Legendary fast food connoisseur Donald Trump doesn’t like the “TACO”s.

A fixture of Trump’s tariff negotiating strategy — if you can call it that — is an inclination to view US equity market strength as a green light to re-escalate and stock weakness as a red, or yellow, light to deescalate.

We’ve seen that dynamic so many times by now that the financial media coined an acronym: “TACO” which, in expanded form, is “Trump Always Chickens Out.”

Trump hates that — the idea that he’s a “chicken” — but he likes to play the game, and although it’s maddening for market participants, it’s also tradable. By virtue of being so damn predictable.

As sure as night follows day, Trump re-escalated on Friday, taking to TruthSocial to declare China in “total violation” of an unspecified “agreement,” which he described as follows:

The very high Tariffs I set made it virtually impossible for China to TRADE into the United States marketplace which is, by far, number one in the World. We went, in effect, COLD TURKEY with China, and it was devastating for them. Many factories closed and there was, to put it mildly, “civil unrest.” I saw what was happening and didn’t like it, for them, not for us. I made a FAST DEAL with China in order to save them from what I thought was going to be a very bad situation. Because of this deal, everything quickly stabilized and China got back to business as usual. Everybody was happy!

Look, I don’t think I’m making a partisan statement here to call that laughable. Trump’s effectively suggesting the Party was on the verge of being challenged in the streets by angry Chinese, which simply isn’t true. There were, however, street protests across the US during the period Trump’s referring to. Remember: With Trump, everything’s a projection.

Trump didn’t reveal the specifics of his “FAST DEAL” with Beijing, unless he just means the Geneva agreement to pause the tariffs. But here’s the thing: There’s a lot of credible reporting to suggest that in fact, it was The White House which approached Beijing asking for an off-ramp ahead of this month’s discussions in Switzerland.

If that reporting’s true (and I think it is), one interpretation says it was Xi who “saw what was happening and didn’t like it, for them, not for us,” and decided to “save” Trump from what China “thought was going to be a very bad situation.” With the tariffs paused, “everything quickly stabilized” in the US, including on Wall Street, and America “got back to business as usual.” One more time: Everything’s a projection.

Anyway, with Trump displeased at being called a “chicken” and the US equity market back flirting with SPX 6000, a re-escalation of trade tensions with Beijing was inevitable. After speaking his “Truth,” Trump declared an end to “Mr. NICE GUY!” which one can only assume means that absent a phone call from Xi over the weekend, we can expect the China tariffs to be back on in relatively short order.

The figures below, from Nomura’s Charlie McElligott, give you a sense of just how — and I’ll be polite — fluid the situation is in 2025.

Out of 84 trading days since Trump’s election, there have been 30 tariff announcements, resulting in outsized moves for implied vol, vol-of-vol and the S&P.

“What it all adds up to now is the de facto ‘Trump collar,’ as the market retrains its reaction function in the ‘Human VVIX” era,” McElligott wrote Friday.

He went on to describe the reflexivity. “As the market forces ‘TACO’ and equities rally back near prior highs on capitulation, Trump then becomes re-emboldened and sells the call,” Charlie wrote. “In response to Trump re-opening the downside scenario, vol-of-vol re-expands, USD assets trade lower again in unstable fashion, restrik[ing] the ‘Trump put,’ as his pain threshold is hit and [we] then rally back thereafter.”

The table above documents notable tariff escalations and de-escalations along with the associated move in vol-of-vol.

Again, this is tradable for… well, for traders, maddening though it is for everyone else. Charlie flagged “waves of call overwriting” from clients when the S&P creeps up near 6000, for example.

The best thing about this trade is that on the downswing, Trump will let you know when it’s time to reengage on the upside. Literally. Recall that just hours before he announced the tariff pause on April 9, Trump told 9.8 million TruthSocial followers — and God only knows how many social media-scanning algos — that it was “a great time to buy.”