By Jennifer A. Dlouhy | Bloomberg
President Donald Trump bristled at suggestions that Wall Street believes he’s ultimately unwilling to follow through on extreme tariff threats, saying his repeated retreats are instead part of a strategy to exert trade concessions.
“It’s called negotiation,” Trump said on Wednesday, adding that he intentionally would “set a number at a ridiculous high number” and then “go down a little bit” as part of talks.
Trump was asked during an Oval Office event to respond to reports of a so-called “TACO” trade, in which investors seize on market tumbles after the president makes tariff threats, predicting he will ultimately relent and equities will rebound.
The acronym — which stands for Trump Always Chickens Out — was coined by a Financial Times columnist and has since been adopted by traders attempting to navigate the dozens of changes to tariff policy Trump has announced over the early months of his presidency.
In the most recent case, stocks tumbled Friday after Trump threatened to impose a 50% tariff on European goods beginning June 1, only to rally after he agreed to delay the levies more than a month to allow for negotiations.
Trump’s tariff policy has been marked by frequent retreats and recalibrations. Consider:
— As Trump’s 145% levies on Chinese imports drove fears of soaring costs for consumer goods and threatened a recession, the US president agreed to roll back duties on most of those goods to 30%. The detente announced May 12 — which was matched by a pullback from Beijing — followed talks between the world’s two largest economies and is designed to allow at least 90 days for additional negotiations.
— Trump ignited market turmoil and a pullback from US treasuries in April when he hit dozens of US trading partners with levies as high as 50%. The White House denied a report of a possible reprieve, and the president took to social media, urging investors to “BE COOL!” while calling it A GREAT TIME TO BUY!!” Hours later, Trump announced he was pausing his higher tariffs, resetting them to 10% for 90 days in a bid for talks. In response, stocks staged their best rally since 2008.
— Trump’s March announcement he was slapping a 25% tariff on imported automobiles and auto parts ignited furious lobbying by carmakers who said the levies would cripple the industry and undermine investments made under Trump’s renegotiated North American trade deal. A month later, Trump yielded to that pressure, effectively easing separate metals duties for the auto industry while offering a temporary offset for American-made vehicles.
— Consumers had fretted about higher expected prices for consumer electronics under Trump’s April tariffs, when the administration in a surprise move exempted smartphones, computers and other technology. Administration officials said those tariff exclusions were designed to allow time for the Commerce Department to conduct a separate trade probe targeting semiconductors.
All of those moves followed Trump’s earlier retreats on sweeping Canada and Mexico tariffs, as well as shifting plans to collect levies on low-cost packages.
Trump’s approach — threaten big levies and use the leverage to exact concessions — has sometimes yielded quick success.
For instance, after Trump vowed a 50% tariff on goods from Colombia unless the country accepted deportees, Colombian President Gustavo Petro ultimately backed down, accepting those deportation flights.
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Ports of LA and Long Beach react to 90-day pause on 145% China tariffs Freight shipper says ‘millions’ of businesses in peril from China tariffs Ports of LA, Long Beach, could see cargo dip with new tariffs How tariffs on Canadian energy imports will drive California prices higherYet analysts have warned the tactic offers diminishing returns every time Trump scales back a previous threat, since counterparties are less likely to view them as credible from the start.
On Wednesday in the Oval Office, a reporter’s question about the “TACO” trade elicited a fiery response from Trump, who said he was more often criticized for being too harsh in his executive actions. He labeled the query “nasty.”
“They wouldn’t be over here today negotiating if I didn’t put a 50% tariff on,” Trump said. “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.’ That’s unbelievable.”
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