JPMorgan has built a new Wall Street tool that bets on President Donald Trump backing down. The bank calls it the "TACO" trade — short for "Trump Always Chickens Out" — and it's designed to predict when the president will retreat from his own tariff threats.
The index tracks market moves tied to Trump's tariff announcements, according to MarketWatch. When the president threatens steep tariffs and markets sell off, the TACO gauge signals that a reversal is likely. Investors who follow it have been right more often than not.
The phrase gained traction after Trump announced sweeping "reciprocal" tariffs in April, then paused most of them within days as stocks plunged. He did it again in late May, threatening a 50% tariff on European Union goods before backing off to a later deadline.
Each retreat followed the same pattern: a sharp market drop, pressure from business groups and Republican lawmakers, then a delay or exemption. JPMorgan's index quantifies that cycle.
"The market has learned to fade Trump's tariff threats," one strategist told MarketWatch, describing the TACO trade as a bet that the president blinks first.
The index matters because Trump's tariff decisions have moved trillions in market value this year. The S&P 500 swung more than 10% in a single week in April after the initial tariff announcement. Bond yields spiked. The dollar weakened.
For investors, the TACO signal offers a way to trade the pattern instead of reacting to headlines. For the White House, it's an uncomfortable label — one that suggests the president's threats are bargaining chips, not settled policy.
Trump has pushed back on the idea that he folds under pressure. "I don't chicken out," he said at a press conference in May. "I make deals."
But the market data tells a different story. Of the major tariff threats Trump has issued since January, most were either delayed, narrowed or dropped entirely after financial markets reacted badly, according to an analysis cited by MarketWatch.
The TACO index now sits at a level that suggests another retreat is coming. JPMorgan's model points to a deal — likely with the European Union or China — within weeks if stocks keep falling.
That's the bet Wall Street is making. Not on Trump holding the line, but on him finding a way out.
The index is not a formal JPMorgan product available to retail investors. It's an internal gauge the bank uses to advise clients, MarketWatch reported. But its existence says something about how the financial world views the president's negotiating style.
Trump has used tariffs as leverage since his first term. In 2018 and 2019, he threatened Mexico with tariffs over immigration, then called them off after Mexico agreed to enforcement measures. He did the same with China before signing a phase-one trade deal in January 2020.
The pattern repeated this year, and JPMorgan's TACO index is the first attempt by a major bank to measure it in real time.
