Financial markets experienced significant volatility this week as President Donald Trump’s threats of imposing tariffs on multiple European nations—including Germany, France, Britain, and Denmark—triggered widespread uncertainty. The market turbulence stemmed from these countries’ resistance to Trump’s controversial proposition to acquire Greenland, Denmark’s autonomous territory.
The situation took an unexpected turn on Wednesday when the President abruptly retracted both his tariff threats and ambitions to forcibly seize the Arctic island from the NATO ally. This reversal catalyzed what analysts have termed the ‘TACO trade’—an acronym for ‘Trump Always Chickens Out’—prompting one of the most substantial market rallies witnessed in recent months.
According to Fawad Razaqzada, market analyst at Forex.com, this pattern has become characteristic of Trump’s approach to international negotiations. The terminology originated among Wall Street analysts in May 2025, describing the President’s tendency to establish aggressive tariff deadlines in April only to substantially moderate them as deadlines approached.
The TACO phenomenon resurfaced dramatically during the Davos summit, where Trump initially delivered an uncompromising reaffirmation of his claims over Greenland, which he described as a ‘big piece of ice.’ However, he subsequently surprised attendees by declaring, ‘I won’t use force,’ acknowledging this concession as ‘probably the biggest statement I made.’ Hours later, he announced via Truth Social that he had negotiated a ‘future deal’ regarding the Danish territory and would lift sanction threats against eight European nations.
California’s Democratic Governor Gavin Newsom promptly characterized this reversal as another TACO moment, drawing parallels to Trump’s relaxation of ‘Liberation Day’ tariffs the previous April. Some analysts suggest this pattern reflects the ‘art of the deal’ strategy Trump outlined in his 1987 book, involving extreme initial demands to secure unexpected concessions.
The uncertainty surrounding this negotiation technique continues to concern U.S. allies, particularly given Trump’s statement regarding Greenland: ‘You can say yes, and we will be very appreciative. Or you can say no and we will remember’—a comment compared by New York Times commentator Bret Stephens to dialogue from mafia classic ‘The Godfather.’