Donald Trump’s planned visit to India, while dressed in the usual diplomatic pageantry, is fundamentally a signal that the old British Commonwealth bloc is losing its economic heft. The markets, as ever, are pricing this reality faster than the politicians in Whitehall can spin it.
Let us be clear: the Commonwealth trade preference that London has relied upon is an asset whose yield is rapidly declining. When the President of the United States bypasses London to court New Delhi directly, the message to the City is unambiguous. Your historical network has a weakening balance sheet.
The timing is no coincidence. With Indian tariffs still stubbornly high on British whisky and cars, and the UK’s own post-Brexit trade negotiations faltering, Trump’s charm offensive exposes the limited premium of Commonwealth ties. India, as an emerging market hedge fund manager might put it, is diversifying its counterparty risk away from the Crown.
And what of the fiscal implications? A direct US-India trade deal would divert capital flows away from London’s financial services. The gilt market, already jittery under the weight of rising deficits, could face another headwind if Indian sovereign wealth decides to shift allocations from UK debt to US dollar assets. The Bank of England, which has been walking a tightrope between inflation and stagnation, will find its job no easier.
The irony is thick. The very government that promised global Britain now finds its global gateway undercut by a US president who deals in bilateral trophies. Investors should watch the sterling trade-weighted index. A sustained break below 75 would be a vote of no confidence in the UK’s post-imperial trading model.
In the end, this is not about diplomatic tours. It is about the bottom line. If the US and India start swapping market access on terms that exclude Britain, the Commonwealth’s marginal utility falls further. The City must recalibrate its pricing of political risk. The old network is yielding sub-par returns.
