Exclusive interview with former WTO Chief Economist Koopman: Trump won't change, but midterm elections may alter the TACO deal | Boao Time

Ask AI · How Could the Midterm Elections Upend Trump’s TACO Trading Model?

Whenever U.S. stocks, crude oil, and U.S. Treasury yields hit certain thresholds, White House rhetoric turns toward more conciliatory language, and the market immediately responds to U.S. President Donald Trump’s “TACO moment” (Trump always chickens out). From “reciprocal tariffs” to this round of the Middle East conflict, Trump’s erratic policy pivots leave traders feeling worn out.

During the 2026 Boao Forum for Asia annual conference, Robert Koopman (Robert Koopman), former chief economist of the World Trade Organization (WTO) and director of the Economic Research and Statistics Division, as well as a professor at American University, said in an exclusive interview with First Financial that Trump won’t change his way of doing things, but the midterm election will introduce variables into TACO.

He also said that although the two safe-haven assets—the U.S. dollar and gold—have moved in different directions during the Middle East conflict, in the long run the U.S. dollar will still weaken, and the gold price will still edge up.

Koopman previously served as chairman of the U.S. International Trade Commission and chief economist during the Clinton administration through the Obama administration. Regarding the large-scale 301 investigation that the U.S. has recently launched, he believes this move has “fundamentally changed nothing; it only adds uncertainty for businesses,” and he reminded everyone not to underestimate the resilience of international trade.

Midterm elections could change TACO trading

Fears about the escalation of the Middle East conflict caused U.S. stocks to see the sharpest selloff in months on the 26th local time. And 11 minutes after the close, Trump posted on social media, saying, “at the request of the Iranian government,” he would postpone the “destruction” operations against Iran’s energy facilities by 10 days, and that the relevant negotiations were underway and progress was “very smooth.” Soon after, the U.S. dollar index surged rapidly after the close; after WTI crude briefly plunged, it quickly rebounded.

When asked about the persistence of TACO, Koopman believed that Trump would continue his erratic policies, but the midterm elections coming up would cast doubt on TACO’s staying power.

“I don’t think he will change anything during his term. It’s just the way he is—he acts on instinct, has no interest in deep discussion and scenario planning, and doesn’t plan to change his own way of doing things. He firmly believes he has the right solution, and his supporter base firmly believes the same,” Koopman said.

But at the same time, he emphasized that if the balance of partisan power in Congress changes after the midterm elections, then although Trump may still try to unilaterally change the United States’ policies toward the world, his actions may be obstructed by Congress, and the market will re-examine whether it is possible to bet on TACO. “If Congress can successfully constrain his power, then there will be no ‘backing down,’ because he simply cannot propose drastic policy changes without Congress’s support.” he said.

With about 7 months left until the midterm elections, a recent poll by Ipsos shows that, driven by the Middle East conflict pushing oil prices higher, Trump’s approval rating has fallen to 36%, the lowest point since he returned to the White House. Even so, Democrats’ approval rating did not rise. This poll, based on 1,272 U.S. adult respondents, shows that about 38% of registered voters believe Republicans can manage the U.S. economy better, while only 34% believe Democrats would be better.

Multiple forces combine to weaken gold

During this round of the Middle East conflict, the U.S. dollar and gold—long regarded as safe-haven assets—moved along opposite curves. Since February 28, the U.S. dollar index rose as much as 2.78% to 100.54, and as of the time of writing it still maintained nearly a 2.3% gain. Meanwhile, London gold prices fell 16.03% to $4,429 per ounce, nearly wiping out all of this year’s gains.

“This is a complex and extremely unusual situation.” Koopman believes that behind the “two different sides of the sky” behavior of the dollar and gold are the combined effects of two forces. On the one hand, gold is not an interest-bearing asset; holding gold is purely speculation on gold price volatility. At present, people expect real interest rates to remain high; as the yields on U.S. Treasuries rise, investors shift their asset allocation toward higher-yield assets. On the other hand, because the stock market has fallen, leveraged positions held by hedge funds must, in order to maintain their positions, liquidate the most liquid assets they hold—namely gold—so these two forces together erode gold’s position.

When it comes to the long- and medium-term trend of gold and the U.S. dollar, Koopman believes that although there has been some rebound recently, the U.S. dollar will not strengthen over the long run, and gold prices will not remain low indefinitely. Given significant uncertainty about the United States’ ability to service its debt, if the United States plans to resolve its debt through inflation, then holding gold becomes a better choice. “In the long run, gold prices will face upward pressure again. But considering how much they have already risen, I’m not sure it can return to the previous peak level,” Koopman said.

Still optimistic about international trade prospects

As the Middle East conflict drags on, the U.S. government’s large-scale 301 investigation once again puts global trade under uncertainty. On March 19, the latest issue of the WTO’s report, Global Trade Outlook and Statistics, stated that in a scenario in which energy prices are high, the real growth rate of the volume of global goods trade would be only 1.4%. In 2026, the growth rate of services trade is also expected to slow to 4.1%.

When asked about the outlook for global trade, Koopman said not to underestimate the resilience of global trade, and stressed that tariffs are not the decisive factor affecting global trade.

“The impact of changes in tariffs on growth in global trade accounts for only 25%, while other factors—especially economic growth—account for about 66% to 75%.” He added: “Even if you raise tariffs, improvements in transportation efficiency and other factors that increase trade efficiency and reduce trade costs, as well as exchange rate movements, can offset the impact caused by higher tariffs.”

He further explained that although the United States is large, other countries in the world are conducting “risk isolation” in their trade with the United States, and they are working to maintain trade relationships with other countries under WTO rules. “This is a situation the United States doesn’t like.”

According to WTO research, after experiencing volatility triggered by policy changes unprecedented before 2025, as of the end of February 2026, the share of trade conducted on the basis of the “most-favored-nation” (MFN) principle in global trade had risen back to 72%. This analysis confirms that in most sectors of the global economy, MFN remains the dominant framework governing international trade.

When asked about the impact of the current Middle East situation on global trade, Koopman said that it is still difficult to predict when the conflict will end.

“Looking at history, whether it’s the pandemic or the Russia-Ukraine conflict, commodity prices often surge. The extent to which these shocks damage the global economy largely depends on how long supply disruptions last.” But he added that companies and the global trade system have already shown remarkable coping capacity in response to constrained energy supply. If the Middle East conflict continues, energy costs will soar, but companies and global trade flows will also have stronger incentives to seek mitigation measures. “In any case, I think one of the long-term impacts of this event is that it will accelerate the green transition. Many countries will realize that investing in wind power, solar power, and other alternative energy sources helps reduce reliance on this globally turbulent region.”

The outcomes of the 301 investigation could be changed

On March 27, a spokesperson for the Ministry of Commerce, responding to reporters’ questions regarding two trade barrier investigation cases launched against the U.S., said that the Office of the U.S. Trade Representative launched two 301 investigations against China and 16 other economic entities on March 12 Beijing time on the grounds of “excess capacity,” and launched another two 301 investigations against China and 60 other economic entities on March 13 on the grounds of “failure to effectively ban imports of forced labor products.” The Chinese side is strongly dissatisfied and firmly opposes this.

To firmly safeguard the interests of relevant Chinese industries, in accordance with the relevant provisions of the Foreign Trade Law of the People’s Republic of China and the Rules on the Investigation of Trade Barriers, for the two 301 investigations launched by the U.S. against China, the Ministry of Commerce issued two announcements to the public on March 27, respectively addressing the U.S.’s practices and measures that disrupt global production and supply chains, and the U.S.’s practices and measures that obstruct trade in green products, and thus launched two trade barrier investigations on an equal basis.

When discussing how to view the outlook for the 301 investigations, Koopman said that the 301 investigations currently carried out by the United States are, in essence, an alternative to the large-scale tariffs imposed under the International Emergency Economic Powers Act. “Fundamentally, it changes nothing; it only adds uncertainty for businesses.”

“Two forces could change the outcome,” Koopman explained. Given how widely the current “Section 301” provisions are being used, the courts may rule that this approach is not its correct interpretation, or that the scope of application is too broad. Second, invoking “Section 301” to impose tariffs involves complex procedures, including investigation, consultations, determinations, and remedies; during the public consultation stage, companies and stakeholders would push the government to adjust its policies on its own.

He gave an example: “The United States once planned to impose up to $1 million in fees on vessels entering U.S. ports operated by specific operators. But during the consultation stage, many U.S. companies complained, ‘Look at the real economic impact brought by your arrogant so-called good policies—this is a disaster for many of us,’ which also led to major changes to the final measures.”

(This article comes from First Financial.)