“Trump always chickens out,” briefly explained
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Welcome to The Logoff: Donald Trump is once again moving markets — and being moved by them in turn.
What happened? On Wednesday afternoon, the president said in a social media post that he was backing away from new tariffs on Europe after reaching a “framework of a future deal with respect to Greenland,” potentially involving US sovereignty over new US military bases there. The Dow and other US stock indices jumped in response, after suffering a bad day on Tuesday because of Trump’s continuing threats.
It’s the latest example of one of the more reliable patterns to emerge from Trump’s first year back in office: TACO, or “Trump always chickens out.”
Why TACO? The term comes from a Financial Times column in May breaking down the market response to Trump backing down on his “Liberation Day” tariffs. As my colleague Andrew Prokop explained at the time, the short-lived tariffs pushed the market to the verge of crisis, and Trump blinked. TACO postulates Trump always handles market dips the same way: Once the damage gets bad enough, he will relent.
What’s the context? Until Wednesday, Trump had been all-in on acquiring Greenland, logic and decades-old US alliances be damned. Over the weekend, he announced escalating tariffs on eight European countries over their opposition to the plan, and threatened Norway’s prime minister.
What’s the big picture? TACO is, in some ways, good news — a built-in circuit breaker for some of Trump’s more damaging impulses. But as Arin Dube, a University of Massachusetts economics professor, points out, it’s not a permanent solution. As markets grow accustomed to Trump backing down, they’re less likely to get jittery in the first place; if they don’t fall, Trump also doesn’t get the signal to stop touching the stove.
The result could be an ever-elongating TACO cycle where Trump tiptoes closer to the brink of a seriously damaging decision — and maybe over it — before the markets send a signal he should reconsider.
And with that, it’s time to log off…
Last month, my colleague Benji Jones traveled to Australia to report on “the largest effort ever mounted to keep the Great Barrier Reef alive.” The Australian government’s nearly $300 million Reef Restoration and Adaptation Program is planned as a multi-decade effort to bolster the dying reefs, including by spawning new corals in a lab. You can read his excellent reporting here, along with some wonderful photos of the reefs. Enjoy, and we’ll see you back here tomorrow!