Global Highlights This Week: Trump talks about tariffs again. Will the TACO trade still work?

Last week, against the backdrop of Trump's trade agenda descending into chaos and his renewed use of tariff measures, turbulent market swings were triggered.

Nevertheless, the U.S. stock market still achieved its best monthly performance since the end of 2023.

Analysts noted that concerns about the negative impacts of a prolonged trade war remain latent. Trump's latest remarks on trade policy suggest that any trade truce may only be temporary, as he continues to inject uncertainty into the market.

On Friday, Trump announced that he would double the tariffs on imported steel and aluminum products, claiming the move would provide greater protection for the domestic steel industry. "We will double the tariff rate from 25% to 50%. This means no one can steal your industry," he said.

In the face of tariff threats, the "TACO trade" has become the most popular strategy on Wall Street. TACO is an abbreviation for "Trump always chickens out," meaning investors profit by buying the dip after Trump's tariff threats cause market declines.

Has Trump always backed down on tariff threats? So far, the answer is yes. Tom Essaye, founder of Sevens Report Research, pointed out that history indeed shows Trump does not implement unstable or extreme tariff threats. He added that these threats appear to be part of his negotiation strategy, which centers on demanding outrageously high tariffs to achieve more moderate goals.

Trump himself has expressed great anger toward the TACO trade, calling it his "least favorite issue," and arguing that his repeated retreats are part of a trade compromise strategy. "This is called negotiation," Trump said, explaining that as part of negotiations, he intentionally sets an outrageously high figure and then slightly lowers it.

However, Essaye emphasized that while the TACO trade strategy has been effective, investors should not become complacent. He warned that the current tariff burden is already higher, and this will slow economic growth.

In addition to monitoring Trump's social media, a series of economic data will be released this week, with the U.S. nonfarm payrolls report on Friday being the most critical.

Markets expect the U.S. to add 130,000 nonfarm jobs in May, below the 177,000 in April. Since the April 2 "Liberation Day" tariff announcement that shocked the world, investors have been eager to understand how Trump's tariff policies might impact the economy.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, said the May data could help shed light on how businesses have coped with tariff-related uncertainty and market pressures over the past month.

If the nonfarm data exceeds expectations, it could delay the Federal Reserve's rate-cut plans. In recent weeks, investors have scaled back bets on the magnitude of rate cuts this year, now expecting two cuts, with the first likely in October. Of course, if the data shows the U.S. economy slowing, it would boost expectations for rate cuts.

With the Q1 earnings season for U.S. stocks nearing its end, companies such as NIO, Broadcom, lululemon, and Dollar Tree will report their results.

The European Central Bank's interest rate decision will also be closely watched, with a widely expected 25-basis-point rate cut. The Bank of Canada is expected to keep rates unchanged.

Overview of Important Economic Events This Week:

Monday: UK Nationwide House Price Index MoM , Germany Manufacturing PMI Final , Eurozone Manufacturing PMI Final , UK Manufacturing PMI Final , UK Central Bank Mortgage Approvals , US S&P Global Manufacturing PMI Final , US ISM Manufacturing PMI , US Construction Spending MoM , Fed Governor Waller Speaks on Economic Outlook, A-share Markets Closed for Dragon Boat Festival Holiday
Tuesday: China Caixin Manufacturing PMI , Switzerland CPI MoM , Eurozone CPI YoY Preliminary , Eurozone Unemployment Rate , US JOLTs Job Openings , US Factory Orders MoM , Chicago Fed President Goolsbee Participates in Q&A, Fed Chair Powell Delivers Opening Remarks at an Event, Reserve Bank of Australia Releases June Monetary Policy Meeting Minutes, Bank of Japan Governor Kazuo Ueda Speaks, South Korea Holds General Election, China’s Refined Oil Products Enter New Price Adjustment Window
Wednesday: US API Crude Oil Inventories , Australia GDP Annual Rate , Eurozone Services PMI Final , UK Services PMI Final , US ADP Employment Change , Bank of Canada Interest Rate Decision, US S&P Global Services PMI Final , US ISM Non-Manufacturing PMI , US EIA Crude Oil Inventories, US EIA Strategic Petroleum Reserve Inventories , Chicago Fed President Goolsbee Participates in Q&A, Bank of Canada Announces Rate Decision, Atlanta Fed President Bostic and Fed Governor Lisa Cook Attend "Fed Listens" Event
Thursday: China Caixin Services PMI , Switzerland Seasonally Adjusted Unemployment Rate , Eurozone PPI MoM , US Challenger Job Cuts , European Central Bank Announces Interest Rate Decision, US Initial Jobless Claims, US Trade Balance , US Global Supply Chain Pressure Index , US EIA Natural Gas Inventories , Federal Reserve Releases Economic "Beige Book", ECB President Lagarde Holds Monetary Policy Press Conference, Saudi Aramco Announces Official Crude Oil Selling Prices
Friday: Germany Seasonally Adjusted Industrial Output MoM , Germany Trade Balance , France Trade Balance , Eurozone GDP Annual Rate Revision, Eurozone Retail Sales MoM , Canada Employment Change , US Unemployment Rate , US Nonfarm Payrolls, US Average Hourly Earnings MoM , Fed Governor Kugler Speaks at Economic Club of New York, Philadelphia Fed President Harker Discusses Economic Outlook, Central Bank of Russia Announces Interest Rate Decision