'Trump Always Chickens Out': What Is TACO Trade And Why Is It Back?

(MENAFN- Khaleej Times)

Markets had been rattled this week by US President Donald Trump saying he would hammer several nations - including Germany, France, Britain and Denmark - with levies for their pushback against his grab for Greenland, a Danish autonomous territory.

But relief came Wednesday when Trump backed down on threats to seize the Arctic island by force from ally Denmark and retracted his tariff threat

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"That was enough to trigger the so-called TACO trade - 'Trump Always Chickens Out' - and markets responded with one of their strongest rallies in recent months," said Fawad Razaqzada, market analyst at Forex.

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What is TACO?

The term 'Trump Always Chickens Out' originated around May 2025, coined by Wall Street analysts to describe Trump's actions of setting hefty tariffs in April, and then lowering them, often close to the deadline.

The US President did not seem to take kindly to a reporter's question about the phrase in May, calling it a "nasty question". He defended his position on trade, and said such tariff changes "are called negotiations".

Since then, the phrase has been used as a catch-all to describe Trump's stance on several global issues, ranging from Greenland to Iran:

Watch this video where New York Times breaks down the term further:

TACO moment at Davos?

Trump had headed into Davos late, after Air Force One broke down - an inauspicious start to his trip. He flew in amid deep disquiet among US allies over his threats to take Greenland from NATO ally Denmark.

During his speech he launched into an apparently uncompromising restatement of his claims over the "big piece of ice."

But then, Trump suddenly announced that "I won't use force" The former reality TV star knew it would make headlines, adding "that's probably the biggest statement I made, because people thought I would use force."

Hours later there came another shock.

Trump announced on his Truth Social network that he had agreed a "future deal" on the Danish territory and was lifting the threat of sanctions on eight European countries.

"He's taken the off ramp," one stunned Davos delegate said.

From Trump's critics on both sides the critique was even stronger.

"TACO," said California's Democratic Governor Gavin Newsom, accusing him of another TACO ("Trump Always Chickens Out") moment akin to his earlier relaxation of some "Liberation Day" tariffs last April.

A Trump technique?

Or was it simply the "art of the deal," as espoused in Trump's co-written 1987 book describing his technique of making outrageous demands to extract unexpected concessions in business.

None of his fellow leaders at Davos could be sure, and that may have been the point.

But US allies will still have concerns about what to expect next from an unprecedented disruptor of the post-World War II order - and one who rarely forgets a grudge.

"You can say yes, and we will be very appreciative. Or you can say no and we will remember," Trump said about Greenland, in comments the New York Times's conservative commentator Bret Stephens said "could have been written by Mario Puzo", the writer of mafia classic "The Godfather".

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