The drama following U.S. President Donald Trump’s “Liberation Day” just over a year ago seemed to confirm a simple theory. On April 2, 2025, Trump unveiled sweeping tariffs; markets plunged even as 10-year Treasury yields spiked; then, when tariffs were paused, equities surged in one of the strongest rebounds since the global financial crisis.
For some investors, the lesson was obvious: Trump escalates, markets fall; he backs down, markets rise. A trade — and a theory — was born: “Trump Always Chickens Out,” better known by the acronym “TACO.”
One year later — and what a year it’s been — it’s worth asking whether this market-driven TACO narrative describes reality or merely reflects an assumption embedded in a trading strategy. The issue is not whether markets influence Trump (they clearly do) but how that influence operates and shapes his decisions.
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