This week, President Donald Trump announced that he was considering a 50% tariff on goods from the European Union. Just days later, he reversed himself, announcing that any such tariffs would be delayed until July 9.
Traders rejoiced, with the S&P 500 spiking dramatically. The market’s leap at Trump’s flip-flop was not unusual; in fact, it’s become a common feature of the financial landscape. As one Financial Times columnist has flippantly suggested, traders are making bank by betting on the “TACO” trade—Trump Always Chickens Out.
The notion is that, like Liberation Day tariffs and threatened tariffs on China and now threatened tariffs on the European Union, Trump enjoys launching shots across the bow of his geopolitical opponents, but then quickly backs off once the prospective damage becomes clear.
Now, the buried lede in this arrangement is obvious: The…
