Trump’s Greenland and EU Tariff Rhetoric Challenges 'TACO' Trade Pattern

Investors are testing the resilience of the "TACO" (Trump Always Chickens Out) trading strategy after President Trump's recent aggressive rhetoric on Greenland and European tariffs triggered market volatility. On January 20, 2026, the S&P 500 dropped 2.1%, VIX surged to its highest level since November, and gold hit a record high—signals that market complacency may be eroding. While historical precedent shows Trump often retreats from extreme positions, analysts warn this only happens after meaningful market pain. Miller Tabak + Co.’s Matt Maley noted current reactions remain mild, but Trump appears more resolute on Greenland. BCA Research’s Marko Papic suggests the tensions may serve political distraction tactics, potentially requiring a “liberation day” crash to reset valuations. Despite this, some strategists like Columbia Threadneedle’s Ed Al-Hussainy argue TACO expectations continue to suppress risk premiums, while Michael Purves of Tallbacken Capital sees eventual compromise favoring corporate profitability.