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Pushkin. Listeners, exciting times. You'll never guess what happened. Unhedged is changing the world one stupid joke at a time. Maybe. Yes, customers, we've made it all the way to the White House. Specifically, my podcast co-pilot, First Admiral Robert Armstrong, has made his presence felt at the very highest level of US politics.
What am I on about? Has Rob been buying loads of crypto and going to dinner with the president? No. Not as far as I know. No more than usual. But...
Earlier this week, a reporter asked Mr Donald J Trump, leader of the free world, about the hottest new acronym on Wall Street, the taco trade. Trump always chickens out. Coined by Rob himself. The president was not terribly amused. People, the taco has broken containment. It is running riot out in the wild.
There are songs on the internet and everything. So today on the show, we're asking, oh man, what have we done? And now that tacos are out there, will they eat themselves?
This is Unhedged, the markets and finance podcast and high-level political influencing operation from the Financial Times and Pushkin. I'm Katie Martin, a markets columnist at the FT in London, and this week's main character in markets, Robert Armstrong himself, joins me down the line from the Unhedged newsletter base camp, Taco Central, in New York City. I'm just hoping that this is not my last podcast that is not from a prison cell in El Salvador.
some awful place like that or perhaps Guantanamo Bay. As you know, I've already been in touch with the producers to make sure that we can still broadcast it from El Salvador or whatever. We have discussed the taco trade on this podcast before. Several times. By the way, Katie, I have no idea how it got loose. I remember saying to you some weeks ago, maybe we can make this a thing and trying to make it a thing and having that not work at all.
Yeah. And then suddenly... And then suddenly, like, it's in a New York Times headline, and the next day, it's in a White House press briefing. And I don't know how these things happen. The mysteries of social media and media in general are still completely hidden to me. They are quite mysterious. We can talk about that a bit later. But, okay, listeners who have been lucky enough to miss this whole completely ridiculous phenomenon...
So you mentioned the taco trade in one of your newsletters, I'm going to say two, three weeks ago. Yes. And then like, you know, very online finance people like me were like, lol, taco trade, ha ha ha. And then it became a thing that was suddenly in notes from all the investment banks and all this sort of stuff. Brokers notes. And then a reporter asked Trump about how everyone on Wall Street is talking about the taco trade, which they are.
And his response...
I'm going to say it rambled a little bit at the start and we're going to spare you the full version, but let's just have a little listen to what he said. Don't ever say what you said. That's a nasty question. Go ahead. To me, that's the nastiest question. You've annoyed the president. Can I just say one very important thing, which is, you know, obviously I didn't expect this to happen and
The outcome I really, really hope does not happen is that this has anything to do with the president stopping his habitual chickening out. Let us state clearly chickening out is good and something to be celebrated.
Bad policy chickening out. Hooray. So this is an unintended consequences thing. If, as I think is quite unlikely, by the way, given that I am an unimportant person and the president is an important person, if this gets into his head and he digs in his heels about some of this stuff, that is really a disaster for which I am very, very sorry. Are you apologizing in advance? Yes, I am apologizing in advance to the country and in particular to
to the Mexican food industry if this should have any bad consequences for taco production. Which bears no responsibility for all this. I mean, maybe they'll sell more tacos, in which case I'll take credit, but I don't want bad outcomes here. You're going to have people delivering tacos to the New York office of the Financial Times as a kind of threat, maybe.
But stuff, okay, chickening out is an unfortunate phrase because it does imply weakness and a degree of silliness. But stuff that Trump has said he was going to do and then backed away from includes...
First of all, all of the massive, massive, super massive reciprocal Liberation Day tariffs. The tariffs on the penguins. Tariffs on electronics. Because we can't have expensive iPhones. Yeah, yeah. And then it was, I'm going to get rid of Jay Powell. I'm paraphrasing here. Yeah, that's out. He's the chairman of the Federal Reserve. Then that...
That went out the window. Then there was, I'm going to put, I don't even know if you remember this one because it's been so many. I'm going to tariff foreign films. Yeah, that was one. Movies, make Hollywood great again. That seems to have gone by the wayside. So there's a lot of stuff that the president. The high tariffs on Europe. Those lasted a long weekend.
50% on Europe. Just kidding. And I think we should take seriously what the president did say in response to this was like, look, this is called negotiation. You ask a nasty question like that. It's called negotiation. You set a number.
And there is something to that. You come in high, you anchor the negotiations at a high level, and then it's easier to come to a midpoint that is more on your side. That's a classic principle of negotiation. The reason that doesn't really apply in this case, however, is that Trump backs off before the negotiations have even begun. Right. He weirdly seems, you know, the other side doesn't even have a chance to say anything.
When he says, oh, just kidding, just kidding. I was just throwing that out there. Like, I do not accept the idea that if Trump had not thrown out these outrageous claims at the beginning, outcomes would be very different. I mean, I just don't think his habitual exaggeration has bought him very much. But there's room for debate there. And it's a serious point. And I think that would be his response to the taco claim is that it's a negotiation tactic that works.
Yeah, it's an interesting insight into what he considers negotiation to be, right? Because as he said, you know, at this press conference when he was asked about the taco trade, he said the whole point is you put out, and I quote, a ridiculous high number. Yes. And then you talk down. So his own numbers are ridiculously high. His own demands are ridiculously pressing. Which raises an interesting question.
which is why does the stock market and to an extent the bond market then take them seriously? In other words, one version of the taco trade thesis is just Trump says crazy thing, market go down. Two days later, Trump takes it back, market go up. And this has been 100% true, by the way. I mean, it may not work now. Maybe this idea that the boy who cried wolf situation becomes now market will respond less. But
you know, the market doesn't seem to be in on the gag, at least up until this point, which is weird and which is the reason that we kind of coined the term in the first place. Yeah. That's sort of the point I was making around will the taco trade eat itself? Yes. Is it over now? Is the taco trade over now? Let's say it is. I sort of hope so. But I know. I think if the stock market didn't learn the first four times...
On the fifth time, is the market really going to act differently?
I wouldn't expect so. Yeah. We've had lots of emails from readers and listeners about the taco trade, particularly over the past couple of days. And some of them are saying, essentially, lol. Some of them are saying, wow, congrats. And some of them are saying, if Donald Trump lashes out here and does something radical just to annoy the nasty haters and losers, it's all Rob Armstrong's fault. Yes. There is a horrible, extremely unlikely...
But horrible timeline in which I've just caused a worldwide recession by making a dumb joke. But I think it's really infinitesimally unlikely. I am not the first person to make fun of Donald Trump. No, but if that does happen, can I just state for the record, it was you, not me.
If I can attempt to take this otherwise frivolous conversation in a serious direction, there is another point about the taco trade that goes beyond just this weird pattern we've seen in markets. There is a kind of claim about the president in there that goes like this. The president actually isn't prepared to absorb any political or economic pain to get his tariff policies through. Mm-hmm.
He believes this is this is my thesis. This is the taco thesis Armstrong version. He believes that high tariffs were the meaningful economic policy that involved no significant tradeoffs. Yes. And that, you know, all it was was other countries doing wicked things to the United States. And when that stopped, everything would just be better.
And the thing about meaningful economic policies that don't involve significant trade-offs is that they don't exist. There are none of them. There are zero of those in the universe, right? If you're going to have a policy that makes a difference in an economy, there's going to be puts and takes. And every time some downside appears, it's as if the president is surprised. Right.
Right. And maybe he's surprised and maybe he's not. Maybe he never meant it all along. I don't want to plumb too deeply into his psychology. However, this is a claim about the president's psychology that could horribly turn out to be wrong at some point in the future. So let's suppose the taco trade eats itself. Nobody believes him anymore when he says he's going to be a big tariff. And then sometime down the road, the old man turns out to mean it. Yep.
That would be a terrible outcome. That's the wolf showing up in the boy who cries wolf story. Except it doesn't quite fit because he kind of is the wolf. I don't know. The analogy is not perfect. But it's the villagers, not the boy who get eaten in that story. I mean, one thing that may be slightly lost on the president here is that
The finance industry to which we are sort of parasites, you and I, Rob. Proud to say it. I'm the president of Parasite Union 104, New York City branch. Yeah.
It has a fine and long tradition of coming up with stupid acronyms for things. It's true. You hear a lot in finance about FOMO, right? Fear of missing out. That's not just in finance, but people use it all the time. There was a period when bond yields were so low that people felt like they had no alternative but to go into stocks. So all the discourse became about TINA. There is no alternative. Let us not forget the BRICS. The BRICS.
Very powerful acronym, Brazil, Russia, India, China, which became this kind of tagline for the very high potential emerging countries of the world. That was Goldman Sachs' fault. Yes, that was Jim O'Neill, right, at Goldman Sachs. And it really took off. And it took about 10 years for people to notice that those four countries actually have nothing whatever to do with one another. Right.
It was like, oh, that whole thing was dumb. Sorry about that. Sorry about forcing you to talk about that for 10 years. Well, that was the other thing I was going to raise, which is I know that like your whole like taco discourse is very much in the spotlight at the moment. But I'm here to tell you that these things have a habit of like not going away because like it is over. I think like.
I think like 10 years ago, maybe longer. You may recall I came up with, well, I didn't come up with, but I amplified this vomiting camel thing. Oh, yes. And that's been, that's your legacy. That is the first paragraph of Katie Martin's obituary is Katie Martin, founder of the imaginary hedge fund, vomiting, vomiting camel capital management died today at age 96. Wow.
So that's this idea that before crypto came along, technical analysis was one of the silliest things in finance. And the idea of technical analysis is that if you draw enough straight lines on charts of things going up and down, you can make it look like a thing and that tells you what is going to happen next. I'm going to get emails from the technical analyst now. Sorry, guys. You've done it before. You people do magic.
Yeah. But so I was like drawing vomiting camels onto charts. And then like literally 10 years later, I was at this...
I was at an event like quite recently and I was being introduced to a former interest rate setter from the Bank of England, kind of a big cheese in like UK econ circles. And I was like, yes, hello, I'm Katie Martin from the Financial Times. I'm a very serious person. Some other economics big cheese came over and said she invented the vomiting camel.
I am happy. If it turns into a joke and there's funny videos and it's a gag, I am fine with that. The irony is that a lot of this taco stuff could just end up being moot anyway. So on Wednesday this week, from like total left field, a court in the U.S. that I'm going to just freely admit I've never heard of, the U.S. Court of International Trade, said,
said the Liberation Day tariffs that were announced on April 2nd by Donald Trump are illegal. Yes. You just, you can't do this stuff. You can't, you can't as president declare willy nilly this to be a national emergency that means that powers to raise tariffs shifts from Congress to the president in this way. So some of the tariffs are still there. There's sort of additional stuff on like,
steel and aluminum and cars and stuff like that. But the tariffs that he stood on the Rose Garden with the big pieces of cardboard with, you know, tariffing the penguins and whatnot, that's all been ruled illegal. Now, obviously, the White House is appealing this. Yes, it's a big deal. And as we discussed before, the most surprising thing about this development is that it surprised our colleague Alan Beattie.
the person who knows about global trade rules has forgotten more about global trade rules than any of us will ever actually know. And he was like, wow, I didn't see that coming. And if Alan doesn't see it coming, no one saw it coming. So everybody expected this court to kind of defer to the president. But, you know, the salient point, as you said, is they basically said the president has taken powers that rightfully belong to Congress and he must stop. Yeah.
And as you say, that doesn't mean the game is over, but this is some serious sand in the gears, I would say, of the Trump tariff machine. Yeah, very much so. Now, the line from Barclays on this is, never a dull moment, true story. The line from Goldman Sachs was, was this all a bad dream? Like, have you...
Well, I think the bad dream is going to continue even under the taco view of things. Trump knows he has a rhetorical winner in tariffs. So he's going to keep rattling on about it, keep making noise about it, even if so much sand gets thrown in the gears that the process kind of breaks down and he has to humiliatingly go to Congress and actually pass a law about this stuff or actually get congressional approval for this stuff.
The story is not going away. The frightening rhetoric is not going away because the talk, if not the action, is a winner for Trump.
And so I think that is unchanged. Maybe the end game is that he says, look, I wanted to do this, but the deep state stopped me. Very likely. I think that's extremely likely. Is at some point he says, I was your savior and I was going to make everything perfect. And the dumb courts and the dumb Congress and the dumb this and the dumb that, it's all someone else's fault. I think that is one, that's one of the probable outcomes if the whole project kind of comes clanking to a stop here.
So I think we can all agree that Donald Trump does not like taco. He says it's nasty. You should never say that. Nasty. So I wonder what other stupid little acronyms, given the finance industry's fondness for acronyms, could we... I thought about this in advance and I thought maybe... Okay, tell me. Maybe Tang. Trump always negotiates like a genius. He might like that. Yes.
That would get them off my back. Send that one around. Yeah. Tang. I like Tang too. Did you have Tang? Did you have Tang as a young woman in the UK? The strange orange powdered beverage? No. No. You're going to have to look that up on the internet. Sounds poisonous. Americans of my generation will remember Tang. I'm sure Trump remembers it. If it's an orange powder, he's quite likely to. Or Tang. Trump always negotiates cleverly.
I'm clutching at straws here. You really are. You really are. Have you got any other good ideas? No, none. I've coined my last acronym. I have touched the stove and it was hot. I'm out of the acronym business, Katie. Okay. Tanget is let us never speak of taco again. We are officially putting the taco back in the donkey. And on that bombshell, we're going to be back in a second with Longshore.
If this government spending in defense goes towards things like R&D that have dual-use civilian purposes, you could get spillovers that actually end up enhancing productivity in Europe and so have a more long-lasting impact on growth.
To learn more about the intersection of national security and global trade, subscribe to PGM's The Outthinking Investor in your favourite podcast app. Okie doke, it's time for Long Short, that part of the show where we go long, a thing we love, or short, a thing we hate. Rob, what you got? Katie, it won't surprise you to hear that I'm short my own 15 minutes of fame today.
Today, I'm like getting emails from my mother's friends who just found out that I have a job. And they're like all happy and, you know, people remember me. But next Tuesday, when we're next on this show, Katie, it's just going to be me and you talking about interest rates again. Your mom's friends are going to be so disappointed. Well, we look forward to having them on board the Tackle Train.
I am long of whatever it is the Tesla shareholders are taking to make them want Elon Musk to put in 40-hour weeks at the company now that he's done with politics. I just cannot help but wonder...
how that would be good for the company at this point. Isn't three hours bad enough? I love that line he said when he was leaving politics. He was like, I think I've done enough. And everybody, no matter what their opinion of Elon Musk, was like, yeah, I think that's right. I think we're done here. Get back to the cars. Anyway, good luck, Tesla shareholders. I'll have what you're having.
On that note, we are going to be back on Tuesday. So listen up then. And in the meantime, stay chickeny. Unhedged is produced by Jake Harper and edited by Brian Erstad. Our executive producer is Jacob Goldstein. We had additional help from Topher Forges. Cheryl Brumley is the FT's global head of audio. Special thanks to Laura Clark, Alistair Mackey, Greta Cohn and Natalie Sadler.
FT Premium subscribers can get the Unhedged newsletter for free. A 30-day free trial is available to everyone else. Just go to ft.com slash unhedged offer. I'm Katie Martin. Thanks for listening.
Donald Trump has already changed the way we think about the US economy. Now he's back in the White House and Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Whatever the big question of the week is, we'll have something interesting to tell you about it in a lively conversation with the reporters and analysts closest to the action. Listen to new episodes every Wednesday and follow Trumponomics on Apple Podcasts, Spotify or wherever you listen.