Markets Slide as Trump Tariff Threats Rekindle Fears: Will the TACO Trade Hold Again?

Hadisur Rahman, JadeTimes Staff

H. Rahman is a Jadetimes news reporter covering Business

---

Photo Credit: Carlos Barria/REUTERS

Wall Street stumbled Monday as investors reacted sharply to renewed tariff threats from former President Donald Trump, reigniting fears of a global trade war just as markets had begun to stabilize. The Dow Jones Industrial Average dropped 0.94%, shedding more than 400 points, while the S&P 500 and Nasdaq both slipped 0.79%. High-profile stocks such as Apple (-1.65%), Tesla (-5.26%), and Microsoft (-0.19%) bore the brunt of the selloff.

The volatility follows Trump’s announcement of 25% tariffs on imports from Japan and South Korea, set to begin August 1, with possible additional duties targeting other trading partners. The move caught markets off guard, given recent progress on trade negotiations with China and other global allies.

Amid the renewed tension, investors are once again leaning on what’s become known as the “TACO trade” — short for “Trump Always Chickens Out.” The term, coined by Financial Times columnist Robert Armstrong, reflects a market belief that Trump frequently walks back harsh policy threats once economic or political pressure mounts.

Historically, markets have rebounded strongly when Trump has pivoted away from aggressive stances. One key example came in April 2025, when Trump backed off from firing Federal Reserve Chair Jerome Powell, sparking a week-long rally dubbed “Liberation Day.”

Investors Betting on a Walkback

“The TACO trade is back in full swing,” said Tom Essaye, founder of Sevens Report Research, which advises clients at major firms including JPMorgan and UBS. “The market is reacting to the announcement now, but most believe Trump will eventually moderate his stance — either due to economic pushback or political calculation.”

While Monday's dip was notable, it was mild compared to the sharp selloffs seen earlier in the year. Analysts believe that investor sentiment is shifting, with a growing belief that headline risk from tariffs is temporary, not structural.

“Even if tariffs go into effect,” Essaye added, “most investors don’t expect them to last. There’s a growing sense that the administration won’t allow anything that would genuinely derail the economy even if the rhetoric suggests otherwise.”

Tech and Auto Stocks Take the Hit

Major technology and auto stocks bore the brunt of the losses. Apple, heavily reliant on global supply chains, fell 1.65%, while Tesla plunged more than 5% amid fears of retaliatory tariffs and rising production costs. Semiconductor leader Nvidia dipped just 0.01%, holding steady, while Meta and Amazon bucked the trend, rising 0.80% and 0.58%, respectively.

The broader drop was a reminder of how interconnected global trade and stock performance remain, even in a market increasingly focused on AI-driven growth and earnings optimism.

Short-Term Jitters, Long-Term Uncertainty

Despite the day’s losses, some analysts downplayed the impact of the tariff announcement on long-term market direction.

“Investors are becoming desensitized to trade war headlines,” said Sarah Lindstrom, an equity strategist at BNY Mellon. “We’ve seen this movie before. Unless there’s concrete action, the selloff could be short-lived especially with earnings season approaching.”

Still, business leaders and economists warn of deeper risks. Beyond investor reactions, ongoing trade uncertainty complicates planning and capital investment decisions for companies reliant on international supply chains.

“There’s a difference between how investors and business owners respond to uncertainty,” Essaye noted. “While markets might price in a short-term rebound, manufacturers and retailers are still left guessing and that can have real economic consequences over time.”

With tariffs scheduled to begin August 1, all eyes are now on Trump’s next move. Will he double down, or follow his familiar pattern of softening the blow before economic pain sets in? Markets, for now, are placing their bets on the latter.