TACO effect is causing market failure

Ask AI · How the market adapts to Trump’s TACO model causes the effect to fail

In the U.S. time zone on March 23, an unusually quiet bout of trading was completed.

About $580 million worth of oil futures were sold off in a concentrated manner, with the volume nearly ten times that of the same time period earlier. These trades, as if they were predicting it, wrapped up cleanly right before the coming oil price crash.

15 minutes later, U.S. President Trump posted a message on or before the deadline of his “48-hour ultimatum” sent to Iran.

Trump said he would delay a military strike on Iran.

He reported with “great pleasure” that the U.S. and Iran had held “very good and productive” talks over the past two days, and that he had instructed the Department of War to “delay the military strike by 5 days.”

As soon as the news broke, international oil prices dropped sharply across the board; both Brent crude and WTI crude fell by more than $15 per barrel on the day.

However, it wasn’t long before Iran’s Fars News Agency cited sources as denying that any talks had taken place, saying, “Iran has had no direct or indirect contact with Trump.”

“Trump TACO’d again.” Market analyst Neil Wilson of Saxo Bank laid the facts bare.

What is TACO? It’s not literally a “Mexican tortilla,” and in Wall Street’s context, TACO is an abbreviation for “Trump Always Chickens Out.”

The term was coined in 2025 by Robert Armstrong, a columnist at the Financial Times, to describe a script repeatedly used in Trump’s second term: first threaten with extreme measures; once the market worries and crashes, he then finds an excuse to back down or stop, and the market rebounds accordingly—after running this playbook, Trump can still package himself as a “winner.”

On Wall Street, it has even evolved into a trading strategy. People choose to buy low, then bet that Trump will eventually cave, and then sell high to make a big profit. This is what’s known as the “TACO trade.”

So just how TACO is Trump?

According to statistics from Bloomberg, on tariffs—from Trump’s election win in November 2024 through January 25, 2026—Trump has issued a cumulative total of 49 threats of tariffs or new trade investigations. Only about a quarter of those threats were carried out fully, while more than 70% of the tariff threats ultimately ended up TACOing.

On military action, research by Jeremy Shapiro, research director at the European Council on Foreign Relations, says Trump threatened to use force at least 22 times during his second term, but only 2 times were actually carried out. That means more than 90% of force threats ultimately ended up TACOing as well.

Regarding the U.S.-Iran conflict, TACO has appeared at least 2 times. One was on January 16, when Trump “talked himself into” postponing action against Iran; and one was yesterday, when the 48-hour ultimatum turned into “delayed by 5 days.”

For Trump, TACO may not be an occasional “slip of the hand,” but a stable habit. Behind it, there’s no getting around one thing—money.

Right before Trump announced “delay by 5 days,” this conflict had already caused global bond markets to see a total market value wipeout of more than $2.5 trillion. An insider said Trump’s statement was meant to calm the market and prevent another wave of intense sell-offs when the new week begins.

Because market turmoil would affect the economic interests of a broad group of voters, thereby hitting Trump’s approval rating.

A public opinion survey by Reuters and Ipsos shows that, influenced by the spike in oil prices and widespread public opposition to his plan to launch a war on Iran, Trump’s approval rating has recently fallen to its lowest point since he returned to the White House.

Bloomberg reported that as U.S. gasoline prices rise, Trump’s influence on U.S. consumers’ willingness to buy is also weakening.

“Trump clearly wants to hit back at those who criticize him for using the term TACO,” Bloomberg commented, “but if the whole world has seen through your scheme, none of this could possibly work.”

“Talk tough—market falls; then loosen up—market rises.” The Trump TACO effect is failing.

(“Sanlihe” Studio)