There’s a new acronym making the rounds on Wall Street, and it’s as absurd as it sounds: the TACO trade. Short for “Tariffs Are Coming Off,” it refers to the growing market expectation that President Trump may be softening his trade stance — which is fantastic news for consumers and terrible news for the steel and aluminum companies that have been riding the protectionist wave.
Shares of major steel producers fell sharply on Friday after a Financial Times report revealed that the Trump administration is reviewing a list of steel and aluminum products hit with tariffs of up to 50% last summer. The plan, reportedly, is to scale back some of those levies and exempt certain items as part of the president’s broader push to address consumer affordability concerns. Steel Dynamics (STLD) dropped nearly 4%, and other metals names followed suit as investors headed for the exits.
The irony here is almost poetic. Steel stocks were among the biggest beneficiaries of Trump’s aggressive tariff regime. Domestic producers enjoyed protection from cheaper foreign imports, and the stocks rallied accordingly. Now those same stocks are getting punished because the tariffs that inflated their margins might be going away. It’s a textbook case of “the trade giveth, and the trade taketh away.”
The bigger picture is instructive. Consumer backlash over rising prices has become a genuine political liability, and the administration appears to be recalibrating. When voters feel inflation at the grocery store and the hardware store, steel tariffs become harder to defend — regardless of the industrial policy rationale behind them. The shift signals that protecting domestic producers is losing ground to the simpler political message of “things cost too much.”
For traders, the TACO trade creates an interesting sector rotation setup. If tariffs come off in meaningful ways, the beneficiaries are downstream manufacturers — think automakers, appliance companies, and construction firms that use steel and aluminum as raw inputs. Their costs go down, margins expand. The losers are the domestic producers who’ve been riding the tariff premium for the past year. Whether you’re positioned for or against the TACO trade, one thing is clear: tariff policy remains the single biggest wildcard for industrial stocks in 2026, and Friday’s action showed how fast the narrative can flip.