Trump's Tariff Strategy: Market Reacts to Latest Retraction

First, he threatens with powerful tariff increases. Then, he backs down. President Donald Trump's tariff strategy has given a new concept on the market: Taco – ”Trump Always Chickens Out”.

» Published: May 26 2025

Trump's Tariff Strategy: Market Reacts to Latest Retraction
Photo: Mark Schiefelbein

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The trading week begins with strongly rising stock prices on, among others, the Stockholm Stock Exchange, following Sunday's tariff announcement from the USA. Among the winners, companies that took a hit on Friday after the threat of imposing tariffs of 50 percent as of June 1 against the EU stand out. However, Trump changed his mind on Sunday night, and the tariff pause is now in effect until July 9.

This is not the first time Trump's tariff threats have not become a reality. Earlier this spring, there was a retreat from the moves against China, and the tariffs announced on April 2, the so-called "Liberation Day", have not become a reality either.

"Always backs down"

This has given rise to the concept of "Taco", which freely translated stands for "Trump backs down". Lars Söderfjell, chief investment officer at Ålandsbanken, notes that the price drops should actually have been even greater.

On Friday, we were down on the tariffs and now the stock market is taking back more than the decline. You might as well call it a "taco-trade", you count on further retractions, he says to TT.

You almost have to count on a complete retraction to get the numbers together.

Söderfjell notes that he is surprised by the strength of the stock market's recovery.

"Wait and see behavior"

Meanwhile, SEB's chief economist Robert Bergqvist calls it "devastating negotiation tactics for the USA, which also risk lowering companies' demand, as it becomes a "wait and see behavior".

This is based on when I talk to some corporate customers we have. What is devastating is the uncertainty that puts households and companies in a situation where you wait and see. It's something that not only affects Europe but gives a global headache, he says to TT.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers

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