China-US tensions fuel hopes for return of ‘taco’ trade: this time with extra spice
Short for ‘Trump always chickens out’, the ‘taco’ trade saw a significant market rebound in April. Some traders believe it could happen again.
The term “taco” – a tongue-in-cheek acronym for “Trump always chickens out” – refers to the expectation among some investors that US President Donald Trump may eventually back down from his tariff threats, leading to the kind of strong market rebound that came in the wake of April’s tariff-induced sell-off.
This sentiment follows Trump’s recent threat of 100 per cent tariffs on all Chinese imports, which came in response to China’s tightened rare earth export controls.
Despite the threats, Chinese markets appeared largely to hold the line on Monday.
While the Hang Seng Index slumped 1.5 per cent and the CSI 300 Index of Chinese mainland-listed stocks fell by 0.5 per cent, futures linked to major US benchmarks indicated otherwise, with contracts on the S&P 500 and the Nasdaq 100 rising more than 1 per cent during Asian trading hours.
This divergence suggests the abrupt sell-offs might be fleeting, potentially offering a re-entry point for those buying the dip.