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Trump Always Chickens Out

A month ago, I wrote about the leading indicators – the early economic warnings - associated with Trump’s tariffs – the taxes he is unilaterally imposing on goods coming from other countries that American businesses and consumers pay. It turns out these taxes are having an outsized effect on small businesses. [1]

Small businesses, which make up 98% of retailers and support more than 13 million U.S. jobs, are bearing the brunt of Trump’s tariffs, according to the National Retail Federation (NRF). In their case, the unintended fallout in the broader trade dispute has been the “American Dream.”
The tariffs, aimed at China and our closest trading partners, are forcing small businesses to absorb increased expenses of imported materials or pass them along to consumers like you. For small independent vendors on sites like Etsy, a global online marketplace, the Trump administration’s latest tariff policy could make matters worse.

It’s especially hard on small businesses that add value through their ingenuity and creativity, making a living and creating jobs from the value they provide to their customers. These businesses can’t find the supplies at low enough prices for customers to pay for their creations. And customers benefit by letting their money go further for valuable items, created by Americans.

Yet, the administration wants us all to pay more, just because there is an element of value coming from other countries. Americans are better innovators and live better lives when we are connected to the rest of the world, not by closing ourselves off from it. Here’s an example from a young entrepreneur, selling her artistic creations through Etsy: [2]

For many business owners on Etsy, which is best known for handmade products, tariffs have impacted the cost of their supplies and profits. At the same time, some have already noticed a dip in sales as customers react to price hikes.
“I’m dropping off Etsy packages and I’m feeling so bummed. I just feel like my Etsy shop is going to die, my Etsy shop is dead,” Emmalyn Perez said in a TikTok post. [3] “I have to import some things. What am I going to do? I can’t afford those anymore.”
Perez, who owns BewitchedStitchery, sells custom needle minders and cross-stitch patterns on Etsy. The custom needle minders sold in the shop are produced in China, Perez explains, because the machines used to produce them are illegal in the U.S.

Given these leading indicators, decisions can be made to avoid the negative consequences, such as reversing the tariffs. When the consequences seem dire and more imminent (and it’s clear that one might be blamed for the negative outcomes), the administration has backed off.

For those trying to make their living building real businesses, this back-and-forth whiplash can be highly disruptive; Main Street suffers. However, Wall Street has many ways to make money, regardless of whether the markets go up or down. Stephanie Ruhle, host of “The 11th Hour with Stephanie Ruhle” on MSNBC described what her financial market experience has told her and about the patterns observant traders take from these actions: [4]

Consumer sentiment can also track those patterns. When people feel like tariffs are coming, they worry, and when they think Trump won’t go for it, they’re happy. For investors and market makers, they can trade around these announcements. But for businesses, this kind of approach is paralyzing at best.
But here’s what’s interesting: Those close to Trump’s team have told me that the president doesn’t actually mind the market reaction to his tariff whiplash. In fact, he reportedly enjoys the power and influence he has over global markets.

This brings us to the TACO trade.

Robert Armstrong is the Financial Times’s US financial commentator and writes the Unhedged newsletter. In his May 2 opinion piece, he coined the Taco theory this way: [5]

Regular readers will not be surprised by Unhedged’s view that the recent rally has a lot to do with markets realising that the US administration does not have a very high tolerance for market and economic pressure, and will be quick to back off when tariffs cause pain. This is the Taco theory: Trump Always Chickens Out.

While Armstrong coined the term a month ago, President Trump was finally asked about it this week by CNBC’s Megan Cassella where he first learned of the term [6] – here’s the video on how Trump responded, calling it a “nasty question”: [7]

In an Unhedged podcast episode after Trump’s “nasty question” response, Armstrong spoke about the TACO theory: [8][9]

Armstrong: One version of the TACO trade thesis is just “Trump says crazy thing; market go down. Two days later, Trump takes it back; market go up.” And this has been 100% true, by the way. And it may not work now – maybe this idea of the boy who cried wolf situation becomes, now, market will respond less. But, you know, the market doesn’t seem to be in on the gag – at least, until this point, which is weird, which is the reason we kind of coined the term in the first place.
Katie Martin, Financial Times Markets Columnist: That’s sort of the point I was making around: Will the TACO trade eat itself?
Armstrong: Is the TACO trade over now?
Martin: Let’s say it is.
Armstrong: So, I sort of hope so, but I don’t know. I think if the stock market didn’t learn the first four times, like on the fifth time, is it really going to act differently? Yeah, I’d expect so.

Cassella’s question didn’t come out of the blue, as the actions and reactions of Trump have been reasonably predictable, enough so such that market watchers were willing to place winning bets on the strategy.

NBC News documented the ten times (so far) “Trump has threatened, then backtracked on, tariffs since he took office”: [10]

E.U tariffs
Wine tariff
Canada and Mexico tariffs
Tariff on films
Reciprocal tariffs
China tariffs
Tariff on iPhones
Colombia tariff
Tariff on dolls
Auto tariffs

MSNBC’s Nicolle Wallace interviews Financial Times’s Robert Armstrong on *Deadline: White House* [12]

Of course, now that everyone knows about it, and Trump sees that he’s being called a chicken in public, he may change his behavior by keeping the tariffs on and tanking the economy – just for spite. [11] In an interview with Armstrong on Nicolle Wallace’s Deadline: White House, Wallace and Armstrong discuss the after-effects and the potential to place blame elsewhere: [12]

Wallace: Robert, I guess I would push back on the premise that anyone humiliated Donald Trump other than Donald Trump. I mean, the truth of the number of times that he blinked is a data point that exists in public. No investigative journalist dug up the number of times Trump balked because of the poor reception to his tariffs. And they were announced, they were paused, they were raised, they were dropped, they were put back in, they were pulled off. 100 deals in 100 days, there were none. Now there’s a framework for one with the UK and the beginning of talks in Switzerland with China; no framework, no deal. And I’m no economist, but I can read a newspaper. So, no one’s humiliating Donald Trump except Donald Trump.
Armstrong: Look, the reason why the Taco trade joke, which is kind of a dumb joke, stuck is because it has this huge element of truth in it. And yes, a lot of times in the last, you know, 12 or 18 hours since that conversation in the White House, people have either written me or mentioned me on social media saying: “This guy’s dumb joke is going to cause a recession.” And I don’t like that at all – I meant to make a joke, not cause a recession. But there is a serious question here about, as Charlotte and Charlie have just argued so well, there’s a serious question about a world in which you’re not allowed to make fun of the President. He’s the President; I am an inky-fingered hack making a dumb joke. I’m the one who’s supposed to behave carefully around the President of the United States? How did we get here? I mean, this situation – bizarre doesn’t even begin to cover it as far as I’m concerned.
Wallace: Robert, I would argue if we enter into a recession, it will have nothing to do with you. It will be done by policies that tip us toward a recession. The study of fiction around dysfunctional families – it’s the same story all the time – an otherwise normal body bends and collapses around the mentally ill or addicted or most sick member of the family. A country is the same: we had the Republican party collapse onto itself around the dysfunctional leader and then you had the sort of partisan actors collapse and now you’re seeing Trump collapse the economy around his dysfunction.
Armstrong: It’s not altogether unlike the inner circle of Biden collapsing around him. He was frail. He was really unqualified to be President. They knew it, and they collapsed around him and that was no good. And similarly treating the current President with kid gloves by his advisers or by the press or by anybody else is a bad idea. It was a bad idea with a Democrat; it’s a bad idea with a Republican. We shouldn’t do it.
Wallace: I guess the only difference is Joe Biden would never tank the global economy if he found out that someone had made a joke about him. What you’re all saying to me here on live TV is Trump would.
Armstrong: Joe has a sense of humor, and Trump does not.

Courts may be declaring the TACO Trade dead anyway

This week, the courts weighed in on whether President Trump even has the authority to impose these tariffs. On Wednesday, the Court of International Trade ruled that he doesn’t: [13]

A U.S. trade court blocked most of President Donald Trump's tariffs in a sweeping ruling on Wednesday that found the president overstepped his authority by imposing across-the-board duties on imports from U.S. trading partners.
The Court of International Trade said the U.S. Constitution gives Congress exclusive authority to regulate commerce with other countries that is not overridden by the president's emergency powers to safeguard the U.S. economy.

In striking down the Trump tariffs, the Court unanimously ruled that: [14]

The Constitution assigns Congress the exclusive powers to “lay and collect Taxes, Duties, Imposts and Excises,” and to “regulate Commerce with foreign Nations.” U.S. Const. art. I, § 8, cls. 1, 3. The question in the two cases before the court is whether the International Emergency Economic Powers Act of 1977 (“IEEPA”) delegates these powers to the President in the form of authority to impose unlimited tariffs on goods from nearly every country in the world. The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.

The cases related to tariffs encompassed by four executive orders where the Court ruled that the President overstepped his authority to impose taxes, a power explicitly provided to Congress: [15]

Underlying the issues in this case is the notion that “the powers properly belonging to one of the departments ought not to be directly and completely administered by either of the other departments.” Federalist No. 48 (James Madison). Because of the Constitution’s express allocation of the tariff power to Congress, see U.S. Const. art. I, § 8, cl. 1, we do not read IEEPA to delegate an unbounded tariff authority to the President. We instead read IEEPA’s provisions to impose meaningful limits on any such authority it confers.

Here’s the order, declaring that: [16]

Executive Order 14193, Imposing Duties To Address the Flow of Illicit Drugs Across Our Northern Border, 90 Fed. Reg. 9113 (Feb. 1, 2025); Executive Order 14194, Imposing Duties To Address the Situation at Our Southern Border, 90 Fed. Reg. 9117 (Feb. 1, 2025); Executive Order 14195, Imposing Duties To Address the Synthetic Opioid Supply Chain in the People’s Republic of China, 90 Fed. Reg. 9121 (Feb. 1, 2025); Executive Order 14257, Regulating Imports with a Reciprocal Tariff to Rectify Trade Practices that Contribute to Large and Persistent Annual United States Goods Trade Deficits, 90 Fed. Reg. 15041 (Apr. 2, 2025) (collectively, the “Challenged Tariff Orders”); and all modifications and amendments thereto; be, and hereby are, declared to be invalid as contrary to law.

The Court’s ruling has been appealed, and the Court of International Trade’s permanent injunction has been stayed “until further notice while this court considers the motions papers.” Briefings and replies are due by June 9,” so the tariffs remain in effect under “an immediate administrative stay.” [17][18]

A Little History

Marking the Semiquincentennial of American Independence 250 years ago

June 10 1775 - John Adams proposes to form a Continental Army

From History.com: [19]

On June 10, 1775, John Adams proposes to Congress, meeting in Philadelphia, that the men laying siege to Boston should be considered a Continental Army led by a general.

The men who had armed themselves and rushed to surround British forces in Boston following the Battle of Lexington and Concord were overwhelmingly from New England. However, John Adams, representing Massachusetts, realized that the military effort would only succeed if the British thought the colonies were united. To this end, Adams suggested the appointment of a Virginian, George Washington, to command the Continental forces, despite the fact that New Englanders were used to fighting in local militias under officers elected from among their own ranks.

Narratives

The book I’m reading or movie I’m watching

“Rickey: The Life and Legend of an American Original” - by Howard Bryant

Howard Bryant is the author of numerous titles including The Last Hero: A Life of Henry Aaron. Bryant is a senior writer for ESPN and the sports correspondent for NPR’s Weekend Edition. He is a three-time nominee for the National Magazine Award for Commentary and a two-time Casey Award winner for best baseball book of the year.

From the book jacket: [34]

Few names in the history of baseball evoke the excellence and dynamism that Rickey Henderson’s does. He holds the record for the most stolen bases in a single game, and he’s scored more runs than any player ever. “If you cut Rickey Henderson in half, you’d have two Hall of Famers,” the baseball historian Bill James once said.
But perhaps even more than his prowess on the field, Rickey Henderson’s is a story of Oakland, California, the town that gave rise to so many legendary athletes like him. And it’s a story of a sea change in sports, when athletes gained celebrity status and Black players finally earned equitable salaries. Henderson embraced this shift with his trademark style, playing for nine different teams throughout his decades-long career and sculpting a brash, larger-than-life persona that stole the nation’s heart. Now, in the hands of critically acclaimed sportswriter and culture critic Howard Bryant, one of baseball’s greatest and most original stars finally gets his due.

Rickey Henderson played for nine Major League teams including the Yankees, the Red Sox, the Dodgers, and, most notably, four stints with the Oakland A’s. He won two World Series titles with the Yankees and the Toronto Blue Jays, and was the American League Most Valuable Player in 1990.

In 1982, he broke Lou Brock’s single-season stolen base record by stealing 130 bases, a record that still stands today.

In 1991, he broke Lou Brock’s all-time stolen base record with his 939th stolen base.

He holds Major League Baseball records for:

1,406 career stolen bases
2,295 career runs
130 stolen bases, single season

Henderson was a first ballot Hall of Famer, inducted in 2009 with 94.8% voting for his induction. Henderson passed away late last year.

Fun fact: On August 22, 1989, he became Nolan Ryan’s 5,000th strikeout victim, but Henderson took an odd delight in the occurrence, saying, "If you haven't been struck out by Nolan Ryan, you're nobody." [21]

GIF Game

Snoop Dogg in *Martha and Snoop’s Potluck Dinner Party* on VH1

Notes and Sources

[1] Gabriella Cruz-Martínez, “‘My Etsy Shop is Dead’: Vendors Cry for Help Amid Trump’s Tariffs,” Kiplinger, May 2025, https://www.kiplinger.com/taxes/my-etsy-shop-is-dead-vendors-cry-for-help-amid-trump-tariffs

[2] Ibid.

[3] Emmalyn Perez [/@emmalogue.mp4], TikTok, April 8, 2025, https://www.tiktok.com/@emmalogue.mp4/video/7491044130932509982

[4] Stephanie Ruhle, “'Trump always chickens out': U.S. delays E.U. tariffs, reinforcing 'TACO' trade theory,” MSNBC, May 28, 2025, https://www.msnbc.com/top-stories/latest/trump-taco-trade-tariff-european-union-whiplash-rcna209446

[5] Robert Armstrong and Aiden Reiter, “The US market’s surprise comeback,” Financial Times, May 2, 2025, https://www.ft.com/content/e81ae481-fbb6-47e7-bd6b-c7d76ca5ab69 (archive link: https://archive.ph/fwrdN)

[6] Catherine Zhu, “How a financial columnist coined 'TACO' to describe Trump's tariffs flip-flops,” CBC Radio, May 29, 2025, https://www.cbc.ca/radio/asithappens/how-a-financial-columnist-coined-taco-to-describe-trump-s-tariffs-flip-flops-1.7547492

[7] Lindsay Kornick, “Trump blasts 'nasty' question from Oval Office reporter on whether he always 'chickens out' on tariffs,” Fox News, May 29, 2025, https://www.foxnews.com/media/trump-blasts-nasty-question-from-oval-office-reporter-whether-he-always-chickens-out-tariffs

[8] “Transcript: The nasty Taco question,” Financial Times, May 29, 2025, https://www.ft.com/content/2d20f954-86cf-4ef9-8e3e-7a98467cf192

[9] Financial Times [@financialtimes], TikTok, May 29, 2025, https://www.tiktok.com/@financialtimes/video/7509979661405916418

[10] Shannon Pettypiece, “10 times Trump has threatened, then backtracked on, tariffs as 'TACO trade' jab gains traction,” NBC News, May 29, 2025, https://www.nbcnews.com/politics/trump-administration/10-trump-threatened-backtracked-tariffs-wall-street-embraces-taco-trad-rcna209450

[11] Carl Gibson, “‘Serious question’: Creator of viral Trump nickname fears he may tank economy out of spite,” AlterNet, May 29, 2025, https://www.alternet.org/trump-nickname-tank-economy/# (video at https://www.youtube.com/watch?v=CR5c1I7tDEg)

[12] “‘No one is humiliating Donald Trump except for Donald Trump’: Nicolle on Wall Street mocking Trump,” Deadline: White House, MSNBC, May 29, 2025, https://www.msnbc.com/deadline-white-house

[13] Dietrich Knauth and Daniel Wiessner, “US court blocks most Trump tariffs, says president exceeded his authority,” Reuters, May 28, 2025, https://www.reuters.com/world/us/us-court-blocks-trumps-liberation-day-tariffs-2025-05-28/

[14] V.O.S. Selections, Inc. v. Donald J. Trump, 1:25-cv-00066, (Ct. Intl. Trade), Document 55, May 28, 2025, https://storage.courtlistener.com/recap/gov.uscourts.cit.17080/gov.uscourts.cit.17080.55.0.pdf

[15] Ibid.

[16] V.O.S. Selections, Inc. v. Donald J. Trump, 1:25-cv-00066, (Ct. Intl. Trade), Document 56, May 28, 2025, https://storage.courtlistener.com/recap/gov.uscourts.cit.17080/gov.uscourts.cit.17080.56.0.pdf

[17] V.O.S. Selections, Inc. v. Trump, 25-1812, (Fed. Cir.), Document, 7, May 29, 2025, https://www.cafc.uscourts.gov/opinions-orders/25-1812.ORDER.5-29-2025_2522636.pdf

[18] Josh Gerstein, Daniel Desrochers, Ari Hawkins and Kyle Cheney, “Federal court temporarily reinstates Trump’s tariffs on dozens of countries,” Politico, May 29, 2025, https://www.politico.com/news/2025/05/29/federal-judge-temporarily-reinstates-trumps-tariffs-on-dozens-of-countries-00375001

[19] “John Adams proposes a Continental Army,” History.com, November 13, 2009, retrieved May 31, 2025, https://www.history.com/this-day-in-history/june-10/john-adams-proposes-a-continental-army

[20] Howard Bryant, Rickey: The Life and Legend of an American Original, Mariner Books, 2022, https://www.amazon.com/Rickey-Life-Legend-American-Original/dp/0358047315

[21] Michael A. Lutz, "Nolan Ryan Speeds Into Hall of Fame," Associated Press, July 17, 1999.

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