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Thanks to Donald Trump and my FT colleague, Robert Armstrong, many of the world’s investors are now talking about the “Taco trade”.
It was Robert who coined the phrase “Trump always chickens out” (Taco). The pattern is that the US president will promise to impose massive tariffs on a chosen target. But he will then later cut or delay the tariffs, often in response to an adverse reaction from the markets.
So far this has happened with Canada and Mexico, then with the “reciprocal tariffs” imposed on most of humanity (and some penguins), then with the 145 per cent rate on China. A threat to raise tariffs on the EU to 50 per cent lasted all of a weekend. Hence — Taco.
The Taco phrase was drawn to Trump’s attention in a press conference last week. He was not amused and called it a “nasty question”.
All the nastier, perhaps, for being accurate. In fact, “Taco” is not just a useful heuristic for investors. It also turns out to be a key to analysing Trump’s foreign policy.
As Jeremy Shapiro of the European Council on Foreign Relations points out in a recent paper, Trump enjoys issuing blood-curdling threats of the use of force. But he very rarely follows through.
In his first term in office, Trump famously threatened North Korea with “fire and fury” and also mused about the possibility of wiping Afghanistan “off the face of the earth” within 10 days.
And what happened? He entered into negotiations with North Korea about its nuclear programme. When the talks ultimately failed, they were followed not with fire and fury, but with amnesia. North Korea has accelerated its nuclear weapons programme over the past five years. Trump seems to have forgotten about the problem.
When it came to Afghanistan, Trump ultimately agreed to pull US troops out of the country without securing any real concessions from the Taliban — setting the stage for the fall of Kabul during the Biden administration.
The most striking use of force in Trump’s first term was the killing of Qassem Soleimani, the head of Iran’s Quds force, in January 2020. But Trump authorised that drone strike only after receiving reassurances that the risk of Iranian retaliation was low.
Looking at Trump’s two periods in office, Shapiro finds 22 occasions so far in which he has threatened the use of force — but only two in which he has actually followed through. There have been 25 actual uses of force — mainly limited strikes against terrorist groups such as Isis or al-Qaeda. But only on two occasions were they preceded by a presidential threat.
Surveying the record, Shapiro comes to a clear conclusion: “Trump uses threats and force much like a playground bully: while large and outwardly powerful, he actually fears the use of force in any situation even vaguely resembling a fair fight . . . Actual violence only occurs against much weaker foes that have no hope of striking back.”
Applying the Taco principle to today’s foreign policy crises is instructive. Trump has threatened to authorise attacks on Iran, if the current talks to limit its nuclear programme end in failure. But the record suggests that he is likely to remain very reluctant to strike Iran whatever happens in the negotiations.
When it comes to Ukraine, Trump is likely to be even more wary than the Biden administration of anything that risks escalation with Russia. Despite last week’s warning from Pete Hegseth, the US defence secretary, that a Chinese attack on Taiwan could be “imminent” — it also seems unlikely that Trump would risk a war over Taiwan, whatever China does.
There has been talk in Trump circles about using the US military to go after Mexican drug cartels. But he may even be wary of tangling with them if there is a risk that the cartels could strike back on US territory.
The places that need to worry are those that look vulnerable or unlikely to fight back. Greenland may fall into that category — which suggests that Denmark and the EU need to find ways of letting Trump know that there will be a price to pay if he makes a move on the island.
Trump, of course, is not unique in his reluctance to use force. Both Joe Biden and Barack Obama were also notably wary of committing US troops to battle. Like Trump, their outlook as presidents was shaped by the bitter experiences of the Iraq and Afghan wars.
What sets Trump apart is not his reluctance to go to war — but the striking contrast between his tough-guy rhetoric and his real-world caution. The current president seems to have inverted Teddy Roosevelt’s famous maxim about speaking softly and carrying a big stick. Trump prefers to shout loudly, while brandishing a pencil.
There is, however, one obvious problem with making too much of the Taco principle. Now that it has been pointed out to him, Trump may be goaded into trying to demonstrate that he genuinely is a tough guy. A day after the nasty “Taco” question, Trump increased America’s tariff on foreign steel to 50 per cent.
It is rarely a good idea to mock a bully. Countries that suspect Trump’s ferocious threats won’t amount to much, would probably do best to keep that thought to themselves.
gideon.rachman@ft.com
