It came as no surprise that European carbon prices rebounded during Thursday’s session, after Donald Trump appeared to soften his stance on potential military action in Greenland and on imposing new tariffs against European nations opposing his plans.

The EUA Dec’25 contract extended the upward trend that began on Wednesday, recovering €3.5 over two sessions after a sharp 10% decline in the previous two days. The move mirrored gains in equity markets, while diverging from trends in the European gas market.

The pan-European STOXX Europe 600 rose 1.1%, while Germany’s DAX closed 1.28% higher, with analysts pointing to the return of the so-called TACO trade. The acronym—short for “Trump Always Chickens Out”—was popularised by financial journalist Robert Armstrong, who identified a recurring pattern in Trump’s policy behaviour.

Armstrong describes the TACO trade as a strategy adopted by investors who buy market dips following Trump’s announcements of steep tariffs, on the assumption that he will later back away from the measures, allowing markets to rebound, according to USA Today.

On Friday morning, EUAs were trading higher, tracking gains in the gas market, while European equity markets edged lower amid uncertainty surrounding a potential Greenland deal. With the risk of renewed tensions between the US and Europe lingering, the likelihood of a return to TACO-style trading remains elevated.