Markets may soon call US' bluff

Three months after President Donald Trump announced plans to impose sweeping new tariffs on most countries, the US economy appears surprisingly resilient.

- Pinelopi Goldberg

The stock market has rebounded from its initial slump, inflation remains under control and fears of a recession have receded — or at least they had before Mr Trump announced a new 30% tariff on imports from Mexico and the European Union, two of America’s biggest trading partners.

In the months since Mr Trump's initial announcement, several countries have entered negotiations with the United States, offering concessions they had long resisted. Many observers view this as evidence that Mr Trump's aggressive trade tactics are working and that economists may have overestimated the potential costs.

Yet this interpretation overlooks a critical detail: many of the tariffs that Mr Trump announced over the past few months have not been fully implemented. In fact, the administration has repeatedly backed down from its initial threats — a pattern so consistent that it has earned the acronym TACO: “Trump always chickens out.”

Despite its outspoken distrust of experts — particularly economists, scientists and health professionals — the Trump administration has consistently been attuned to financial markets. Since early April, announcements of new or increased duties have repeatedly triggered stock-market declines. In response, the administration has often softened its stance by issuing exemptions, delaying some tariffs and renegotiating others, leading to quick rebounds in equity prices. Announcements of bilateral deals have been met with investor optimism, while renewed threats of escalation have triggered selloffs.