financial Times and refers to the increasing skepticism among traders that Trump’s bluff tariff threats often don’t translate into permanent policy. Instead, he tends to back down when markets begin to freak out.
Here’s how it works: Trump announces new tariffs, which sends stocks tumbling. But soon after, he either delays or softens the announcement, sparking a rebound. Traders who buy during the initial dip and hold through the walk-back stand to make quick profits.
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Real-world examples of the TACO trade in action
So far this year, we’ve already seen several classic TACO moments:
- On April 2, Trump announced blanket “Liberation Day” tariffs. The S&P 500 plunged over 12% in the following days.
- But by April 9, he had put on hold most of those tariffs for 90 days. The market responded with a gigantic rally, and the S&P posted its biggest one-day gain in nearly 20 years.
- In May, a framework agreement with China temporarily lowered tariffs. The S&P has since recovered its April losses and increased by over 1%.
- Recently, a 50% tariff on the European Union, which was to go into effect on June 1, sent stocks lower—before Trump postponed it to July 9. When markets reopened after Memorial Day, the S&P 500 recovered nearly 2%.
The only individual or institution [Trump] pays attention to is the stock market.” That is, poor performance seems to make him change his mind.
Why the TACO trade matters
During Trump’s time in power, investors bet everything on the so-called “Trump trade”—betting on sectors they thought would benefit from deregulation, infrastructure investment, or protectionism. A few of these bets were winners, but others went bust as Trump’s rhetoric over the trade war dented investor faith.
Now, thanks to TACO, investors have a new script: buy the tariff dip. As The Sevens Report’s Tom Essaye put it, “Trump has proven to investors that he won’t follow through with draconian tariffs.“
It’s a belief that has ushered in a tide of dip-buying, most notably by retail traders who’ve grown more active and aggressive in 2025.
A word of caution
Despite that, professionals warn that the TACO trade is not foolproof. Short-term gains will result, but if Trump ever sticks to tariffs—or fails to produce trade deals—the consequences could be dire. “If this game continues,” Sterner warned, “it will put the US economy into recession at some point.”
So while the TACO trade might currently pay off, it’s a risky gamble on political volatility. Be cautious, stay alert, and don’t forget even memes aren’t risk-free.
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