“His negotiating strategy is to throw a grenade in the room,” says Evodio Kaltenecker, associate teaching professor in the D’Amore-McKim School of Business.
The newly ascribed “TACO” trade meme reflects genuine investor reaction to President Donald Trump’s negotiating strategy, which Northeastern business observers say has splintered alliances and hurt business worldwide.
“His negotiating strategy is to throw a grenade in the room,” says Evodio Kaltenecker, associate teaching professor in the D’Amore-McKim School of Business. “He tries to weaken the other party, and only then does he start negotiating. And this has been his approach as president.”
Referring to Trump’s on-again, off-again tariff threats, the term TACO is an acronym for “Trump Always Chickens Out.” Coined by a financial columnist, it describes Trump’s pattern of making bold threats against trading partners, then softening his position when confronted with adverse market reaction or political push back.
Those who view Trump’s extreme approach more favorably have likened this yo-yo effect to a game of chess, where each move is a calculation toward some larger result. But Northeastern business observers say the president has been far less strategic than his supporters would make him out to be, dragging down the whole economy and stoking fears of higher prices as a result.
Among the proponents of Trump’s approach is Treasury Secretary Scott Bessent, who cites the potential long-term benefits of onshoring, or returning manufacturing operations back to the United States from abroad, which would, in theory, generate more jobs for Americans. Bessent has defended Trump’s overall style, which he describes as putting the administration in a “maximalist negotiating position.”
“The economic benefits of onshoring tend to be a bit hazy and uncertain — and if there are any, they’re long term,” Kaltenecker says. “The costs, however, are immediate.”
Trump’s “art of the deal” style approach — which, as he writes in his 1987 book on the subject, is all “gut feeling” — has resulted in some victories for the president. But they’ve come at the cost of economic stability and American credibility, some experts say.
What are some of Trump’s wins? As a result of pressure from his administration, Panama recently severed ties with China in favor of a closer relationship with the U.S. The United Kingdom also signed a trade deal with the U.S. under the threat of tariffs; and the administration and Ukraine signed a deal to give the U.S. access to so-called “rare earth minerals” in the war-torn country.
But Ravi Ramamurti, director of Northeastern’s Center for Emerging Markets and a university distinguished professor in international business and strategy, says the damage to international relationships hardly justified those victories.
“It’s easy to underestimate the amount of harm that his negotiating style has done, not just to other countries but also to the United States,” Ramamurti says.
When Trump announced a series of sweeping tariffs on April 2, the U.S. stock market plummeted. The S&P 500 fell about 12%, and the Dow Jones industrial average lost nearly 4,600 points, or about 11%. The stock market has since made close to a full recovery, which suggests that the TACO effect is genuine, Ramamurti and Kaltenecker say.
“We all did believe it for a while,” Ramamurti says. “In the beginning, the investors did. That’s why the markets tanked.”
But investors appear to have caught on after about 10 instances of policy retractions or pauses. Still, the unpredictable nature of Trump’s decisions has shaken business leaders around the world and created uncertainty not reflected in the stock market.
“The companies that I am in touch with and the executives I speak to are paralyzed by this uncertainty,” Ramamurti says. “They don’t have the luxury of shifting their portfolio completely from one set of investments to another like investors in the stock market. So for them, there is a real economic cost of not being able to move or make decisions because you don’t know what the future holds. We haven’t seen this kind of self-inflicted paralysis before.”
Ramamurti says Trump’s approach to trade is fundamentally flawed. Foundational to international trade is the idea that relationships are a positive-sum game, where all parties leave a negotiation better off.
“When you’re a businessman running an individual company, you can think of life as a zero-sum game,” Ramamurti says. “That at the margin of every deal you can squeeze a little bit more from the other person.”
That is not so in the area of international affairs. Ramamurti continues: “Trade is not a zero-sum game; international relationships are non-zero-sum games.”
But Ramamurti gives credit where credit’s due. He says Trump clearly understood that access to the U.S. market is “incredibly valuable,” thus becoming a source of leverage in trade negotiations — one that future leaders may try to more effectively wield. Over time, Trump’s tactics will likely lead to increased access for American companies to various export markets.
“Some countries may do this just to appease the U.S., but only because we’ve twisted their arm,” Ramamurti says. “A skilled negotiator could have gotten to that point without all that drama, without reneging on all their legal agreements, and without shooting themselves in the foot with heavy tariffs on imports.”
Ramamurti even thinks the notion of reciprocal tariffs — if they result in lower tariffs all around — “has some justification.” But the recent escalation between the U.S. and China, which saw both sides ratchet up tariffs to levels that would have made trade unsustainable, illustrates the folly of Trump’s approach, Ramamurti says.
It also illustrates the TACO effect at the highest level.
“China called America’s bluff on the tariffs because they didn’t budge,” Ramamurti says. “Then the administration was left negotiating with itself, and having to talk itself down. When tariffs are already absurdly high you don’t gain any additional negotiating power by threatening to raise them, because then there wouldn’t be any trade, period.”