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Home Business & Finance Economic Policies

Economist details the real danger behind Trump’s ‘chicken taco trading’ todayheadline

May 31, 2025
in Economic Policies
Reading Time: 4 mins read
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Calling someone “chicken” might sound like a playground insult, but it’s exactly the label some financial investors have begun attaching to US president Donald Trump. The “Taco” trade, short for “Trump Always Chickens Out”, has gained traction in financial circles in recent weeks, as investors come to believe that whenever markets begin to slide as a result of one of his policy decisions, Trump tends to retreat.

The jibe appears to have struck a nerve. When a reporter asked him about the “chicken” reputation this week, Trump bristled. “Oh isn’t that nice – I chicken out. I’ve never heard that,” he snapped. The president returned to the topic later to criticise the “nasty” question and insisted that he was no such thing.

Policy reversals have been a hallmark of both Trump’s first and second terms. During the 2018-19 trade wars, he frequently threatened sweeping tariffs only to water them down in subsequent rounds of negotiation.

A similar pattern has emerged this year. In early April, Trump’s “liberation day” announcement triggered a sharp sell-off, with the S&P 500 falling more than 12% over the following week.

However, as market volatility surged, the administration softened its positioned and opted to delay the tariffs for 90 days. As the tariff plans were softened, markets rebounded. The index is now 4% higher than it was before the announcement and up 0.7% year-to-date.

To the president’s supporters, these policy U-turns reflect his shrewd negotiating tactics designed to extract concessions or cajole reluctant governments into striking trade deals. But to many investors, the pattern looks less like strategy and more like retreat. And while the Taco nickname might sound like a playground insult, for financial investors the jibe has a real impact on navigating financial markets.

Credibility is currency

When investors call a politician or policymaker a “chicken”, it’s not just a jab at their courage. It’s a much more serious insult that calls into question their credibility. And in financial markets, that’s one of the most valuable assets a leader can have.

As a policymaker or politician, communicating successfully with markets depends on trust. Investors allocate capital based on expectations about the future – inflation, trade flows, interest rates, fiscal spending – and those expectations are influenced not only by what policymakers do, but by what they say.

If a leader regularly threatens sweeping economic action but repeatedly backs down at the first sign of trouble, their credibility begins to erode.

Once that doubt takes hold, it changes the dynamic. Investors begin to ignore warnings as threats are brushed off and policymakers’ influence loses its force.

The erosion of a leader’s credibility among investors is likely initially to dampen market volatility as investors begin to ignore the words of politicians and policymakers. They assume that the status quo will remain in place as a leader is unwilling or unable to instigate the changes they had initially proposed, leading to little change in financial markets. This weakens a leader’s ability to steer market expectations and, by extension, the broader economy.

However, the Taco mindset could be dangerous if it takes hold in markets. Once investors start to assume that Trump will always blink, they build their portfolios around that expectation. Talk of sweeping economic changes or significant increases in tariffs begin to be ignored as investors lean into risky positions in the belief that escalation will be avoided at the last minute. This can create a false sense of calm that holds only as long as Trump plays to type.

But the “chicken” jibe has clearly angered the president. He may well be looking for an opportunity to change investors’ minds. If Trump decides to hold the line by pushing through tariffs without compromise even in the face of legal action, or let a standoff over the US debt ceiling run hot, this could catch complacent investors off-guard.

The resulting repricing is likely to be sharp and disorderly. Volatility could spike, not because Trump changed, but because investors assumed he never would and then overreact when he does. In that sense, the real risk of the Taco mindset isn’t that it insults Trump – it’s that it provokes a stubborn response. A president who digs his heels in and ploughs ahead with risky policies despite all the warning signs would be bad news for the whole world – and the global economy.

Alex Dryden, PhD Student in Economics, Department of Economics, SOAS, University of London

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Tags: ChickendangerdetailseconomistrealTacotodayheadlinetradingTrumps
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