TACO is back! Trump delays 50% tariffs on Canada, $20 billion worth of goods temporarily avoids the storm of tariffs.

U.S. President Donald Trump announced late Tuesday night local time that the new tariffs of up to 50% on Canadian goods, which were scheduled to take effect on Wednesday, will be paused for three days, stating that the two countries have essentially reached an agreement. The latest three-day suspension of the 50% tariff is characteristic of the "Trump TACO deal" first creating a risk shock with extreme tariffs, then cooling down through an agreement or postponement before the deadline. However, this does not necessarily mean that Trump is fully backing down, as the details of the agreement and the auto tariffs have not yet been finalized. In a post on the Truth Social platform, Trump stated that suspending the tariff is based on the fact that Canada and the U.S. have reached an agreement, with only the finalization of relevant documents pending. The Canadian government has not immediately commented on or confirmed this news. The 50% tariff has been paused for three days! $20 billion worth of goods temporarily escape the tariff storm. Trump also mentioned in his social media post that the Keystone XL pipeline may be brought back to life. This project was canceled by then-U.S. President Joe Biden in 2021 after years of opposition from Indigenous groups and environmentalists. However, Trump did not provide specific details. Before Trump made the announcement, he spoke with Canadian Prime Minister Mark Carney on Tuesday afternoon, marking their second conversation this week; prior to this, the two sides had engaged in weeks of tense and opaque negotiations. Two industry insiders familiar with the negotiations earlier stated that the existing auto tariffs have been one of the sticking points in recent rounds of trade talks between the two sides. The proposed new tariffs from the U.S. would cover approximately $20 billion worth of imported goods, regardless of whether Canadian products meet the preferential treatment conditions specified in the U.S.-Mexico-Canada Agreement (USMCA). This agreement previously shielded the vast majority of Canadian industries from earlier U.S. tariff measures. The $20 billion refers to the total value of Canadian imports that were to be subjected to the new 50% tariff from Wednesday, not the procurement amount or value of the U.S.-Canada agreement; affected sectors may include lumber, wine, and dairy products. Trade experts and industry officials in North America generally say that the new tariffs could lead to large-scale unemployment and business closures in vulnerable industries such as lumber, wine, and dairy products. They also warned that this dispute could complicate the broader USMCA negotiations. Billions of dollars worth of goods that had previously been unaffected are now facing a significant risk of impact, said Candice Lane, CEO of the Canadian Chamber of Commerce. Businesses have been walking a tightrope for over a year, delaying hiring, investment, and expansion in Canada. Dominic LeBlanc, Canadas Minister for Trade with the U.S., and Chief Trade Negotiator Janis Sharpe have been in Washington participating in negotiations since last week. On Monday, Canadian officials held nearly two hours of talks with U.S. Trade Representative Jamison Greer and Commerce Secretary Howard Luttnick. Greer has repeatedly listed Canada's counter-tariffs against initial U.S. tariffs, some provinces refusal to sell U.S. alcoholic beverages, and Canadas dairy supply management system as points of U.S. dissatisfaction. According to two insiders, one of the main sticking points is the tariffs the U.S. imposes on Canadian automobiles. They stated that the two sides discussed reducing the tariff imposed by the U.S. under Section 232 on Canadian automobiles from 25% to 15%, and further adjusting it based on the proportion of American-produced content in each vehicle. The specific details of the agreement proclaimed by Trump remain unclear. Calculating Tariff Credits One major focus of contention is how to calculate tariff credits based on product composition the Washington side, where Trump is based, is demanding that only the U.S.-produced content be counted, while Canada argues that all North American-produced content, including Canadian and Mexican parts, should be included, according to insiders. Earlier on Tuesday, the U.S. Department of Commerce issued new regulations for manufacturers exporting automobiles from Canada and Mexico, requiring them to certify the proportion of U.S.-produced content currently in their products to apply for tariff credits, and reducing this complex certification effort from twice a year to once a year. However, a notice published in the Federal Register states that automakers must recertify the proportion of U.S.-produced content in their vehicles by September 30 in order to apply for tariff credits during the new annual cycle starting December 1. A source from the Canadian government noted last week that if the new tariffs officially take effect, Canada would still retain all options for response, including government support for affected domestic industries and potentially suspending bilateral trade negotiations; however, the source also expressed hope that the U.S. is willing to reach an agreement. The Expected Arrival of TACO Trumps sudden announcement on social media of a three-day suspension of the 50% tariff is very characteristic of a Trump-style TACO deal that is, first creating a risk shock with extreme tariffs, and then cooling off through an agreement or postponement before the deadline. But this does not mean that Trump is fully backing down, as the details of the agreement and auto tariffs have not yet been finalized. Trumps TACO regarding the U.S.-Canada trade agreement is a short-term benefit for global stock markets, as it can lower tail risks and drive valuations in cyclical sectors such as autos, industrials, and raw materials, as well as Canadian assets; however, investments should see it more as temporary retreat of risk premiums rather than the permanent end of a trade war. The market's optimism must wait for formal documents and tariff implementation details before any significant surge in stocks. The trading strategy that has become increasingly popular on Wall Street TACO (Trump Always Chickens Out) originated in April 2025 during the unprecedented reciprocal tariffs campaign launched by Trump. At that time, traders bet that either the U.S. government would retract tariff threats or that even if implemented, they would be far less severe than what Trump threatened and insufficient to significantly drag down U.S. economic expansion. The term TACO was coined by a Financial Times columnist to describe Trumps vacillation on tariffs after his Day of Liberation speech on April 2, 2025, but he would ultimately choose to back down, resulting in a significant stock market rebound. When asked about TACO at a press conference, Trump became furious, calling the question malicious. The TACO strategy has now been widely adopted by traders as the current hottest trading strategy; each time Trump issues a new, more aggressive tariff threat or makes other significant threats that lead to a market downturn, global stock and bond market investors bet that he will ultimately back down or that the policies that actually come to fruition will be substantially weaker than Trump's verbal threats. This leads them to choose to make significant bets at appropriate low points, anticipating a substantial rebound in the stock market in the short term.