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Investors Lean into 'TACO Trade' as Trump Accuses China of Violating Agreement

Persistent tariff shifts whip stocks, prompting investors to buy dips ahead of looming European levies

Traders at the New York Stock Exchange on May 27.
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Overview

  • The 'TACO trade'—Trump Always Chickens Out—has become a widespread strategy as investors buy the dip after his tariff reversals.
  • Markets swung sharply when Trump took to Truth Social to allege that China breached their recent trade pact.
  • Traders captured quick gains of about 2.7% in the S&P 500 and up to 6.1% in select AI stocks by betting on rebounds.
  • After imposing 125% tariffs on Chinese goods, Trump rolled them back to 30% for 90 days and pushed planned 50% EU levies from June 1 to July 9.
  • Analysts warn the dip-buying tactic may falter if Trump holds firm on tariffs, even as former aide Alyssa Farah Griffin argues it ultimately aids his agenda.