The spectacle of internal party cleansing has long been a feature of authoritarian regimes, not mature democracies. Yet here we are, observing what seasoned political analysts are calling an ‘unprecedented’ purge within the Republican Party, orchestrated by its de facto leader, Donald Trump. For those of us in the City of London, the implications are not merely academic. When America sneezes, global markets catch a cold, and this particular flu looks like it could mutate into something far more virulent.
The mechanism of the purge is brutal in its simplicity: cross Trump, and your political career is terminated. The latest victim is Liz Cheney, a conservative stalwart who dared to serve on the House committee investigating the January 6th insurrection. Her reward? Expulsion from House Republican leadership, replaced by Elise Stefanik, a Trump loyalist who has divorced herself from any semblance of ideological consistency. The message is clear: within the GOP, loyalty to the man trumps loyalty to the party, the constitution, or indeed the country.
For British investors, this raises a troubling question: what happens to the ‘special relationship’ when one of its pillars becomes a personality cult? The UK’s financial services sector relies heavily on US cooperation. If American foreign policy becomes a function of Trump’s personal vendettas, we face a world of unpredictable tariffs, trade wars, and a retreat from multilateralism. That is a risk premium no balance sheet can easily absorb.
Gilt yields, the benchmark for UK government debt, have already begun to twitch. The 10-year yield is up 12 basis points this week, partly on fears that US political instability could spill over into global markets. The dollar, traditionally a safe haven, is showing signs of strain. If the US dollar weakens, sterling may benefit in the short term, but a sustained loss of confidence in American governance would be catastrophic for all major currencies.
Meanwhile, the Bank of England is watching the situation with alarm. Governor Andrew Bailey has warned that ‘geopolitical risks’ are the largest threat to UK financial stability. He is not wrong. A fractured US political landscape could lead to a sovereign debt crisis, or at the very least, a sharp increase in volatility. The Bank’s ability to manage inflation, currently running at 2.5%, could be compromised if US capital markets seize up.
What makes this purge particularly dangerous is its speed. In normal times, political parties evolve; they do not undergo Stalinist-style purges. The removal of Cheney was not a democratic vote but a show of force. It signals that any Republican who questions the leader is not merely wrong but illegitimate. This is the logic of a one-party state, not a functioning democracy.
For the UK, the strategic calculus is grim. Our diplomats in Washington are scrambling to maintain lines of communication, but they are dealing with a moving target. The GOP is no longer a coherent party with predictable policy preferences. It is a vehicle for one man’s ambitions. That makes long-term planning impossible.
Some may argue that this is an American problem, and that the UK should simply wait it out. But in a globally interconnected economy, there is no isolation. The London Stock Exchange is heavily weighted towards US-based companies. A disruption in American political stability will hit UK portfolios directly.
Fiscal responsibility demands that we prepare for the worst. The Treasury should be stress-testing the UK banking system for a US political crisis. The Financial Conduct Authority must ensure that asset managers have contingency plans for a sudden loss of US liquidity. And the Chancellor should pause any new borrowing until the situation clarifies.
In the end, the Trump purge is not just about Liz Cheney. It is about whether the United States can remain a reliable partner for the United Kingdom. The financial markets are already pricing in a risk. It is time for the government to do the same.
