Trump’s latest tariffs U-turn is sparking a global market rally — and reviving talk of the ‘TACO trade’

Trump’s latest retreat from a trade war has catalyzed an international asset rally — and revived investors’ talk of “TACO” — “Trump Always Chickens Out.”

Speaking to CNBC’s Joe Kernen at the World Economic Forum in Davos, Switzerland, on Wednesday evening, Trump said he’d walked back tariffs on European allies because he now had “the concept of a deal” over Greenland, after weeks of demanding to annex it for the U.S.

He had threatened impose 10% tariffs on eight European countries that opposed his push to “buy” the Arctic island. They would have risen to 25% from June 1.

Europe vowed an “unflinching” response to any new tariffs and stocks, bonds and the U.S. dollar staged a steep sell-off on Tuesday, as investors panicked about the fresh possibility of a trade war.

But Wall Street’s major averages jumped after Trump’s walk-back on Wednesday, with stock futures pointing to an extension of those gains on Thursday morning. The rebound rippled into global markets, with equities listed in Europe and Asia also rising when regional markets reopened on Thursday.