Markets or Trump — who’s in charge?

This is an audio transcript of the Political Fix podcast episode: ‘Markets or Trump: who’s in charge?’

Donald Trump in audio clip
I thought that people were jumping a little bit out of line, they were getting yippy, you know? They were getting a little yippy, a little bit afraid.

Lucy Fisher
Welcome to Political Fix from the Financial Times with me, Lucy Fisher. The markets have gone haywire in the past week since Donald Trump’s announcement and then reversal of a host of new US tariffs. We’ll look at the precipitous plungers in global stocks, then the rallies that have taken place, to try and figure out what on earth is going on.

Are the markets more powerful than the US president? And where does the UK stand with no change to its 10 per cent levy rate? Plus, as parliament rises for a two-week Easter recess, we take stock of the political year so far. With me to discuss it all are my colleagues, George Parker. Hi George.

George Parker
Hello, Lucy.

Lucy Fisher
And Miranda Green. Hi Miranda.

Miranda Green
Hello, Lucy!

Lucy Fisher
Plus we’re joined this week by the FT’s Markets columnist, Katie Martin. Hi, Katie.

Katie Martin
Hi, thanks for having me.

[MUSIC PLAYING].

Lucy Fisher
So Katie, it’s been a week and a half or less than that since Donald Trump’s so-called ‘liberation day’. Can you just recap for us briefly what he announced, what he’s reversed, and what’s happened with the markets in between?

Katie Martin
Yeah, it has been pretty wild. So ‘liberation day’ came along and Donald Trump stood in the Rose Garden with his famous kind of poster-type things that were laying out what levies there were gonna be on which countries and they were much, much higher than anyone had been expecting, even in a worst-case scenario.

The formula that had gone into putting these tariffs together was kind of bonkers. The countries that had been sucked into this tariff regime made no sense, including some islands that are inhabited pretty much exclusively by penguins. So for a host of reasons, markets didn’t like this very much. And we saw some really steep declines in global stocks, but particularly in US stocks. And that’s kind of fine. That’s fair enough. That’s the market’s way of saying, we think this is gonna be bad for the profitability of corporate America, we think that maybe there’s a recession coming.

That’s fine in the sense that Trump and his kind of advisers were saying, don’t worry everyone, this is all part of the plan; you, we need to take a bit of medicine so that we can make America great again.

But it unravelled a bit when the stress leaked out of the stock market and into its bigger scarier cousin, which is the bond market, which also didn’t like what it was seeing. So all things being equal something bad happens: US government bonds rise in price because everyone wants somewhere safe to hide. On this occasion, investors were saying, hmm, not sure the US is the safest place to hide; I’m gonna find somewhere else to hide instead.

So . . . crazy stuff, wild scenes, and as soon as the bond market got ‘yippy’, as the president was just describing, he was saying that the bond market, which he had been watching closely, had got a little queasy. I’d say that’s a bit of an understatement. Anyhow, when the bond market got a bit queasy, that’s the point at which he put this post out on Truth Social and said, OK, I’m putting in a 90-day delay, but ratcheting up the tariffs on China. Last time we checked they were gonna stand at 145 per cent . . . 

George Parker
At the time of recording.

Katie Martin
At the time of recording. Things may change, but still a pretty hefty levy on everybody else. So it’s sort of 10 per cent baseline. You’ve got extras for cars. You’ve got extras for steel and aluminium. Even that is, if you’d said sort of three weeks ago, OK, what he’s gonna do is 145 on China and like 10 on everyone else and 25 on this and 25 on that, the market would have said what? I don’t like this at all. But at the moment, it’s been taken as a bit of a win.

So there was a massive jump in particularly US stocks in response to this. You know, he blinked. He blinked, stocks jumped, but it hasn’t lasted in the US and that is a little bit worrying longer term.

Lucy Fisher
There’s a lot there that I want to unpick, but can you just give a sense of it? I mean you are one of the foremost reader of the runes when it comes to markets. You’ve got a lot of experience. How does this compare to other weeks of market turmoil in your career to date?

Katie Martin
It’s been pretty scary, I will say. I missed the worst bits of 2008 because I had a baby. I was actually off last week with Covid. I had Covid again.

Lucy Fisher
Oh no.

Katie Martin
It’s a whole other story. But there were definitely periods in the past sort of week or so that felt like the system was getting closer to disaster than I would like, because when markets move really quickly, something always breaks, whether it’s a fund getting into trouble or a company getting into trouble or a particular market blowing up, just that sort of volatility is really not helpful.

But the thing that I guess really worries me longer term is that sensible people who I speak to — not alarmist people, not people who shout fire in a crowded cinema — are saying, you know, I really think we need to have a conversation around whether investing in the US makes sense any more, whether it’s worth it for the political risk, whether I can really trust US government bonds to be this sort of safe hidey hole in a time of crisis.

And the big sort of thing that’s been kicking around my chats this week is, is China selling yet? Can we tell if China is selling yet? Now, my impression is that it’s not, but they haven’t called me up and told me, I should say. But, you know, there is a point at which these really large global reserve holders in China, in Japan, elsewhere around the world, maybe they don’t sell the treasuries that they currently own, but maybe they don’t really buy so many more of them in the future as they might previously have done.

So people around Trump, his economic advisers, very much look on the dollar’s global reserve currency status as a double-edged sword. You know, it’s a bit of a burden, they argue it pushes the dollar higher than it should otherwise be, and that’s bad for US manufacturing. But, you know, they’ll really miss that exorbitant privilege once it’s gone. And I think . . . Reasonable people can disagree about this, but I think they’re pretty close to really compromising that status that they’ve enjoyed for all these decades.

Lucy Fisher
Well, George, as Katie sketches out, a lot has changed in the course of just a few days, but in some ways for the UK, things have stayed the same. You know, we are still facing the same baseline 10 per cent levy rate that is now the same for the rest of the world bar China. We still got 25 per cent on carmakers, steel and aluminium.

Where does the UK stand at the end of this? Is there a silver lining? Could the UK sort of receive some of that investment from investors who are nervous about the US that Katie mentions?

George Parker
You can look for silver linings, but you can’t get away from the fact this is bad news. We’ve had Sarah Breeden, the deputy governor of the Bank of England, talking about the chilling effects on the economy of a global trade war. You’ve got Keir Starmer saying nobody’s going to pretend this is good news. And as Katie was saying earlier, if you step back about a month and said at the end of this, Britain would face a 10 per cent tariff on exports to the US plus 25 per cent on its car exports, the biggest single export item to the United States, you would’ve said that was pretty bad, and it is pretty bad.

I mean, you can look at things that might offer a silver lining; for example, lower oil prices, the prospect of lower inflation, if Chinese goods start ending up on the British market, pushing down consumer prices in the short term. But in the end, this is bad news. It makes life for Rachel Reeves, the chancellor, more complicated.

Just pick up on one thing Katie said, which I think is something you will hear more from Rachel Reeves in the weeks ahead, is this idea of Britain being a safe haven. Katie was saying about how the US is flirting with the risk at least of not being seen as this place where you can go and hide.

Does the UK, as a place with a stable government at the moment, with a very big parliamentary majority, with those ironclad fiscal rules, you know, does it become a place which does appear a more attractive economy to invest in, or does its university sector, for example, become a more enticing place for people to come, maybe tiring of Donald Trump’s endless assault on Ivy League universities? We’ll see, but in the end, you know, this doesn’t help anyone. It certainly doesn’t helped Rachel Reeves, the chancellor.

Lucy Fisher
Miranda, what’s your take on where this leaves Britain?

Miranda Green
So it’s sort of raining dilemmas, isn’t it, for Starmer and Reeves at the moment? And this is just a kind of much, much heavier rainfall than they were already suffering, I think. And one of the things that strikes me as George there is of course, they’re in the middle of trying to put out an industrial policy for the UK.

And they’re gonna have to be rewriting it on the fly now, you know, if they’re having to consider steps as extreme as renationalising British steel, you know, they’ve got to try and erect some bulwarks around the UK auto industry, which was central to previous governments’ industrial strategies. And interestingly, actually, they put out a document just recently this week saying that the new industrial strategy is going to be based on lessons from, you know, the last few years, very recent ones. So we’ll have some clues there. But all of this is gonna have to be done on the fly.

And I think behind it all also is this question of, well, if what the UK government decides to do is to try and mitigate the damage and the risks of the Trump tariff environment and all the turbulence that comes with the Trump presidency by doing this limited but still significant deal with the US, which has been very elusive since Brexit, will that actually be advantageous now?

For example, George was mentioning the university sector. One of the things we have going for us in the UK is an amazing life sciences sector. We have some of the best universities in the world, you know. Imperial now — it brooks no challenge as a science institution. We could actually be advantaged by some of this. So if we then try and strike a trade deal with Trump that undermines those sectors where we are strong, as well as consumer protections that the British public value on food, etc, you know, we could harm ourselves further. So something that looks like the answer for the government may actually be something they want to swerve.

So I think it’s really, really tricky for Starmer, but I must say so far, I think their shtick of we will remain cool, calm, and collected in the face of this chaos is just a good message internationally, as George has said, you know, do we try and sell ourselves as a safe haven of some sort for trade and investment, if not for bonds. It’s also politically quite wise, I think, to strike that pose.

Lucy Fisher
But behind the scenes, we know that it is creating lots of these dilemmas, as you point out, the official . . . 

Miranda Green
Yeah, the legs underneath the swan are, you know . . . 

Lucy Fisher
Yes, underneath the water . . . 

Miranda Green
Paddling furiously. I’ve been writing a bit about British Steel and the dilemma for the government this week there and certainly something that they discussed with industry, trade unions at the Steel Council this week was whether to give up a primary steelmaking capability in the UK, which they thought maybe that was fine to do if global supply chains were secure, and now they’re having to rethink that and of course that would mean keeping these blast furnaces open rather than switching to the greener electric arc furnaces.

Katie, as much as you’re able to crystal ball-gaze, you know, what happens next? Trump has said that there’s a 90-day pause. Is that promise worth the paper it’s written on? Should we expect market volatility, including the bond markets, to continue in the weeks ahead?

Katie Martin
My insight into the inner workings of Donald Trump’s brain is quite limited, I have to say. I think the only reasonable thing that you can expect from here on out is a lot of volatility. You know, the idea that investors ran into this year with, which was that it was all gonna be about American exceptionalism, it’s all about American stocks streaking ahead of the rest of the world, it’s all about go, go US, you know, very vibrant economy, low taxes, low regulation, everything is rosy — that has fallen apart spectacularly.

So now I think we’re just going to have lots of volatility while investors try and figure out what the new picture is. But one thing that people keep coming back to in that new picture is UK and Europe over the US. And I’ve been doing this for quite a long time; you never hear this. (Laughter) This is really quite unusual.

So, you know, the sort of chit-chat in markets is about really big long-term investors just turning away from the US — not selling every US asset they own, otherwise markets would be in total chaos right now, but just shifting, just thinking, OK, so the global indices are sort of 60, 70 per cent US. That’s a big US position to be running in a global index, isn’t it? Maybe I need more Europe, maybe I need more UK. Once these conversations start, they can really develop quite a lot of momentum. And so I would expect, yes, volatility, but with this shift towards Asia ex-China, probably, but also Europe and UK.

Lucy Fisher
George, what about this trade deal then that the UK has been seeking with the US? I mean, Miranda makes the point, maybe looking less favourable to pursue. Is it looking less likely? We saw Trump announce that Japan was sending a negotiating team in at the beginning of this week, making clear they were at the top of the line or queue. The UK hasn’t really got started in its negotiations, either on tariffs or on the trade deal.

George Parker
No, it’s looking a lot more problematic, I’d say, than it did a couple of weeks ago, certainly in the minds of British negotiators. You know, there’s been some criticism of Keir Starmer for going too early, offering the royal visit, the state visit to Britain, to Trump, and basically sucking up to Trump in the White House. I take the view that you have to try. And if you’re going to try, you might as well try at the start.

It didn’t really get us very far. Britain ended up with a 10 per cent baseline tariff, the same as other countries that were basically running balanced trade relationships with the United States. The question is, what do we do now? Now they say that there’s this trade deal, terms of heads of agreement is there, which includes stuff about watering down our digital sales tax, taking off some tariffs on American meat and seafood products, some sort of broader stuff about AI and tech co-operation and so on. But talking to British officials now, you don’t get the sense that’s anywhere near the top of Donald Trump’s in tray.

You mentioned there, Lucy, that the Japanese were there, this was before, of course, he reversed or put these very high tariffs on pause for 90 days. But I think the real priority for Donald Trump will be negotiating with countries which run big trade surpluses with the United States, first of all, try and get concessions out of them.

Britain, obviously, doesn’t fall into that category. And then the question is, what does Britain get? I mean, there’s a growing view in British circles that Donald Trump sees 10 per cent as the absolute baseline. He’s not going to go below that. So what are we actually trying to negotiate? We’re trying to negotiate on British cars . . . 

Miranda Green
Cars, basically, isn’t it?

George Parker
The 25 per cent tariff on cars, where Downing Street say they are a bit more optimistic, there may be some movement from Donald Trump. That’ll be good news for Jaguar Land Rover, Aston Martin, Bentley and all those companies. But what do we have to give America to get that back? Miranda was touching on this.

All of these things are laden with political risk for Keir Starmer, whether it’s watering down your digital sales tax, you’re giving a tax break to big tech firms on the West Coast whilst at the time squeezing disabled people’s benefits — that doesn’t look good, for a start. Jamieson Greer, the US trade representative, this week started talking about, again, non-tariff barriers to American agricultural exports. Our favourite foodstuffs, the hormone-treated beef and chlorine-washed chicken.

Lucy Fisher
They’re back on the menu.

George Parker
They’re on the back on menu, oh my god. But the fact that he’s talking about this again, that stymied trade talks going back for five or six years or probably even longer than that. So . . . 

Lucy Fisher
That’s even before you get into the NHS. The NHS data and all of that.

George Parker
So there are lots of risks. And what’s the upside for us? Do we get a better deal on cars? Do we get better co-operation on tech? Talk to people like Peter Mandelson and they’ll say, yes, it’s worth going for it. But, you know, when you hear Keir Starmer saying there’s not gonna be a deal at any price, I think he actually means that.

Lucy Fisher
Miranda, where does the escalating trade war between the US and China leave the UK and its attempt for rapprochement with Beijing? I was very struck this week that Admiral Sir Tony Radakin, the head of the British military, went out to China — the first chief of the defence staff to do so for 10 years — and yet it was only announced by one party, the Chinese side, and you get the sense that maybe the UK MOD, somewhat naively, thought that this could fly under the radar. Not so.

Miranda Green
Do you know what, I completely agree on that story. It’s clearly quite a significant moment in terms of whether it’s defence procurement or whatever the discussions are gonna be. But also it makes you wonder how much Starmer’s government is hoping they can talk to other powers without Washington noticing.

Also this week we had this fantastic FT interview with Rachel Reeves where she started to talk up hugely closer co-operation and trying to break down some of the barriers with the EU now that we’re out, which for her to say publicly on camera is quite a big thing. Are they hoping, again, that Washington doesn’t notice since we know that all the Trump White House is pretty hostile to the EU? And if it comes to Britain’s insistence on saying, we don’t have to choose, OK, fine, that’s a piece of rhetoric that I think Starmer feels he has to keep to. But are we actually hoping that we can do both without antagonising Washington? It’s quite confusing.

And you wonder on the Chinese sort of rapprochement whether again, you know, are we gonna have conversations with the Chinese on tech, for example, and hope that that doesn’t screw up negotiations with Washington on tech co-operation and AI? It’s a bit mysterious how they think they’re gonna handle it. I mean, you gotta say as a British citizen, I kind of hope they pull off whatever wheeze it is or whatever cunning plan.

Lucy Fisher and George Parker
Hmmm.

Miranda Green
No to scepticism there.

George Parker
Well, not really. I mean, there are lots of obnoxious things about the Chinese regime.

Lucy Fisher
Indeed.

George Parker
Not least their human rights record, but if you were sitting in London thinking who’s the more reliable trade partner at the moment, a bloke who stands up in the Rose Garden with a big sign saying how much he’s gonna disrupt the world economy or the Chinese Communist party, you’d probably say the Chinese Communist party. But this has been done very much under the radar, as you say, Lucy, but it’s not just on defence, it’s on financial services as well. They’ve resumed talking to the Chinese about economic and financial co-operation.

And they see China — a trade deal with India that’s being discussed this week, the trade deal they want to do with the EU, which will come into view in the next six weeks or so — those are all rising up the political agenda.

Lucy Fisher
And I’ll be interested to see whether the UK government decides to send its aircraft carrier, the Prince of Wales, into the South China Sea when it embarks on this voyage to the Indo-Pacific later this month. That feels to me as sort of a key potential moment. The government hasn’t said either way. So I suspect that is the backdrop to why . . . 

George Parker
The last time that happened, didn’t they give it a bit of a swerve? We thought it was going to the South China Sea and then it turned right, didn’t it?

Lucy Fisher
I think there have been freedom of navigation exercises, certainly by some Royal Navy warships, but I think the big question is whether this multinational 12-nation UK-led carrier strike group will go for it or not. So that’s definitely one to watch.

Katie, just drawing back a bit, I mean, what have we learned this week about where power lies? Do you have a sense of whether it was kind of Donald Trump bowing to sort of the markets or more pressure from Elon Musk or people inside his inner circle in the decision to back down? And what do you make of those who, to my mind, somewhat extraordinarily seem to still claim there’s method to his madness and this was all part of a master plan?

Katie Martin
The method to his madness thing just does not survive contact with scrutiny at all.

George Parker
Janan Ganesh has written a brilliant column on this, by the way, this week, hasn’t he?

Katie Martin
Yeah, like, you know, first of all, his supporters were saying, oh, well, you know, this is all part of a master plan to boost US government bonds and bring down borrowing costs. And then borrowing costs exploded higher and they all kind of went quiet. Then you have people like the commerce secretary Howard Lutnick saying this was all part a great vision to have millions of Americans screwing tiny screws into iPhones in warehouses in the US and this is part of the revival of US craftsmanship. And it’s just like, what are you guys talking about? Like, really?

And so now they’re saying, oh, this is all part of the plan and this has been expertly executed. I mean, I don’t see it, personally. But in terms of, you know, what it was that forced Trump’s hand — again, no insight into the inner workings of his brain, he was out playing golf while the markets were bleeding out over the past few days — but markets people that I speak to, and I speak mostly to markets people, are like, yes, we did it. You know, it’s the bond market what won it, you know, bond vigilantes saved the day. If you want the job doing properly, stock market can’t do it. You’ve got to leave it to the bond guys, you know, trebles all around kind of thing.

But actually, at the same time as the bond market was in trouble, and I do suspect that someone tapped him on the shoulder and said, sir, this is quite serious. At the same time, you can see some signs of distress among his backers within the Republican party, in American business circles that were saying, this is going to really hurt us and it’s going to hurt the economy. Now, one of the interesting things about the way that he has backtracked on this tariff plan is that he’s maintained this incredibly aggressive levy against Chinese imports. the rest of the world gets a somewhat softer treatment.

But to me, what that means is that who’s gonna suffer here? Yes, it’s China, but it’s the US. The US is going to feel the pain of this much more than Europe will, than the UK will. You know, all of those Chinese exports are now going to cost like double and more to what they were before. Now, yes, they’re very cheap, but there’s a lot of small businesses in the States that cannot bear that cost.

And so I think the market impact is a way of kind of being an early warning sign, if you like, to the real-world impact. And the real-world impact of that enormous hike in tariffs is going to be painful. So whether it was really, you know, the markets what won it or whether it was people within his own ranks saying, you know, perhaps we need a little kind of rethink here, I don’t know.

Lucy Fisher
Katie, can I just ask you one question? Has anyone benefited from this rollercoaster and might there be any motivation by looking at who might have benefited?

Miranda Green
Have you been reading the internet again? (Laughter)

Lucy Fisher
I just wanna head off any conspiracy theories right here, right now in the studio or, you know, wonder whether there’s something else going on.

Katie Martin
There are certainly — whether you call it conspiracy theories or not — there is a school of thought that maybe some people knew about this change of heart ahead of time. There are some kind of iffy looking positive bets on the market that came in the hours before his announcement that made . . . Maybe they made sense on their own terms, maybe people were just being lucky or clever, maybe there’s something more to it, I don’t know. I mean, buying the dip is one thing, but . . .

Lucy Fisher
Buying the dip is one thing. But can I just add to the question, which is of course Donald Trump himself posted on his Truth Social platform several hours before he announced the pause, now’s a great time to buy. And if, I don’t know, would his loyalist followers have maybe followed him into battle and stood to make a profit?

Katie Martin
Possibly? And is that right and proper?

Lucy Fisher
Is it illegal?

Katie Martin
You know, where’s our lawyer? But you know, there are questions around that and there are people who will have made a lot of money on the way down and a lot money on the way up. The scenes that we saw in markets at the back end of last week were certainly the tell-tale signs that funds were in trouble. They were losing a lot of money and very quickly. That was why they were having to raise cash to send back to their banks to fill the gap.

So there’s been a lot of pain in both directions. I know, for example, some hedge funds lost a load of money, precisely at the moment when he said, OK, U-turn, reverse ferret, because a lot people were caught on the wrong side of that. So whatever you do, there is money to be made and lost. The people sitting in the middle who were sort of facilitating the trading are probably just like rubbing their hands at just the sheer volume of trades that’s been happening.

Again, it’s not a helpful sign of the public trust in the administration and trust in the administration from the sort of investment community, if you like, that people are asking these questions. Because everything looks like some sort of get-rich-quick scheme. And that’s not a very healthy way to be looking at politics, I would argue.

Lucy Fisher
Final quick question for you, Katie, before you have to dash off. Who’s your stock pick for this week?

Katie Martin
Oh, so my stock pick this for week is, slightly reluctantly, Scott Bessent, the Treasury secretary. At a certain point when the markets were crying out in pain, the nickname for Scott Bessent became ‘stock descent’, (Laughter) which I don’t think is quite good value.

Someone somewhere must have spoken in the president’s ear to say the bond market matters and it’s in pain. Bessent is widely considered to be a smart guy and an adult in the room. And, you know, was it him that — because I find it difficult to believe that Trump is watching the bond market all by himself — so somebody must have told him that this was a serious issue.

The thinking in market circles is that a lot of people in the Trump administration and advisers close to him are pretty maverick, whereas Bessent is seen as a kind of stabilising force. If he were to leave for any reason, I would not expect that to go down well in the market. So to the extent that it seems like he’s steadying the ship a little bit, I think he’s done the world a favour.

George Parker
I was speaking to someone who has been following this very closely, who was making the point about Scott Bessent, but saying he’s got to be very careful because it looks like he’s winning the argument, as you say, Katie, but if he’s winning the argument too obviously, (Laughter) he’s losing. And so he’s got to be careful about how he plays it.

Katie Martin
Yeah, very and he has to. Luckily, Trump does think this is all his idea (Laughter) and it’s been a masterstroke. So maybe that’s working, too.

But there have certainly been periods in the past few weeks when people have been thinking, what is the point of Bessent? Like he’s not controlling the president at all. He’s not control his wilder instincts at all. The U-turn makes me think, maybe that has been a little unfair and maybe he has been helping behind the scenes.

Lucy Fisher
Great. I’ve learned a lot from what you’ve said, not least that his surname is pronounced Bessént, not Béssent.

Katie Martin
Well, if I’m wrong, I will get emails. (Laughter) And I might well be, but I think that’s right.

Lucy Fisher
I’m sure you are.

George Parker
(Overlapping speech) with Bessent as well.

Katie Martin
Yeah, mine’s better. He’s the FT person in the news this weekend. So there we are. We can all learn all there is to know about Scott Bessent.

George Parker
In the audio version at least.

Lucy Fisher
We’ll put a link to that in the show notes. Katie Martin, Markets columnist and host of the FT’s Unhedged podcast, thanks for joining.

Katie Martin
Thanks for having me. 

[MUSIC PLAYING]

Lucy Fisher
I thought it might also be a good moment, given it’s Easter and all the politicians are taking a lengthy holiday to look at Q1 of this year in politics. Miranda, what’s your assessment of the high and lowlights of the first quarter?

Miranda Green
So it’s been really strange, hasn’t it, because all of the huge challenges that the government has to grapple with domestically were just sort of swept so far down the day-to-day news agenda because of the international crisis, first of all because of Trump’s moves on Ukraine and his apparent sympathy more for Putin than Zelenskyy, who he seems to have treated pretty badly, both face to face and in terms of, you know, as he looks at the international chessboard, and now because of the Trump tariffs drama.

So it’s almost as if Starmer and Reeves have gone from being uncomfortable leaders of domestic policy to figures that we have to sort of hope are doing well on the international stage. But I don’t think — I have to say, I’m really interested in what you two think about this — I don’t think in the medium to long term, it’s going to help them. Because, of course, one of the consequences of all this international turbulence and the potential international trade war is that the fiscal situation in the UK gets worse and worse and worse.

And Rachel Reeves’ Spring Statement, which is, I suppose, the biggest set piece we’ve had in Q1, as you say, was just an incredibly gloomy occasion again in terms of what wiggle room the government has on all the challenges on integrated public services and a new huge appetite for boosting defence spending. They’ve already cut international aid and are doing other welfare cuts, which really antagonise Labour’s kind of base of supporters and sympathisers on that side of politics.

I think, the domestic situation has really not got any warmer for Labour, and those chickens will come home to roost. Some of them may come home to roost as soon as next month, in May, at the local elections, or we may see it later in the year.

Lucy Fisher
George.

George Parker
Yeah, I’d agree with Miranda. I think the Spring Statement was the most important domestic moment. I take a view on Keir Starmer and his Trump bounce, you know, arising from his visit to the White House. I don’t think that the international affairs weigh heavily on the way that voters vote, but I think it may have shifted the opinion of Keir Starmer, who’d been coming to be seen as a bit of a loser, basically with a slightly annoying voice of someone who might be able to hold his own on the world stage.

Lucy Fisher
Well, now that Trump said he has a beautiful voice.

George Parker
He’s got a beautiful voice. (Laughter)

Exactly. I think that probably helps him a bit, even if he didn’t get all that much out of Donald Trump. He introduced himself on to the world stage and didn’t look stupid. I think that probably helped him. I think the Spring Statement, as Miranda said, was probably the defining moment, ominous in lots of different ways. It was a holding operation primarily, but just looking at the books, you can see that the Autumn Budget is gonna be really . . . it was gonna be really tough even before Trump’s tariff onslaught; it’s gonna be even tougher now. There’s no money available. The demands on public spending are huge.

And I think the key thing that happened in the Spring Statement that will really hang over this Labour government, which is the welfare reform package, you know, £5bn, you know, as we said before, that’s £5,000 off a million people. It’s a lot of money and that hasn’t happened yet. It’s gonna come down the line. Labour MPs are already extremely nervous about it justifiably. And I think, that’s gonna be a real problem for them. So, yeah, economics don’t look great.

However, I was looking before we came over at the latest opinion polls, Labour 24, Reform 23, Conservatives 22, Lib Dems 17. The truth is that the public don’t rate any of this lot at the moment, particularly. We know those are good numbers for Reform, obviously, and the Liberal Democrats, but it’s not great for the Conservatives. Certainly not great for Keir Starmer, but I think we’re in a sort of holding pattern. We’re only a year into Parliament. There’s another four years to go.

Lucy Fisher
And you’re right, George, I mean, the polls will shift before the next general election inevitably, but I was very struck looking at the latest polling figures how much more the right-wing parties add up to than, you know, the two major centre-left parties. And one of the big themes of this week has been about, you know, potential co-operation between the Tories and Reform at town hall level.

I mean, Miranda, Kemi Badenoch extended an olive branch to Nigel Farage by making clear she would approve her Conservative councillors going into coalition with Reform in local councils, if that meant they could take power in places where there’s no overall majority. And Farage came and sort of slapped it down.

But do you think that might be something we hear a bit more about this year, unite the right or is there nothing, no incentive for Reform to play ball on that score?

Miranda Green
I think if Reform do very well in May and, you know, hold the balance in power in councils and that, you now, a governing coalition in town halls could only be formed in that way, then it’s going to look a bit eccentric, actually, not to, given, frankly, that quite a lot of those new Reform councillors might well be former Conservative councillors, (Laughter) you know. So great are the defections at grassroots level.

So I think that’s gonna be really difficult for Kemi Badenoch, not to have that as a daily, almost daily question. I was interested talking to a Reform politician recently, who, I didn’t know this, but apparently at the last general election, they had a kind of pact with the very, very small new SDP, which is nothing like the SDP of the Gang of Four, (Laughter) you know, Labour defectors from the 80s. This is a kind socially conservative small movement.

Lucy Fisher
I mean, this is the kind of spike to Jason.

Miranda Green
Yes! Exactly, but they’ve got the same logo as the SDP from the 80s. It’s quite a fascinating story actually. I might have a closer look at it at some point, but so they had a sort of weird on-the-ground pact with them.

But of course, you know, I’m always fascinated by the true motivations and feelings of those inside the Conservative party versus those in Reform, because you know how many times do Reform have to say, our mission is to destroy the Conservative party (Laughter) before people in the Conservative party take that on board and stop thinking that they’re friends in some way.

George Parker
You were writing about this this week, Lucy, about this “unite the right” thing with Anna Gross, our colleague, and didn’t you think it was curious that Kemi Badenoch on the BBC opened up the idea publicly of working in coalition with Reform at a local level, only for Nigel Farage to throw it back in her face?

Lucy Fisher
Yeah. I mean, I think she sort of walked into a bit of a bear trap the way she phrased it without agreeing something with him or the party behind the scenes.

But I am struck, Miranda, by what you say, because you are right. Publicly, Reform like to say that they’re out to kind of cannibalise the Tories. But behind the scenes, you know, I speak to people who say there’s a lot of ideological overlap. And that is evidenced by the fact that amid a big redundancy programme in Conservative campaign headquarters, partly underscored by their financial situation, that Reform have snapped up a lot of their former staffers. So that shows that some people, you know, share the same ideas.

There’s what one Reform person described to me as ‘a lot of social overlap’ as well, you know, that these are friendships that are forged in the pub. And I thought an interesting example was Gawain Towler, the former director of communications at Reform and the Brexit party and Ukip before that, has just gone into business with Chris Heaton-Harris, a former Tory cabinet minister, and they reckon there’s a gap in the market for a sort of one-stop shop public affairs consultancy for foreign investors who want to understand the British right as a kind of coherent element.

So, I don’t know, there is a bit of overlap there, although you’re right, there are also people at loggerheads who sort of feel that they’re in a death match with each other.

George Parker
It’s a dangerous liaison, isn’t it? Don’t you think?

Miranda Green
It is and it’s kind of on one level you can say, OK, well you know on the right of the Tory party it’s narcissism of small differences or whatever but that’s what people on the centre left have always said, challenging the right of the Liberal Democrats to exist at all.

You know, actually, in a political system, you are competitors and you do fight to the death and you fight to the death at local level almost more than at parliamentary battles where it can be much clearer who the territory belongs to. So I think May will be very nasty between the Tories and Reform, not least because of the level of defections and personal animosity. There’ll be history there at local level. It’s going to be interesting.

George Parker
Can I just give a little plug here, by the way, to a Lunch with the FT that I’ve done this week with Theresa May . . . 

Miranda Green
Oh fantastic.

George Parker
Who doesn’t normally like talking to journalists very much. We had a very pleasant two-hour lunch, but we talked about the drift of the Conservative party towards Reform in some places. And she’s plainly very worried about it. We were sitting in her former Maidenhead constituency, now represented by the Liberal Democrats. And she is very worried about some of the, you know, the attempt to sort of talk up immigration as an issue, retreating on some of the net zero promises as well and the danger you basically drive your core supporters into the arms of another party, in this case, the Liberal Democrats, who according to polling, you know 17 per cent at this stage of the Parliament is a very high number for the Lib Dems.

Miranda Green
It is, and actually in the south of England, they seem to be ahead, or they were in the YouGov poll a couple of weeks ago, which cheered them up like mad. And actually, this is really interesting, isn’t it, Lucy? You know, Kemi Badenoch spends her entire time talking about Reform and thinking about and talking about the threat from the Right.

She never says anything at all about the Lib Dems on all of those moderate centrist voters who leeched away at the general election other than to give these backhanded compliments to the Lib Dems saying, oh, they’re just really good at a community level repairing your church roof, which, you know, when you’ve got a local election around the corner, only helps your opponent. So what is Kemi Badenoch’s Lib Dem strategy is actually a really good question. Does she have one at all?

Lucy Fisher
I think there’s another question that’s also worth putting of Keir Starmer, you know. Some of the concerns among the Left and soft Left in his party . . . 

Miranda Green
Yes, quite so.

Lucy Fisher
Is that he is tacking too far to the right and obsessing too much about Reform as well. Can I just add, I have, George had the pleasure, you’ve shared with me an early draft of your copy of Theresa May Lunch and I must say you are the May whisperer. Many Westminster journalists has enjoyed or suffered a very awkward meal with the former Prime Minister, if it’s not too cruel to say, but you seem to unlock her. You’ve got this sort of bond with her, haven’t you?

George Parker
Well, I describe this strange bonds — I think it’s heroic, by the way, to call it a bond; I wouldn’t go quite that far. But what we have in common, and it has served our relationship well over the years, is the fact we both studied geography at university and therefore were advanced colouring in, as people like to call it. So we have as a sort of members of an oppressed minority . . . 

Lucy Fisher
Are you telling me that this piece is all about crop rotation? (Laughter)

George Parker
I tell you what, when the conversation was about to dry up, we started talking about mental maps, chalk streams and the retreat of glaciers in the Alps.

Lucy Fisher
Sensational.

George Parker
So when talk runs out, there’s a whole arena that we can venture into. But no, look, I mean, she was on good form. She looked much, much better than she . . . We have this image of her sort of trying to find her way through that morass of Brexit looking anguished. You know, Boris Johnson waiting to take her job.

She looks much more relaxed now, and we had a actually a very enjoyable lunch at a lovely Italian restaurant in her old constituency in Bray. And I should say it wasn’t one of the two three-star Michelin restaurants in the village, the Fat Duck and the Waterside Inn. It was another very good restaurant as well. So you’re not spoilt for choice out there for sure.

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Lucy Fisher
We’ve just got time left for stock picks. Miranda, who are you buying or selling this week?

Miranda Green
I am gonna buy all the 16- and 17-year-olds in the United Kingdom on the basis that before Easter recess began, one of the last things that Keir Starmer did was to go in front of the liaison committee made up of all the select committee chairs and he was asked a question about votes at 16, which is in the Labour party’s manifesto, and he reiterated in extremely strong terms the fact that they do intend to follow this through.

And I was writing about a big new study of what this 16 to 19 age group actually think about politics. And it seems to me it’s quite an interesting, under-explored area, because if they really do do this, we don’t really know whether, A, that group would turn up on polling day, because of course the younger you are, the less likely you are to vote in the UK, but also would they really go Labour?

You know, as you were saying, Lucy, there’s a lot of activity to the left of Labour. Might that actually come back to bite them? And we know that in Scotland, younger voters are more pro-independence. Might it come back to bite them and give a boost to the SNP, at least at Westminster elections there?

And there are big tests coming up in Wales and Scotland in 2026, and Reform have high hopes for Wales. And we know that young men are quite tempted by quite populist right messages across the democratic world. So I think this is going to be really interesting to watch.

Lucy Fisher
George, how about you?

George Parker
Well, I think I might be shorting stocks on Kemi Badenoch, but I think we’re selling Kemi Badenoch again this week. We’ve discussed already the fact she was trapped by talking about local coalitions with the Reform UK.

But also the other episode recently — it was at the weekend, wasn’t it, where she talked about the two Labour MPs who were detained and then deported from Israel — and her instinct was to support Israel over two elected parliamentarians. It’s almost as if free speech is something she defends to the hilt unless it’s people saying things she doesn’t like. And I think in both those cases, it clearly caused disquiet amongst her own party and people thinking, what is she doing?

So yes, I’m afraid I’m selling Kemi Badenoch this week. How about you, Lucy?

Lucy Fisher
I am buying Michael Gove — or Lord Gove, as I believe we will find out on Friday that he is going to become. I’ve been tracking all the peerage nominations. I get a bit kind of obsessed about the House of Lords for the past few months and I think I first reported back in December that Sunak wanted to nominate him and Simon Hart, the former chief whip and Alister Jack, the former Scotland secretary, on his resignation list. He already had a dissolution list, Rishi Sunak.

So it’s been delayed. I’m still trying to get to the bottom of why, but I think Michael Gove, you know, I counted it up, he’s had six cabinet portfolios under four prime ministers over the best part of a decade and a half. And he still remains enormously influential in Tory circles as the editor of The Spectator. So as a real policy brain, someone who’s had a big impact on a lot of our legislation in the past decade and a half, I will be interested to see what he does going back into the legislature.

Miranda Green
I think that’s a really good one, because also he’s quite influential in Labour circles as well, because he’s seen as somebody who delivered on policy at education, whether you approved the policies or not. They happened, and he followed through. So he has people’s ear.

Lucy Fisher
Yeah, and another thing I always sort of remembered about him when he was a secretary of state across various departments is he was quite non-partisan in his approach. He was smart in getting in sort of Labour people he respected, wasn’t he?

Well, that’s all we’ve got time for. Miranda Green, George Parker, thanks for joining.

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George Parker
Thank you.

Miranda Green
Thank you, Lucy.

Lucy Fisher
And that’s it for this episode of the FT’s Political Fix. I’ve put links to subjects discussed in this episode in the show notes. Do check them out. They’re articles we’ve made free for Political Fix listeners.

There’s also a link there to Stephen’s award-winning Inside Politics newsletter. You’ll get 30 days free. And I’ll also put a link to Unhedged, the excellent markets-based podcast that Katie Martin co-hosts.

Don’t forget to send any burning questions you have for our panel to politicalfix@ft.com if you want me to read them out, or to play a voice note of you reading them out when we come to our new semi-regular format of a Q&A episode, which we’re hoping to start in a couple of weeks’ time.

Political Fix was presented by me, Lucy Fisher, and produced by Lulu Smyth with help from Fiona Symon. Manuela Saragosa is the executive producer. Original music by Breen Turner. Simon Panayi is the sound engineer. Petros Gioumpasis and Andrew Georgiades are the broadcast engineers. And Cheryl Brumley is the FT’s global head of audio. We’ll meet again here next week.