President Donald Trump was visibly upset this week when a reporter asked him about "TACO," an acronym that has gained popularity on Wall Street and suggests that "Trump Always Chickens Out."

The so-called "Taco theory" was coined by Robert Armstrong, a columnist for the Financial Times, to describe a pattern observed by investors and analysts: the president's tendency to backtrack on his policies when they generate volatility in the markets.

Accordin to Armstrong, the U.S. administration does not tolerate market and economic pressure very well, and is quick to backtrack when tariffs cause problems. The analyst named his hypothesis after stocks soared following Trump's announcement to temporarily suspend global tariffs.

The most recent episode fueling the theory was the announcement of 50% tariffs on imports from the European Union starting June 1. However, two days later, the president informed that they would be postponed until July 9, citing an opening to negotiate with Brussels.

It's called negotiating

With a background marked by the real estate sector in the New York of the 1980s, Trump has always kept an eye on the behavior of the stock markets. During his first term, a sharp drop on Wall Street could be one of the few factors capable of making him change course.

Now, with Trump's return to the White House, the "Taco theory" has ceased to be a hallway joke and has become a framework for analysis that has even been cited by figures such as John Hardy, director of macroeconomic strategy at Saxo Bank, who spoke on the subject in a recent podcast.

The concept even reached the president himself, who on Wednesday reacted harshly to a reporter's question.

"We have an end date of July 9. You call that chickening out? (...) I've never heard that (...) Don't say what you said again, it's a nasty question," Trump said, evidently annoyed. Then he added: "It's called negotiation."

For Steve Sosnick, strategist at Interactive Brokers, this theory does not necessarily seek to discredit the president: it is an apolitical way for the market to show how the administration responds to pressure.

Contained reactions

Unlike the first term, this time the markets seem to have adopted a more skeptical stance. In the early months of 2025, Wall Street reacted less nervously to the president's new tariff announcements.

According to Sam Burns of Mill Street Research, traders perceive the threats as easily reversible or unreliable, which has reduced the magnitude of reactions. An example of this was the tepid response to the tariffs aimed at the European Union and also to the judicial back-and-forth over their implementation.

However, Hardy warns against trivializing the substance of the strategy. Although Trump may "flinch" at times, the structural changes he is promoting are profound.

"Trump might 'chicken out' at times," Hardy wrote; nevertheless, for him, the underlying policy moves are real and represent a very serious shift in U.S. economic and industrial policy.

With information from AFP