- Despite markets embracing the so-called “TACO Trade”—Trump Always Chickens Out—JPMorgan CEO Jamie Dimon cautioned that investors may be underestimating the risks of relying on past tariff U-turns. UBS’s Paul Donovan reinforced this concern in a note seen by Fortune, warning that market strength rooted in Trump’s retreating behavior may ironically reduce his incentive to back down this time.
President Trump has become so dependably unpredictable that markets have allegedly devised a phrase for navigating his foreign policy: The TACO Trade: Trump Always Chickens Out.
Jamie Dimon, the CEO of JPMorgan Chase, isn’t a fan of the disparaging phrase, as he says that Trump has been right to change course on tariffs in some instances.
That being said, he added, investors are now getting too comfortable with the see-sawing rhetoric and are letting their guard down as a result.
The Wall Street veteran is known for his focus on risk, and modeling a huge range of outcomes to ensure America’s largest bank is ready for any event.
Looking at the market today, the billionaire banker is finding it lacking in this attention to detail.
Speaking at an event in Ireland organized by the nation’s foreign ministry, Dimon said: “I hate to use the word ‘Taco trade” because I think he did the right thing to chicken out.”
He added, per the Financial Times: “Unfortunately, I think there is complacency in the market.”
Taking this week alone as an example, on Monday Trump kicked off his letter-sending-spree to foreign governments outlining the hikes to exports they would soon be facing.
More than 20 countries have now received such letters, with Brazil, for example, facing a 50% hike and Japan looking at a 25% bump.
Despite the threats and fears over knock-on impacts on inflation, the market took little notice.
The S&P 500 held steady this week—even up 0.3% at the time of writing over the past five days, with the Dow Jones down a minor 0.2%.
Yet this dependence on the fact that Trump will U-turn is the very reason he is increasingly unlikely to, noted UBS’s chief economist Paul Donovan.
In a note sent to Fortune this week, Donovan explained: “Investors are inclined to assume that Trump will retreat as Trump has done so often. However, Trump yesterday suggested equity strength was a sign financial markets like tariffs.
“Thus, the paradox—markets are strong on the assumption Trump will retreat; markets being strong reduces the incentive for Trump to retreat.”
Deutsche Bank’s Jim Reid also noted this morning that President Trump’s policies aren’t shaking the market to the same magnitude as earlier in the year.
He pointed out in a note seen by Fortune: “After a quiet day on the trade front, the White House made some big announcements overnight … there were reports that President Trump had told NBC News that he plans to implement a 15-20% tariff rate on most trading partners … This was followed by news that President Trump was going to place a 35% tariff rate on Canada effective August 1st, though it does seem this is only for goods not covered by the USMCA trade deal, so its scope would be more limited.
“So the bark is probably stronger than the bite here, and this probably reflects why S&P futures are only down a couple of tenths so far this morning.”
Third term bluster
While many questions remain unanswered about Trump 2.0, one that may rise up the agenda as the months tick by is whether there is any appetite for Trump 3.0.
So far, commentators have widely dismissed notions that President Trump may try to run for a third term, on the grounds that it is set out in the 22nd Amendment of the Constitution that presidents can only serve twice.
That being said, Trump doesn’t seem to be entirely against the idea.
He told NBC in March he wasn’t “joking” about finding a loophole to serve out a third term, adding: “A lot of people want me to do it. But, I mean, I basically tell them we have a long way to go, you know, it’s very early in the administration.”
Dimon, who has led JPMorgan for nearly two decades, isn’t getting drawn into the speculation, saying such concerns were “premature.”
Vice President JD Vance, he added, would also likely serve as a solid obstacle in the path of Trump seeking another reelection, as he would want to run under his own steam. Dimon said: “[Vance will] say, ‘Hey buddy, get in the basement. You’ve had your day in the sun!’”
