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This is an adapted excerpt from the May 27 episode of "The 11th Hour with Stephanie Ruhle."
The whiplash over Donald Trump’s tariff policy continued this week. The stock market rallied on Tuesday after the president announced he’s delaying putting a 50% tariff on the European Union. And after five months of decline, consumer confidence rose in May, according to the Conference Board. The rating was stronger than expected, in part due to Trump walking back on some of his most aggressive tariff threats. (We’ll get another read on how consumers are doing on Friday.)
If you’re already feeling confused by the administration’s back-and-forth on tariffs, White House National Economic Council Director Kevin Hassett’s comments on Tuesday certainly didn’t clear anything up. Hassett told CNBC that while “in the end, it’s up to the president,” countries that come up with “good-enough offers” for the United States were likely to keep a 10% tariff rate, “or perhaps even below.”
It’s still unclear what those “good enough offers” would be.
Trump doesn’t actually mind the market reaction. In fact, he reportedly enjoys the power and influence he has over global markets.
Now, if you talk to businesses, big or small, they cannot predict what Trump will do next. But one thing has remained constant: When the president makes a tariff announcement, markets tank, and when he scales tariffs back, markets soar. There’s even a new nickname for it, as coined by Financial Times columnist Robert Armstrong, the “TACO” trade theory, short for “Trump always chickens out.”
Consumer sentiment can also track those patterns. When people feel like tariffs are coming, they worry, and when they think Trump won’t go for it, they’re happy. For investors and market makers, they can trade around these announcements. But for businesses, this kind of approach is paralyzing at best and crippling at worst.
But here’s what’s interesting: Those close to Trump’s team have told me that the president doesn’t actually mind the market reaction to his tariff whiplash. In fact, he reportedly enjoys the power and influence he has over global markets.
One single sentence or one post on social media from the president erases or creates billions, which is why so many are asking if and who is given advance warning on any of these massive market-moving events. The answer, for now, is, we don’t know. But as we await Trump’s next move, the world will be watching.
In the meantime, Trump isn't happy with the “TACO” theory, calling a reporter's question about the term “nasty” on Wednesday.
“I’ve never heard that,” Trump said. “You mean because I reduced China from 145% that I set down to 100, and then down to another number, and I said you have to open up your whole country? And because I gave the European Union a 50% tariff and they called up and said, ‘Please let’s meet right now' ... You call that chickening out?”