U-turn after Greenland ‘deal’ revives TACO trade talk

Trump’s latest retreat from the trade war has triggered an international asset rally and revived investors’ talk of “TACO” — “Trump Is Always Afraid.”

Speaking to CNBC’s Joe Kernen at the World Economic Forum in Davos, Switzerland, on Wednesday evening, Trump said he was withdrawing tariffs on European allies because he now had a “concept of agreement” on Greenland, after weeks of demanding to annex Greenland on behalf of the United States.

He had threatened to impose 10% tariffs on eight European countries that opposed his effort to “buy” the Arctic island. As of June 1, these rates would increase to 25%.

Europe vows to respond “without fear” to new tariffs and stocks, bonds and US dollar; Tuesday saw a sharp selloff as investors panicked about the possibility of a new trade war.

But Wall Street’s major averages jumped after Trump pulled back on Wednesday, and stock futures pointed to continuation of those gains Thursday morning. This recovery was also reflected in global markets; Stocks listed in Europe and Asia also rose on Thursday as regional markets reopened.

Amid the global upswing, one of the most important fixtures of 2025 investing has stepped into the new year: the “TACO” trade.

The phrase refers to the president’s history of threatening to ease, delay or cancel heavy taxes. It was invented last year after Trump’s “liberation day” tariff announcement in April shocked markets, but when Trump eventually backed down, investors became skeptical about its continuation. Market reactions to subsequent US trade policy announcements have been more muted or recoveries have occurred more quickly.

Russ Mould, investment director at AJ Bell, likened today’s market movements to those seen last year.

“Donald Trump’s TACO bell rang once again, much to the delight of financial markets,” he said in a note published Thursday morning. “Trump is in good form when it comes to evading his threats… There are many similarities with the liberation day market wobble in April 2025 and now.

“In both cases, Trump took an aggressive stance and then backed off when financial markets shook.”

But Mold added that some signs of caution remain, with markets appearing to be regaining balance rather than “shifting into top gear”.

“Gold’s rally paused for breath, but it was notable that there was no major sell-off in the metal,” he said. “This shows that investors are willing to keep some safeties in their portfolios. Healthcare and tobacco stocks were also popular, which is something you’d normally expect on a day of concerns, not a day when markets are recovering.”

Alan Siow, co-head of emerging markets corporate debt at asset management giant Ninety One, told CNBC on Thursday that the TACO mentality was the driver of the risky asset rally seen after “liberation day” and that it still appears to be impacting markets.

“We have no evidence yet that this is changing, but we have seen from the rhetoric of global leaders over the last 2 days in Davos that things are hardening and perhaps changing permanently at the policy level, which will then be reflected in the wider economy through changes in business and investment plans,” he said.

“Even if the reality remains TACO in the near term, perhaps we will now see a permanent change in underlying behavior – but to be fair, given how quickly recent developments are moving, it is too early to tell.”

Paul Surguy, managing director and head of investment management and bidding at London-based asset management firm Kingswood Group, said that while markets have reacted negatively to certain White House policies, those reactions have generally become more muted since liberation day.

“The initial position (announcing the worst-case scenario with the view that a more acceptable agreement will be reached later) is the same thing we saw in the comments on Greenland,” he told CNBC in an email. “Very few details have yet been released regarding the ‘framework’ agreement. However, markets have responded positively with a more conciliatory tone.”

Toni Meadows, chief investment officer at BRI Wealth Management, took a more skeptical tone on the TACO trade, urging investors to wait for details on the Greenland “deal” and Europe’s reaction.

Markets would initially “take back some or all of the declines” before Trump announced a potential Greenland deal, Meadows said.

“There is relief, but this is just one of many areas where the US president is trying to shake the tree to see what he can achieve for America based on his resource imperialism agenda,” he added.

He noted that markets are also monitoring the White House’s domestic policies, such as a proposed proposal. Upper limit on credit card interest.