The world’s two largest economies sat down in Beijing today, and if the markets are any judge, the tea was served cold. President Donald Trump and President Xi Jinping met for what was billed as a crucial dialogue on trade, but with tariffs escalating and rhetoric hardening, the City is bracing for a storm. The pound, already battered by Brexit uncertainty, slipped another 0.
3% against the dollar as news broke. Gilt yields edged lower, a telltale sign of capital fleeing to safe havens. For Britain, a nation desperately seeking post-Brexit trade deals, this is not a side show; it is the main event.
Our economy relies on a rules-based global order, and these two titans are rewriting the rulebook in real time. Make no mistake: when elephants fight, the grass gets trampled. And Britain is very much the grass.
The question for Threadneedle Street is whether this is a temporary squall or a permanent shift in the tectonic plates of commerce. I suspect the latter. Fiscal discipline is being abandoned on both sides of the Pacific, and the ripple effects will hit UK shores hard.
The only certainty is volatility. Hold tight.
