US President Donald Trump’s threat to impose 30% tariffs on two major trading partners has barely made a ripple in financial markets. Despite a weekend of heated rhetoric from Trump and his advisors, Wall Street remained unfazed, focusing instead on the upcoming corporate earnings season and signs of a still-decent economy.
Economists say the market is “TACO mode” – assuming that Trump will back down from his most extreme plans. This sentiment has reinforced Trump’s own confidence in his instincts around the Federal Reserve and US trade policies, even if they would be disastrous for the economy.
The Fed, meanwhile, remains unphased by Trump’s accusations against Chair Jerome Powell, publishing a lengthy FAQ on the renovation of its headquarters over the weekend. Powell’s term expires in May 2026, but markets are now pricing in his continued leadership, with investors saying he is unlikely to be bullied out of office.
The “TACO trade” – a strategy where investors buy into Trump’s plans and then sell when he reverses course – has been profitable for now, but some analysts warn that the market may be overconfident. A record-high stock performance last week, noted by Trump as evidence of his tariffs’ success, may embolden him to double down on his trade policies, which could ultimately harm the economy.
Experts say the markets are sowing seeds for a negative economic reversal if they remain complacent about Trump’s plans.
Source: https://edition.cnn.com/2025/07/15/business/trump-powell-markets-taco