Investors are closely examining whether President Trump’s recent aggressive tactics regarding Greenland signify a return to the controversial negotiating style often referred to as TACO, or “Trump Always Chickens Out.” This speculation has arisen as the market reacts to Trump’s bold claims about the need for U.S. control over Greenland for national security purposes. His ongoing pressure on Denmark, including the threat of escalating tariffs on eight European nations, has reignited discussions about his negotiation approach.
Trump’s strategy has taken a significant turn, with proposed tariffs starting at 10% in February 2024 and potentially escalating to 25% come June if the Greenland negotiations do not yield results. The White House has previously advised investors against betting on any retreat from Trump’s positions, but his latest remarks have many on Wall Street revisiting the idea of TACO as a framework for understanding these developments.
Analysts at JPMorgan have echoed this sentiment, suggesting that Trump’s rhetoric serves as a strategic move designed to provoke negotiations. They highlighted the psychological play involved in creating urgency through maximalist positions, noting that this tactic is nothing new for the President. The bank has even suggested that today might be deemed “TACO Tuesday,” referencing the ongoing debate around Trump’s tactics.
David Rosenberg, an economist and president of Rosenberg Research, reinforced the notion that the market grapples with uncertainty surrounding these events. The interplay of fear of missing out (FOMO) and belief in TACO—a conviction that Trump is merely bluffing to secure a more favorable deal—remains a powerful dynamic in investor sentiment.
As analysts contemplate the implications of Trump’s threats regarding Greenland, they have identified three potential outcomes:
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A Deal with Denmark: This scenario is considered the most likely, with JPMorgan assigning a 55% probability. The analysts anticipate a diplomatic agreement that could enhance U.S. access to Greenland’s natural resources, thereby avoiding a dangerous escalation. They argue that Trump’s historical approach of starting negotiations from a staggering position is likely in play here, particularly as the World Economic Forum is taking place. The prospect of a sale of Greenland seems less feasible, primarily due to the required approval from Denmark, while military intervention is deemed highly improbable—likely triggering widespread backlash.
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Reversal of Tariffs: There exists a 40% chance that the threatened tariffs may never come into effect, potentially due to Trump’s own reconsideration. Political strategist Matt Gertken notes the expectation of a “non-military” resolution to the situation, suggesting that negotiations could lead to a truce. Such an outcome would likely involve a suspension of tariffs while discussions continue, reminiscent of previous tariff introductions where eventual compromise followed.
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Supreme Court Intervention: Lastly, there is approximately a 50% chance that the Supreme Court could overturn Trump’s tariffs. Legal experts believe the court may be hesitant to align with Trump’s unilateral actions, especially considering the potential implications for constitutional authority and credibility. Recent challenges facing the legality of the tariffs underscore the complexities involved, particularly with the President’s threats of tariffs impacting multiple EU countries varying on different rates.
As the situation evolves, investors are watching closely for signs of whether Trump’s maneuvers will lead to constructive negotiations, a diplomatic resolution, or further challenges in the legal arena. The intersection of international trade dynamics and domestic political considerations continues to shape economic forecasts in uncertain terrain.
