TACOs Aren't Just For Tuesday's Anymore - July 18, 2025

A family dining tradition was to have tacos for dinner on Tuesday nights. People would enjoy one of their favourite Mexican meals on a weekly basis, “Taco Tuesdays".  

Recently, in political circles and in the media the term “taco” is being utilized to describe Donald Trump’s approach to implementing tariffs on the United States’ trading partners. That being, TACO = Trump Always Chickens Out. The United States indicates it is applying a tariff on a country in x number of days, only to delay or defer the implementation of that tariff.  In other words, Trump’s TACO approach is to threaten a punitive action but then not to actually follow through with that action. 

Some countries have responded to the United States’ threat of tariffs by immediately contacting the Trump administration to negotiate some form of trade deal.  Others have responded by applying their own tariffs on goods imported from the United States into their countries.  

Some have claimed this false threat approach is a negotiating tactic by Trump.  This may have been the case in the beginning as several countries, Canada included, came running to Trump when initial threats of tariffs were made.  But Trump has changed his mind on implementing tariffs so many times now that countries cannot be taking that threat seriously.  Countries have now had sufficient time to develop alternate trade strategies in the face of tariffs from the United States, that none of these countries can still be intimidated by Trump’s tactics, hence the popularity of the term “TACO”.  

The US stock markets initially reacted very poorly to the threat of tariffs. The markets started dropping somewhat in March when there was noise of tariffs, and then we saw a major drop in market indices when the first tariffs were announced in April.  Then, when Trump would announce a delay or cancellation of these tariffs the markets would bounce back.  This up and down in the stock markets happened a few times over the spring of 2025, but by the summer it seemed like the stock markets understood the TACO phenomenon and hardly reacted at all when Trump would announce a new set of tariffs.  

This correlation between Trump's tariffs strategy and the US stock markets is an interesting phenomenon.  Prior to Trump launching this global trade war using tariffs, he used the US stock markets as a barometer of his performance and popularity with American voters.  When the markets reacted adversely to his first tariff announcement Trump claimed he didn’t really pay much attention to the markets, a claim everyone knew not to be true.  Yet even though the markets tanked Trump persisted with his tariff-based trade war. His actions with the tariffs proved he was willing to suffer the downturns in the stock market, but his TACO approach confirmed that he was only willing to suffer for only a limited amount of time.  Now, even the money managers who move the stock markets with their trades, have become numb to Trump’s tariff actions as they don’t believe he’ll actually follow through with real tariffs, he’ll TACO.  

While world leaders and the US stock markets may be numb to Trump’s tariff threats, this back n’ forth is impacting businesses of all sizes.  If the United States does implement tariffs it will increase costs to US consumers, as the cost of tariffs will be borne by the US companies/importers of goods subject to these tariffs,  and this increase in cost will be passed along to the consumers in the form of higher prices on store shelves.  This inflation in prices will hurt sales by American companies as consumers will cut back on their spending.  As much as Trump would like Walmart to “eat the cost increase”, they are unlikely to do so fully and inevitably have to pass some, if not all, of the cost increase onto consumers.  This TACO approach creates uncertainty in the minds of the retailers and brands, making them think twice about hiring and large capital expenditures in the face of potentially softening demand for their products.  And, if consumers are worried about their cost of living going up because of higher prices, their inclination to spend on bigger ticket items like cars, houses and vacations, as well as regular spending like dinner out, will decline.  Businesses and consumers alike have to take the impact of tariffs seriously even if Trump pulls a TACO.  

My understanding is that implementing tariffs is supposed to take an act of Congress, unless there is an issue of national security, in which case the US president can implement a tariff through an executive order. This is what Donald Trump has been doing, in the case of proposed tariffs on Canada and Mexico; he is citing illegal border crossings and the trafficking of fentanyl as the reason for the tariffs on these two countries.  While there is a significant amount of these two acts occurring at the US-Mexico border, there is almost no  such activity at the Canada-US border.  Many Americans and most Canadians realize this explanation is ludicrous. One can only speculate that the real reason for tariffs on Canada, or any other country, is to incentivize American brands to build more of their products to the United States, and in the process create more American jobs and generate more tax revenue in the US.  These are noble ambitions, but the explanations and execution in arriving at these goals is incompetent and create uncertainty that is hurting not only the United States, but also all the countries threatened by tariffs. The threat of inflation is felt globally, as businesses and consumers in every country facing a tariff threat from the US, have the same worry about inflation increasing their cost of living.

People will argue that Trump has been threatening tariffs for several months now but we haven’t seen the inflation that everyone is worried about.  This is explained partially by the fact that retailers stocked up on inventory of goods late last year and early in 2025 in anticipation of tariffs increasing costs when they did get applied, and retailers not wanting to increase prices, as that would impact sales.  This forward thinking by retailers generally spared consumers from higher prices for the first half of 2025.  Most economists anticipate higher prices in the second half of 2025, but even then there is uncertainty.  Retailers don’t know if they should raise prices because they’re not sure if Trump will continue to TACO, or if he’ll actually implement tariffs.  Thus it's hard to forecast inflation, because we have seen only some price increases but not widespread increases.  

The whole world would rejoice if TACOs returned to Tuesday night dinners only, and were limited to Mexican food.  

Real Tacos