Putin's TACO war
Traders figured Trump out. Putin did that some time ago
After surfacing originally in a Financial Times column, the idea of a ‘TACO’ trade has acquired wider currency in recent days, as the evidence that Trump Always Chickens Out seems to be taking a clear pattern. Here’s how the trade works: Donald Trump announces enormous, economically disastrous tariffs (on Canada and Mexico, on China, on the whole world, on the European Union). The markets tumble. At this point, savvy investors (and/or friends of Trump who’ve been given an inside track) buy the cheaper stocks and profit from the rebound when, inevitably it seems, Trump Always Chickens Out.
This is definitely a real pattern: in March, Trump imposed tariffs on Canada and Mexico, only to ‘delay’ them a day later. The Liberation Day tariffs are currently on a 90-day pause (although Trump’s commerce secretary Howard Lutnick insists that they’re coming back) and the worst of the Chinese tariffs were suspended after an agreement in which China made no major concessions. The clear message on each occasion has been that Trump finds it easy to make grand pronouncements but doesn’t have the stomach to see through their implications. Meanwhile, traders are making money from it all.
Putin’s insight
The TACO traders are reading Trump and, for all his ‘unpredictability’ have figured his behavioural patterns. It’s possible that the president is not a complex personality, albeit he’s an unusual one, driven by extreme levels of greed, a desire for constant flattery and (earlier in his life, now possibly dulled as he closes in on his ninth decade) sexual incontinence. For the KGB, this was an opportunity, according to Yuri Shvets, a former Russian intelligence officer now living in Virgina. According to Shvets, the KGB began its cultivation of Trump around forty years ago with Trump’s official visit to Moscow and St Petersburg. As Shvets told a Guardian reporter in 2021: “It was a charm offensive. They had collected a lot of information on his personality so they knew who he was personally. The feeling was that he was extremely vulnerable intellectually, and psychologically, and he was prone to flattery. This is what they exploited. They played the game as if they were immensely impressed by his personality.”
It’s very clear that Putin has learned from the work of his KGB colleagues in dealing with Trump. As has been widely noted, Trump’s approach to ending the Ukraine war was to give Moscow almost everything it wanted, blame Ukraine (and President Biden) for the outbreak of war, and hope that Putin would agree to ridiculously unbalanced terms. As we know, Putin would not take the win, perhaps because he knows he can get something better or perhaps because Russia needs to be fighting a war to justify extreme repression at him. But even when Trump has shown extreme frustration with Putin, for example in the aftermath of massive Russian air strikes on Ukraine, he has enacted no consequences whatsoever for Moscow.
At the time of writing, representatives from Russia and Ukraine are meeting in Istanbul to attempt to find terms on which they might end the war. This comes in the aftermath of the heaviest Russian air-raids yet seen in Ukraine, but also an audacious Ukrainian operation to strike at airfields deep inside Russia using small drones. A key element of these talks is the prospect that Ukraine’s allies will impose extra-harsh sanctions on Moscow if it continues its current obdurate stance, rejecting any ceasefire proposals. At present, there is no evidence that Trump will go through with these; just as the stock market traders know about TACO, so does Putin. A proposal exists for the US Congress, in an unusually bipartisan moment, to enact such sanctions itself, without the White House’s lead, daring Trump to veto them. In the next two weeks we’ll see just how far Trump is willing to go to please his friend in the Kremlin.