Why Trump's Tariff War Is Being Dubbed the 'TACO' Trade

A United States federal court has delivered a major setback to Donald Trump's economic agenda, ruling that the former president overstepped his authority by imposing sweeping tariffs under emergency powers.
On 28 May 2025, the U.S. Court of International Trade invalidated the so-called 'Liberation Day' tariffs, stating they were not justified by any actual national emergency, and must therefore be withdrawn.

The tariffs, which had targeted hundreds of billions worth of goods from countries including China and Mexico, were a cornerstone of Trump's protectionist policy. But in a landmark legal decision, judges stated that the International Emergency Economic Powers Act (IEEPA) does not grant the president unilateral authority to disrupt global trade. The move immediately sparked celebration among free trade advocates—and sent global stock markets soaring.

Wall Street Coins a Mocking Acronym

Adding salt to the wound was Wall Street's latest nickname for the former president's approach: the 'TACO' trade. Short for 'Trump Always Chickens Out,' the phrase reflects how investors have come to expect dramatic tariff threats from Trump, only for them to be retracted or softened under pressure.

Financial Times columnist Robert Armstrong first popularised the term earlier this month, noting a clear pattern: markets tumble on Trump's rhetoric, and rebound when he backtracks. This cycle, Armstrong argued, has become a lucrative opportunity for short-term traders.

When asked about the term during a press briefing, Trump snapped: 'Don't ever say that word. That's a nasty question.' His reaction only added fuel to the media coverage, with late-night hosts and political analysts seizing on the exchange as evidence of the term's sting.

Legal Limits and Economic Ripples

The court's 94-page ruling outlined how the IEEPA, introduced in 1977, was never intended to authorise trade measures based solely on economic rivalry. The tariffs in question, it argued, were not connected to a clear or immediate threat and thus breached constitutional boundaries.

According to the Peterson Institute for International Economics, the 2020–2023 tariffs had affected over £310 billion ($400 billion) worth of imports, contributing to price increases across sectors from manufacturing to retail.

Markets reacted swiftly. The S&P 500 rose 2.3% following the ruling, while the Nasdaq jumped 270 points. Analysts attributed the gains to renewed investor confidence that trade tensions may ease under clearer legal scrutiny.

'This ruling reintroduces predictability to international trade,' said Lisa Nguyen, a global trade expert at the Brookings Institution. 'It limits erratic policy shifts and reinforces the checks and balances intended by the U.S. Constitution.'

International Repercussions

Beyond Wall Street, the decision is being closely watched in Brussels, Beijing and Ottawa. EU officials had previously hesitated to challenge Trump's measures for fear of escalating tensions. But with the legal framework now clarified, European negotiators may adopt a more assertive position.

In Canada, where several small manufacturers had reported losses due to U.S. steel tariffs, the reaction was cautiously optimistic. 'This could open the door to renegotiating terms with more fairness,' said Michael Dufour, trade adviser to Canada's Department of Foreign Affairs.

Meanwhile, Trump's legal team has vowed to appeal the decision, stating that national security concerns remain valid. But with bipartisan legal scholars supporting the court's stance, many believe the appeal is unlikely to succeed.

Pattern or Political Strategy?

Despite the legal blow and ridicule from financial circles, Trump remains adamant that his tactics were part of a larger negotiation strategy. 'We made billions for America because people knew we were serious,' he said in a recent interview with Fox Business.

Critics disagree. 'The so-called 'TACO' trade isn't just a joke,' said economist Daniel Park of Columbia University. 'It reflects a deeper market cynicism about Trump's consistency on trade.'

As the former president eyes a return to politics, his trade record—and the new nickname—may prove difficult to shake.