Are investors relying too much on the TACO strategy?

President Trump has announced plans for a 30% tariff on goods from the EU and Mexico, effective August 1st. Some analysts believe investors are underestimating the seriousness of these tariffs, operating under a "Trump Always Chickens Out" (TACO) strategy, expecting the announcements to be negotiation tactics. However, experts warn that the EU may not concede easily and that Trump may be more inclined to follow through this time, especially with U.S. markets performing well. A 30% tariff could significantly hurt Europe's GDP, while a smaller tariff, like the 10% one facing the U.K., may be less impactful. The EU exports only about 18-20% of its goods to the U.S., suggesting that the tariffs may not affect all of its trade. Some economists suggest that defense, financial, and mining stocks could outperform if the tariffs are enacted, and recommend being cautious on European and U.S. equities while favoring precious metals. German Finance Minister Lars Klingbeil warns that these tariffs could negatively impact both the U.S. and European economies, potentially decimating transatlantic trade and forcing Europe to reconsider its export strategy. The EU is prepared to retaliate if its interests are jeopardized.