The TACO Trade: Why Your Supply Chain Needs SALSA

Would your business have been better off ignoring Trump’s tariffs?

That’s the idea behind the now-trending TACO Trade—short for Trump Always Chickens Out. It didn’t start in the supply chain world. It started on Wall Street.

The theory was simple: every time Trump made a policy threat that tanked the markets, he’d walk it back days later. Investors who didn’t panic—who held their positions or bought the dip—were often rewarded. That pattern has repeated four times already in 2024, and now everybody is talking about it.

The question for operators: should we apply the TACO Trade to our supply chains?

We think the better question is: how do you avoid panicking without becoming paralyzed? That’s why regardless of your politics I believe in pairing TACO with a second principle: SALSA— Sit And Let Shocks Absorb— a deliberate 90-day pause before taking drastic action.

Before we unpack SALSA, let’s see how the TACO strategy would have actually played out across seven different sourcing paths using data from 2017 to 2023.

A Realistic Hypothetical: Luggage Brand, circa 2017

As people evaluate whether there is any truth to TACO or if it's just a clever political slight, we can actually take a step back and review the impacts potential actions/inactions of the first Trump administration.

Let's assume that you're running a mid-market luggage brand in 2017. Your core product is a polycarbonate carry-on bag sourced from China (HTS code 4202.12). You’re producing 100,000 units per year, and the Trump administration hits your category with a 25% Section 301 tariff as it did in 2017.

Now what? You now have to decide:

• Stay in China and absorb the tariffs

• Move to Mexico

• Wait and see

• Or hedge by splitting production

I analyzed seven sourcing strategies over a five-year window (2017–2023). Each scenario includes a breakpoint analysis: what would have to change for this strategy to flip from the right call to the wrong one?

Assumptions Used in the Example

Scenario 1: Stay in China (The Classic TACO Trade)

• Landed Cost: $76.30/unit

• 5-Year Cost: $38.15M

• Assumes: Tariffs remain high throughout

What actually happened:

Many brands—including Away —stuck with China. Margins were pressured, but they avoided disruption and preserved quality.

Breakpoint: → Tariffs must drop below ~19% to make China cheaper than Mexico

Scenario 2: Move to Mexico Immediately

• Landed Cost: $53.00/unit

• 5-Year Cost: $28.5M

What actually happened:

Some large players like Samsonite did this. It was expensive upfront, but many are now insulated from future volatility.

Breakpoint: → Mexico tariff must exceed 21%, or FOB must rise to ~$68/unit for China to win

Scenario 3: Move to Mexico, Then Tariffs Are Removed in Year 3

• 5-Year Cost: $31.14M

• Assumes: You move early, then return to China post-rollback

What actually happened:

Few brands actually returned. Tariffs didn’t roll back as expected, and most moves were too costly to undo.

Breakpoint: → Rollback must happen no later than Year 3. Delays or high re-onboarding costs reduce value

Scenario 4: Mexico Hit with a 10% Tariff

• Landed Cost: $58.00/unit

• 5-Year Cost: $30M

What actually happened:

Trump threatened this in 2019 but didn’t follow through until 2024. 10% is still active as of today.

Breakpoint: → Mexico tariff must exceed ~21%, or China FOB must fall by $7/unit AND China Tariffs bus return to 2023 levels for China to be cheaper

Scenario 5: China Factory Agrees to Eat 50% of Tariff

• Landed Cost: $65.65/unit

• 5-Year Cost: $32.83M

Breakpoint: → China factory would need to eat 75%+ of the tariff for this to break even with Mexico

“Smart founders don’t try to win the news cycle. They buy themselves room to think.”

- Maia Benson, Build a Business Worth Buying Podcast

Scenario 6: China Tariffs Increase by another 30%

• Landed Cost: $91.30/unit

• 5-Year Cost: $45.65M

What actually happened:

This happened and more with Tariffs Peaking at 145%, essentially an embargo, in May 2024.

Breakpoint: → Tariffs needed to fall to ~35% or lower for China to stay competitive with Mexico

Scenario 7: 50/50 Volume Split Between China and Mexico

• Blended Landed Cost: ~$66.65/unit

• 5-Year Cost: $34.3M

What actually happened:

Not all brands can manage dual sourcing. Those who did—through contract manufacturers or CMs—now enjoy real resilience.

Breakpoint: → This strategy performs well in all but extreme low-tariff China scenarios

Scenario Comparison

So What’s the Lesson?

No one strategy wins in every world. The real winners weren’t the ones who picked China or Mexico—they were the ones who modeled their breakpoints, built optionality into their sourcing, and gave themselves time to respond intelligently

In moments of policy chaos—especially with trade and tariffs—overreacting is often more expensive than waiting.

A one-quarter delay often costs less than a five-year mistake.

When policy shocks hit—especially on trade—don’t assume they’re permanent. Courts get involved. Enforcement gets delayed. Politics flip.

Looking Ahead: Time for SALSA

TACO is provocative—and that’s exactly the point. It gets a reaction. It’s designed to. Whether you're cheering it or cringing at it probably says more about your politics than your sourcing plan.

TACO gets a reaction. SALSA gives you optionality.

In today’s environment, we’re seeing more volatility in the first half of 2024 than we did in any full year since 2018. The second Trump administration isn’t just recycling old trade war tactics—it’s accelerating them. We’ve already seen sharper tariff rhetoric, faster executive orders, and a clear breakdown in institutional friction. There’s less time to debate and more pressure to respond.

This is not the time to panic. But it is the time to prepare.

When the next policy shock hits, avoid the two traps that most brands fall into: paralysis or overreaction. Doing nothing may expose you to avoidable risk. Moving too quickly could lock you into five years of regret. That’s where SALSA—Sit And Let Shocks Absorb—becomes your edge.

Set a 90-day window. Use that time to model your breakpoints, evaluate cost thresholds, and test how your assumptions hold up across different futures. Build your decision tree now, so you don’t have to build it under pressure. The goal isn’t to be passive—it’s to be prepared.