Donald Trump is back on his tariff kick. After increasing tariffs on South Korea, Japan, Vietnam, and some other Asian nations, he has placed a 50% tariff on Brazil and a 35% tariff on Canada - and raised the tariff on most other nations from 10% to 15% or 20%. The tariffs are set to take effect on August 1st.
Trump is now bragging that his tariff regime has been good for the country. As proof, he said the stock market has remained strong.
He is right about the stock market remaining strong, but wrong about the reason for it. The market knows the tariffs would be bad for the economy - both for businesses and for consumers. That's why the market sank precipitously when Trump originally announced his tariffs a few months ago.
But since then, they have seen Trump impose and back off on tariffs several times. Now they no longer believe he will actually follow through on them. It was a market denizen who came up with the TACO moniker for Trump. It stands for Trump Always Chickens Out. The market believes he will again chicken out and delay the tariffs (perhaps endlessly).
Will he follow through and actually impose the tariffs on August 1st? He might, because he has been fooled by the strong stock market. But if he does, the market will react badly with a huge drop. Then he will react by delaying the tariffs because a bad stock market scares him.
T.A.C.O. is a real thing - and the stock market knows it.
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