Tick-tock on the taco trade blowback | Forexlive

Are we in the clear?

I’ve always maintained there was a Trump put but it’s been a tough position to hold this year. A big test came last week when a reporter asked Trump about the TACO trade or: Trump Always Chickens Out.

That talk and the question set him off.

“And you ask a nasty question like that? It’s called negotiation,” he
continued. “Don’t ever say what you said. That’s a nasty question. To
me, that’s the nastiest question. … “I have great respect for the people at the European Union. They
wouldn’t be over here today negotiating if I didn’t put a 50% tariff on.
The sad thing is, now when I make a deal with them, it’s something much
more reasonable. They’ll say, ‘Oh, he was chicken. He was chicken,'”
Trump said. “I usually have the opposite problem. They say, ‘You’re too
tough.'”

The fear was that he would lose his temper and escalate in the trade war. That appeared to be well-founded when he wrote this on Truth Social:

“The bad news is that China, perhaps not surprisingly to some, HAS
TOTALLY VIOLATED ITS AGREEMENT WITH US,” Trump posted on social media.
“So much for being Mr NICE GUY!”

The thing is, he hasn’t done anything. Jamieson Greer indicated the issue was around rare earth exports but China quickly hit back with its own quibbles. For now, it appears that Trump is actually being Mr Nice Guy as he waits for a phone call with Xi and diplomats try to arrange it.

Of course it could all blow up at any point but as time goes on, the probability of Trump escalating is dwindling. He might have thicker skin than we thought.

Moreover, I also thought it was notable that he called out his own China tariffs in his response.

If I set a number at ‘a ridiculous high number’ and go do a little bit…a 145% tariff, even I said ‘man that really got up’. I said ‘where are we now’ and they said ‘145%’ I said ‘whoa, that’s high, that’s high’. We’re doing no business whatsoever.

He said they ‘were going cold turkey’ and that he knew that. It all speaks to more of a strategy than someone who wants a fight. It was very revealing and ultimately, I think the takeaway is that the sentiment of the TACO term is right. It’s crass but he’s a guy who ‘escalates to de-escalate’ and that’s a more-nuanced way of framing it.