SCOTT SIMON, HOST:
The Iran war is making investors rethink the TACO trade. TACO is the Wall Street acronym for Trump Always Chickens Out, an allegation that the president shrinks from his most extreme threats and an explanation for why the markets have mostly shrugged off his rhetoric. But this year, the war and the resulting energy crisis are proving harder for investors to digest. NPR's Maria Aspan reports.
MARIA ASPAN, BYLINE: Wall Street loves a TACO. The acronym started as a joke last spring, as President Trump unveiled and then walked back from his most extreme new tariffs. Financial Times columnist Robert Armstrong came up with the term. Here he is talking to NPR last May.
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ROBERT ARMSTRONG: I just tried to think of a catchy acronym, and TACO happened to be the most kind of amusing one that I could think of.
ASPAN: Soon, his financial joke about Trump always chickening out had gone mainstream. Take the 25% tariffs the president announced last year on imports from Japan. In July, he lowered that tax rate to 15%, and stocks rose in relief. In an emailed statement, a White House spokesperson calls the TACO trade nonsense. But whatever it is, Wall Street eventually got used to it. U.S. stock markets rose by double-digit percentages in 2025, despite the ongoing uncertainty about tariffs and the broader economy. But so far, this year has been shakier.
When the U.S. and Israel first attacked Iran in late February, investors were hopeful that the war would end quickly. But it's lasted for weeks, and stocks have taken a hit. U.S. markets just ended their worst quarter in nearly four years. Now some investors are questioning how much the TACO trade still works.
STEPHANIE LINK: I think investors are divided on it, and I am on the TACO side, for sure. But it's a little more extreme this go round. You know, tariffs and reversing tariffs is much different than reversing a war.
ASPAN: That's Stephanie Link, the chief investment strategist for the wealth management firm Hightower. We spoke days before Trump threatened to wipe out Iran's whole civilization and then backed down, announcing a two-week ceasefire. But a ceasefire isn't the same as a definitive end, and investors are still bracing for more uncertainty.
LINK: We are hostage to day-to-day tweets, Truth Social posts and fake news and real news, and we don't even know a quarter of what the heck is going on.
ASPAN: But she points out that Trump does have a lot of reasons to back down. The president has always cared about how Wall Street performs when he's in office, and right now he also has to worry about Main Street. The midterm elections are months away, and the war is broadly unpopular. Oil prices have surged, and if people are still paying a lot at the gas pump come November, things might not go so well for the president or his party.
LINK: He's watching the markets. He's watching sentiment. And then he's got the midterms that he has to worry about.
ASPAN: So before those November elections, investors will be hoping for some more Taco Tuesdays.
Maria Aspan, NPR News, New York.
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