In a pointed address from the White House, President Joe Biden launched a broadside against his predecessor’s foreign policy, dismissing key initiatives as ‘vanity projects’ that undermined global stability. For those of us watching from the City, the message was clear: the era of transactional diplomacy is over, and the transatlantic alliance is back in business.
Biden’s remarks, delivered during a press conference alongside Prime Minister Sir Keir Starmer, took aim at the Trump administration’s approach to NATO, trade deals, and climate accords. ‘Our allies are not competitors,’ Biden stated, a subtle dig at the former president’s tendency to treat international partners as adversaries. The Prime Minister, visibly relieved, reaffirmed Britain’s commitment to the ‘special relationship,’ a phrase that has been sorely tested in recent years.
From a financial perspective, this recalibration is significant. The pound sterling, which has been buffeted by Brexit uncertainty and US trade brinkmanship, reacted positively, gaining half a cent against the dollar within an hour of the press conference. Gilt yields edged lower as investors priced in a more predictable geopolitical environment. The market abhors uncertainty, and Trump’s capricious foreign policy was a constant source of volatility.
But let’s not get carried away. While Biden’s rhetoric is music to the ears of the Foreign Office, the ledger of tangible achievements remains thin. The President spoke of renewed cooperation on climate change, but concrete emissions targets remain elusive. He championed a revamped NATO, yet European members continue to balk at defence spending commitments. In other words, the ‘vanity project’ critique could easily be turned back on Biden’s own ambitious but underfunded agenda.
For British diplomacy, the challenge is to translate warmth into trade. The UK’s post-Brexit trade strategy has been a disappointment, with deals signed but little improvement in the balance of payments. A closer transatlantic alliance could unlock new opportunities, particularly in services and digital trade. However, the US remains protectionist in key sectors, from steel to agriculture. Starmer will need more than soothing words to secure a meaningful free trade agreement.
Meanwhile, the shadow of inflation looms over any recovery. With the US Federal Reserve maintaining high interest rates to curb domestic price pressures, capital flight from emerging markets is accelerating. The pound, though stronger today, remains vulnerable to shifts in US monetary policy. If the Fed tightens further, sterling could slide again, exposing Britain’s current account deficit.
In the end, Biden’s broadside is a welcome signal of continuity, but markets are driven by data not sentiment. The transatlantic alliance must deliver economic dividends, not just diplomatic photo ops. For now, the bulls are content, but the bears are watching the fiscal books across the Atlantic. If Biden’s spending plans fuel inflation, the ‘vanity project’ label may find a new home.
As the Prime Minister returns to London, he carries the goodwill of the White House but also the weight of expectations. British diplomacy has its work cut out: to turn rhetoric into reality, and to ensure the bottom line benefits from this renewed partnership. The City will be watching closely, portfolio in hand.
