Investors Show Muted Response to Trump’s Tariff Announcement Amid ’TACO’ Strategy Reliance

European equity markets displayed minimal volatility following President Trump's declaration of a 30% tariff on EU and Mexican goods, set to take effect August 1. The Stoxx 600 dipped a marginal 0.06% post-announcement, with a subsequent 0.4% decline attributed largely to broader concerns over cooling economic expansion and U.S. inflation trends.

This tepid reaction contrasts sharply with April's selloff, when Trump's earlier tariff threats triggered a 2.7% single-day plunge in the Stoxx 600, followed by two consecutive drops exceeding 4%. Market strategists point to widespread adoption of the 'TACO' approach - 'Trump Always Chickens Out' - as the key dampener on volatility.

'Investors simply aren't pricing in these tariff threats as credible policy actions anymore,' noted Michael Field, Morningstar's European markets strategist. The prevailing assumption views such announcements as negotiating theatrics rather than executable measures. Yet this complacency carries risks - markets remain one credible enforcement action away from repricing.