US Treasury yields breach Trump’s tolerance limit, TACO expectations resurface—but this time could be different.

Against the dual backdrop of macroeconomic factors and geopolitical conflicts, U.S. Treasury yields have risen sharply recently. The 10-year U.S. Treasury yield climbed to around 4.69%, hitting its highest level since January 2025 and a rare peak during Trump’s second term. Previously, amid trade disputes or geopolitical events, Trump often "hit the brakes" when yields surged, easing policies via measures like extensions and exemptions to calm markets. The market has coined this pattern "TACO" (short for "Trump Always Chickens Out"). However, whether Trump will repeat the TACO pattern this time remains to be seen. On one front, the U.S. Trade Representative (USTR) announced on July 23 local time that it would impose tariffs of 10% to 12.5% on 60 economies. On the other front, the current rise in yields is primarily driven by geopolitical conflicts. Even if Trump is willing to make concessions, the hardline Iranian side is unlikely to accept them. In addition, with midterm elections approaching, Trump needs to maintain a strongman image in diplomacy to project a "victor" persona to domestic voters. As such, he has lost the initiative on the Iran issue, and the room for TACO-style policy adjustments is constrained by domestic electoral politics. All told, against this backdrop of domestic and international challenges, how Trump will adjust his policies remains a key development to monitor moving forward.