U.S. President Donald Trump attends a reception with business leaders during the 56th World Economic Forum (WEF) in Davos, Switzerland, on January 21, 2026.
Jonathan Ernst | Reuters
US President Donald Trump’s recent withdrawal from the trade war has fueled a rally in international assets and revived the “TACO” buzz among investors that “Trump always chickens out.”
President Trump told CNBC’s Joe Kernen on Wednesday night at the World Economic Forum in Davos, Switzerland, that he had been calling for Greenland to be annexed to the United States for several weeks, but that he was reversing tariffs on the European ally because he had a “picture of a deal” on Greenland.
It threatened to impose 10% tariffs on eight European countries that opposed the move to purchase Arctic islands. It was supposed to rise to 25% from June 1st.
Stocks, bonds and the U.S. dollar fell sharply on Tuesday as Europe vowed an “unflinching” response to any new tariffs and investors panicked over the possibility of a new trade war.
But Wall Street’s major averages soared after President Trump left office on Wednesday, and stock futures on Thursday morning signaled an extension of those gains. The rally spread globally, with listed stocks in Europe and Asia also rising as regional markets reopened on Thursday.
Revival of TACO trade?
Amidst the global stock market rally, “TACO” trading, one of the key elements of investing in 2025, has entered the new year.
The phrase refers to a past history of presidents threatening to leverage large levies, only to ease, delay, or cancel them. The term was coined last year after President Trump shocked markets by announcing tariffs on “Emancipation Day” in April, but his eventual reversal left investors increasingly skeptical that he would follow through. Subsequent market reactions to U.S. trade policy announcements have been more muted or seen faster recoveries.
Russ Mold, investment director at AJ Bell, likened today’s market movements to last year’s movements.
“President Donald Trump’s TACO bell is ringing again and financial markets are elated,” he said in a note Thursday morning. “Trump is running away from his threats…There are many parallels now to the market turmoil of Emancipation Day in April 2025.
“In both situations, Trump took a bullish stance, only to retreat in the face of financial market turmoil.”
But Mold added that the market appears to be rebalancing rather than “going into top gear” and that there are still some warning signs.
“While it is notable that there was no significant decline in gold prices, there has been a respite in the rise in gold prices,” he said. “This suggests investors want to keep some elements of safety in their portfolios. Health care and tobacco stocks were also popular, but this is usually what you would expect on a worrying day rather than when the market is recovering.”
Alan Siow, co-head of emerging markets corporate debt at asset management giant NinetyOne, told CNBC on Thursday that TACO thinking was the driving force behind the rally in risk assets seen after Liberation Day, and it appears to be still influencing the market.
S&P500 price
“While there is no evidence yet that things have changed, I think what we have seen from world leaders over the past two days in Davos is that something is solidifying and perhaps permanently changing at the policy level, which will ripple through the broader economy through changes in business and investment plans,” he said.
“Even if the reality remains TACO in the short term, we’ll likely see a lasting change in underlying behavior. But to be fair, it’s too early to tell given the fast-moving nature of recent developments.”
Paul Sagay, managing director and head of investment management and propositions at London-based wealth management firm Kingswood Group, said while markets have reacted negatively to certain White House policies, those reactions have generally been more muted since Emancipation Day.
“The original position, that a worst-case scenario would be announced with a view to a more favorable agreement later, is exactly what we have seen in the comments on Greenland,” he told CNBC in an email. “So far, very few details regarding the ‘framework’ agreement have been revealed. That said, markets are reacting positively with a more conciliatory tone.”
Toni Meadows, head of investments at BRI Wealth Management, struck a more skeptical tone on the TACO deal, urging investors to wait for details of the Greenland “deal” and European response.
Meadows said the market initially “will recover some or all of the losses” before President Trump announced the potential Greenland deal.
“While there is a sense of relief, this is just one of many areas in which the President of the United States is trying to determine what he can get for the United States based on his policy of resource imperialism,” he added.
Meadows noted that the market is also monitoring the White House’s domestic policies, such as the proposed cap on credit card interest rates.
“Investors are now likely to return to digesting the effects of the US earnings season,” he said. “But this will continue until President Trump’s next announcement.”
