Trump Extends U.S.-China Tariff Pause 90 Days Amid Market Complacency

President Trump’s 90-day extension of the U.S.-China tariff pause received an almost indifferent response from global markets, with investors largely expecting the move. The U.S. will continue to apply a 30% tariff on Chinese goods, while China maintains a 10% rate. This decision, announced as the initial deadline loomed, marked the latest iteration of a recurring pattern of delay and negotiation between the two sides, a dynamic now encapsulated in the market-slang term “TACO”—short for “Trump Always Chickens Out” [1].

The market’s muted reaction is telling. U.S. stock futures barely moved in pre-market trading, with S&P 500 futures flat following a 0.25% drop in the previous close. Asian markets, meanwhile, showed resilience, with Japan’s Nikkei 225 surging 2.15% and China’s CSI 300 rising 0.5%. European indices were mixed, with the U.K.’s FTSE 100 up 0.27% and Germany’s DAX down 0.1% [1].

UBS’s Paul Donovan and Deutsche Bank’s Jim Reid both noted that the extension had been widely anticipated, with investors focusing more on the upcoming U.S. CPI data and the Trump-Putin summit on Friday. “One obstacle for the week has passed,” Reid said, adding that the near-miss on the China trade deadline had faded into the background amid broader macroeconomic concerns [1].

The TACO trade phenomenon reflects a broader market expectation that Trump’s trade policies will continue to oscillate between escalation and delay. JPMorgan’s CEO, Jamie Dimon, acknowledged this reality, stating that while he personally disliked the term, Trump had done the right thing by extending the deadline. However, he warned of growing market complacency toward policy uncertainty [1].

Meanwhile, underlying trade patterns are shifting. Despite indications of progress in U.S.-China negotiations—particularly on rare earth minerals—U.S. importers are increasingly moving away from direct trade with China. Oxford Economics’ Adam Slater observed that U.S. imports from China have dropped by 50% since January, with China’s share in U.S. imports now at just 7%. The discrepancy between U.S. and Chinese export data may reflect supply chain re-routings, as Chinese goods are increasingly transshipped through other countries [1].

The U.S. also continues to apply a patchwork of tariffs, with exemptions and conditional sales, such as allowing chipmakers like NVIDIA and AMD to operate in China under revenue-sharing agreements. These variations in tariff rates suggest the potential for further trade pattern realignments, with U.S. importers likely to continue seeking alternatives to highly-tariffed partners [1].

As the next phase of negotiations unfolds, the focus remains on whether a final deal can be reached or if the TACO cycle will continue. For now, markets remain in a wait-and-see mode, with limited volatility despite the high-stakes nature of U.S.-China trade relations.

Source: [1] Markets are so used to the TACO trade they didn’t even blink when Trump extended a tariff delay with China (https://fortune.com/2025/08/12/markets-china-us-taco-trade-tariffs-delay/)