US President Donald Trump dismissed the criticism, saying that he is bluffing countries with tariffs and backing out after the market sell-off.
The criticism increased after Trump backed off the 50% tariff threat made against the EU last week.
A decision that initially triggered a major market selloff, followed by a swift rebound when the announcement was delayed.
TACO Trade
A Financial Times report labelled the term TACO trade, an acronym for “Trump Always Chickens Out”. This reflects the sentiment among investors that Trump has a pattern of backing away from aggressive tariff announcements after markets react negatively.
When CNBC in a press briefing asked Trump about the supposed backing off, he responded that he never backed off and said the announcements help the US in trade negotiations.
Trump elaborated that he didn’t chicken out on the tariff negotiations with the EU.
“After I did what I did, they said, ‘We’ll meet anytime you want. You call that chickening out? It’s called negotiation. The sad thing is, now, when I make a deal with them, it’s something much more reasonable, they’ll say, ‘Oh, he was chicken, he was chicken”
The Financial Times stated that when Trump reverses the tariff announcements to protect the fortunes of big tech, significant damage is being done to global trade and growth due to the uncertainty caused by the tariffs.
Market dances to tariff tunes
Trump’s announcement on May 23 sent the markets down with major European indices like the FTSE 100, Stoxx Europe 600 index, CAC and DAX closing in the red.
The US markets were also affected by the sell-off as Trump had announced a 25% tariff on Apple for iPhones produced outside the US and imported into it.
On Sunday, Trump said he is extending the tariff deadline to July 9 from June 1 after Ursula von der Leyen, President of the European Commission, asked for an extension.
On Tuesday, the market indices surged strongly after the announcement.
The pattern has been repeated since Trump’s first tariff announcement in April.
Trump on April 2 announced reciprocal tariffs against major companies with some getting hit with more than 30% tariffs.
Following a week of market turmoil, where major indices like the S&P 500 fell 10% in two sessions, Trump announced the tariffs would be slashed to 10% for 90 days, allowing countries to make trade deals with the US.
After the tariff reversal announcement, S&P 500 rallied over 9% in a single session.
Things unfolded similarly for China as well.
Trump first announced tariffs and China responded. Eventually US put a 145% tariff on China while China slapped a 125% tariff on US goods.
After trade talks with the Chinese administration, both governments agreed to drop the tariffs to 10% for 90 days.
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