The persistent 'TACO' mentality reflects a strategic market adaptation to Trump's tariff threats, illustrating how investors have grown conditioned to see these as tactical rather than catastrophic. The resilience of US and European markets, despite escalating threats, indicates a possible normalization or complacency that could be risky if negotiations break down. Politically, this demonstrates Trump's leverage in trade negotiations, with markets signaling that economic fears are waning, potentially emboldening his stance.
However, this could also lead to a false sense of security among policymakers, risking a sudden correction if tariffs are actually implemented. The calm in the face of escalating threats underscores a shift in market psychology, where traders view tariffs as part of the political chess game rather than an immediate economic threat. This evolving dynamic impacts both domestic and international diplomacy, highlighting the delicate balance of leverage and restraint in transatlantic trade negotiations. Read the full story at the source.
