TACO—short for “Trump Always Chickens Out.” From this observation, the so-called “TACO trade” naturally follows: whenever President Trump announces something that causes markets to swoon, the smart money buys the dip and patiently waits for the familiar sound of clucking from the White House. The TACO trade has gone viral, rightly earning its place as a market meme.

At present, markets seem convinced that Trump will always back down at the last minute. Every time he threatens tariffs, traders and analysts flood social media with TACO memes and largely ignore him.

But is it really that simple? Has the entire world truly seen through Trump’s game? FT’s markets guru Katie Martin, who aptly warned: the “TACO trade will eat itself.”

If the entire market fully believes that Trump will always cave, two serious problems emerge: First, Trump’s political credibility will collapse; second, the United States will be in an extremely weak position in future trade negotiations.

Imagine a country negotiating a trade deal with the U.S. If everyone knows that Trump cares more about market reactions than following through on threats, the logical strategy is to stand firm, knowing that the U.S. will likely back down. If every counterpart takes this approach, trade negotiations will grind to a halt.

To salvage his political reputation and move negotiations forward, Trump may need to demonstrate real resolve and take action that shatters the TACO consensus. Only when markets begin to panic and negotiating partners start to believe he means business will true compromises become possible. With decades of business and negotiation experience, Trump certainly understands this dynamic.

This view was echoed by BCA Research in a recent note, calling the TACO trade “overcooked” and suggesting investors have grown too complacent. Similarly, Pepperstone analyst Michael Brown in late May effectively equated TACO trading with nothing more than a mindless “buy-the-dip” strategy.

Joachim Klement, Head of Strategy at Liberum, warned that as the so-called TACO trade becomes more widespread, the likelihood of Trump sticking to his tariff hikes to prove his credibility only increases.