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Tariffs

Trump's Tariff Threats Spark Market Volatility

Strategic Insights

— 1 min read

Investors and analysts have taken to adopting a tongue-in-cheek term, the "TACO" trade, to describe the pattern of stock market fluctuations caused by President Trump's tariff threats. The term, coined by a Financial Times columnist, refers to Trump Always Chickens Out, highlighting the frequent retreats from threatened tariffs. On Tuesday, the S&P 500 index posted its biggest gain in weeks, rising more than 2 percent, after President Trump delayed a proposed 50 percent tariff on the European Union.

Key Takeaways:

  • The "TACO" trade has become a common term among analysts and commentators to describe the pattern of stock market fluctuations caused by President Trump's tariff threats.
  • The S&P 500 index rose more than 2 percent on Tuesday, its biggest gain in weeks, after President Trump delayed a proposed 50 percent tariff on the European Union.
  • Analysts predict that President Trump will not follow through with threatened tariffs, citing the potential damage they could cause to the US economy.
  • The delayed tariff on the European Union was part of a broader announcement of tariffs on goods from virtually every US trading partner.
  • The tariffs announced by President Trump are significantly higher and broader than anything tried in more than 90 years.
  • Despite the market rally on Tuesday, many blanket tariffs remain in place, and the S&P 500 index is around 4 percent below its record high.

Statistics:

  • The S&P 500 index rose 2.1% on Tuesday, its biggest gain in weeks.
  • The proposed 50 percent tariff on the European Union was delayed to July.
  • The number of days between President Trump's initial barrage of tariffs in early April and the current market rally is approximately 30 days.
  • The S&P 500 index is around 4% below its record high, set in February.
  • The quarter-century-old trading relationships with the US have been included in the blanket tarifls.

Sources:

  • Financial Times columnist
  • Salomon Fiedler, Berenberg, a German bank
  • Paul Donovan, UBS Wealth Management
  • Chris Beauchamp, IG Group
  • CAPTION(S): This article appeared in print on page B3

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