The red carpet rolled out in Beijing for Donald Trump this week was a masterclass in diplomatic theatre. There were marching bands, trade deals signed with theatrical flourish, and a leader who seemed to relish the attention. But for those of us in the City, the question is not whether the optics were impressive. The question is what this tells us about the shifting tectonic plates of global power and what it means for Britain’s increasingly fragile position between Washington and Beijing.
Let’s start with the numbers. The trade agreements Trump touted are more about headlines than hard cash. The reality is that US-China trade tensions remain a drag on global growth, and the so-called ‘Phase One’ deal has done little to restore confidence. Markets have yawned. The S&P 500 barely budged. Meanwhile, gilt yields have been twitchy, reflecting a market that is pricing in uncertainty rather than opportunity.
For Britain, the calculus is more complex. We are a small island nation with a large financial sector and a diminishing empire of soft power. The American security umbrella has been our safety net for decades, but Trump’s transactional approach to alliances has frayed those ties. His visit to Beijing, coming after a series of snubs to European leaders, sends a clear signal: the US is looking east, not west. And while that might be fine for a superpower, it leaves Britain exposed.
Consider the capital flight risk. If investors perceive that Britain is caught between a US that is disengaging from Europe and a China that is aggressively courting influence, they will vote with their feet. Already, we have seen a steady drip of capital from London to New York and even to Hong Kong. The pound has been under pressure, and the Bank of England is running out of ammunition. Fiscal responsibility is the buzzword in Whitehall, but the Chancellor’s options are limited. Austerity is politically toxic, but overspending in a bid to stimulate growth risks a bond market revolt.
What Trump’s Beijing trip underscores is that the old certainties are gone. The post-war order of transatlantic solidarity, free trade, and democratic convergence is giving way to a world of spheres of influence and great power competition. Britain’s instinct is to cling to the US, but Washington’s focus is increasingly on the Pacific. And Beijing, for its part, is happy to exploit the gap.
The City must adapt. That means diversifying export markets, shoring up financial regulation to prevent capital flight, and maintaining an independent fiscal stance. It also means being realistic about our place in the world. We are not a superpower. We are a financial hub with a history of punching above our weight. But that weight is diminishing.
Central bank policy will be critical. The market is pricing in rate cuts, but that is a short-term fix. What we need is structural reform: investment in infrastructure, a trade policy that looks beyond the Atlantic, and a recognition that the British economy cannot rely on the kindness of strangers.
Trump’s fanfare in Beijing may have been a photo opportunity, but for Britain it is a wake-up call. The music is changing. The question is whether we can still dance.
