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A year into US President Donald Trump’s second term, global financial and energy markets have learned a lesson known as a TACO.
Trump always gives back.
Trump is always a coward.
That was the comforting thing Motto due to the crises that the president has caused since last spring.
Of course, the president can act in a limitless and chaotic manner. Crazy. Often – for example when he punished a small penguin colony with high tariffs last spring – it becomes clear that the policy has hardly been thought through.
But according to the TACO doctrine Trump’s most forgiving quality is his ability to change his mind. When a crazy idea goes wrong or proves too costly, he finds a way out.
As a rule, it is the financial markets that send the signal. And then everyone can pretend it’s raining.
This pattern has been confirmed, not least in Trump’s trade policy. TACO is also right to attack the Federal Reserve. And it seems to have been repeated during the Greenland crisis. Trump is a coward.
But there is There are limits to how much this mechanism acts as an emergency brake on the runaway Trump train.
TACO contains its own paradox. Because when the financial markets see a new irresponsible whim from Trump, they immediately assume that the course will end in something relatively harmless. This psychology dampens the very stock market declines, interest rate hikes and oil price reactions to which Trump is vulnerable.
There is therefore a risk that the stop signal will be weakened and ultimately only arrive when it is too late.
But there is another one Weakness in this strange balance of power between markets and the presidency. An unstated assumption behind TACO is that with perfect timing and full control of events, Trump can redirect a course he has set.
It might be possible to shoot wildly and recklessly at a cold Mette Frederiksen or a bureaucrat like Fed Chairman Jerome Powell. You will react rationally and take responsibility. They can give the president room to back down.
Iran?
After the weekend attack There is speculation in the international financial press about retreat positions for Trump. The fact that Iran’s leader Khamenei is dead, for example, is being cited as a victory to rely on if the US wants to put an end to it all and steer its fleet home.
This is where TACO syndrome really reaches its limits.
No one can seriously believe that Trump is in control or even begin to consider the consequences of a full-scale military attack on a radical, desperate dictatorship in the Middle East.
Iran is deep institutionalized oppressive regime. It is one of the world’s greatest military powers, albeit a weakened one. The Islamic Revolutionary Guard Corps is now deployed throughout the region.
In addition to the suffering on the ground, the potential for continued destruction of the global economy is enormous. Because of the war, energy prices, cost of living, interest rates and economic development are also exposed to major risks in the USA. And now there is hardly any safety net left.
Read more:
An Iran under pressure could become a nightmare for the energy market
The attack on Iran: we know that
This happened in the conflict between the USA and Iran
