Can UK trade come up Trumps?: CNBC’s UK Exchange newsletter

This report is from this week’s CNBC’s UK Exchange newsletter. Like what you see? You can subscribe here.

Donald Trump is the first U.S. president to have been honored with two state visits, something not even bestowed on Bill Clinton, George W. Bush or Ronald Reagan — all two-term presidents who enjoyed warm relationships with the British prime minister of the day.

That honor reflects the opportunity his visit offers to deepen trade and business ties between the U.S. and the U.K., which received notably more lenient treatment from Trump when, in April, he unleashed his “Liberation Day” tariffs on the world.

The U.K. frequently exploits the monarchy’s soft power to offer state visits to countries with whom it desires deeper trade ties.

The late Queen Elizabeth II hosted numerous heads of state, including China’s Xi Jinping, Russia’s Vladimir Putin, several Saudi kings and a number of French presidents. In his three years on the throne, King Charles III has already hosted the South African, French and South Korean presidents, the Japanese Emperor and the Emir of Qatar.

So “tiara diplomacy” is not new. It is just that, with the U.K. economy stagnating, it feels as if more is riding on this particular visit.

It helps that Trump, whose mother was born in Scotland, loves the U.K. — something that could not be said of either Joe Biden or Barack Obama, his immediate two predecessors.

This presents a unique opportunity to win favor with Trump when trade and diplomacy revolve around the U.S. president in a way they have not for decades.

The trade and investment element of state visits has increased in recent times.

Xi’s state visit in October 2015 saw some £40 billion ($55 billion) worth of business agreements signed, with the Chinese president attending an investment summit at Mansion House in the City with then Prime Minister David Cameron.

The pair also famously visited The Plough at Cadsden in Buckinghamshire, a pub near Chequers, the country residence of British prime ministers, where Xi quaffed a pint of Greene King IPA (Indian Pale Ale).

The pub has since become a magnet for Chinese tourists, while Greene King itself was acquired for £4.6 billion in 2019 by CK Asset Holdings, founded by Li Ka-shing, Hong Kong’s richest man.

Sometimes the visits are more to support British investment elsewhere, as in 2016, when the Queen hosted Colombian President Juan Manuel Santos de Calderon.

Although there were agreements signed to reduce the tax burden on companies investing in the two countries, the central element was the announcement of £1 billion worth of export finance to support British companies engaged in energy and healthcare projects in the Latin American country.

Occasionally, though, trade and investment come second to diplomacy.

Macron’s state visit in July this year, the first by an EU political leader since Brexit (the king and queen of the Netherlands visited in 2018), was an attempt to repair relations after the French president was antagonized by former Prime Ministers Boris Johnson and Liz Truss, the latter even speculating publicly whether Macron was a “friend or foe” of Britain.

This visit, though, is all about trade and, appropriately enough given Trump’s love of describing events in which he is involved as the “biggest and best,” looks set to be huge in terms of deals.

At the weekend, it emerged that Nvidia and OpenAI will announce a joint multi-billion-pound investment in a data center project in Blyth, Northumberland, which has already been launched by Quality Technology Services, a data center firm owned by the private equity giant Blackstone.

Nvidia CEO Jensen Huang, OpenAI CEO Sam Altman and Stephen Schwarzman, the founder and chief executive of Blackstone, are all reportedly accompanying the president to the state banquet at Windsor Castle.

Others invited are said to include Tim Cook, Apple chief executive, and Larry Fink, the founder and chief executive of BlackRock, the asset management giant, which is expected to announce a $700 million investment in U.K. data centers.

These data centers will require plenty of energy, and, to that end, an agreement will be signed between the two governments enabling companies to build new nuclear power stations in both countries more quickly.

These include plans by X-Energy, the Maryland-based nuclear reactor and fuel design engineer and Centrica, the parent of British Gas, to build up to 12 advanced modular reactors in Hartlepool, County Durham, in the north east of England. It could also potentially provide an opportunity for Britain’s Rolls-Royce, which is planning to build small modular reactors at home, to do so in the U.S.

And the announcements have kept coming. Monday brought news that Blackstone will double its £100 billion investment into the U.K. during the next decade, while yesterday saw Google announce a £5 billion investment which will see it open its first U.K. data center and expand DeepMind, its London-based AI arm, creating more than 8,000 jobs.

The big prize for the U.K. is to establish some kind of “AI sovereignty” — something Huang identified as lacking during his fireside chat with Prime Minister Keir Starmer at London Tech Week in June. This is also consistent with the Trump administration’s ambition to sell American AI “packages” to allies such as the U.K. and South Korea as a counterweight to similar offers from China around AI infrastructure.

Ironically, much of the spadework for these deals was done by Peter Mandelson, who was sacked last week as British ambassador to the U.S. over his previous ties to the disgraced financier Jeffrey Epstein.

Any mention of Epstein this week, particularly at press conferences hosted by Trump and Starmer, will be excruciating — and a reminder of how these sensitive diplomatic occasions can backfire.

The most notorious, in 1978, saw the late queen hide behind a bush in the gardens of Buckingham Palace to avoid Nicolae Ceaușescu, having already removed anything that the Romanian dictator could steal from his room following a warning from Giscard d’Estaing, the then French president.

There is also an apocryphal tale of a state visit in which, during an open-top carriage procession, the queen apologized to her guest after one of her horses broke wind loudly.

The guest — some say it was the Nigerian leader Yakubu Gowon in 1973, others the French President Jacques Chirac in 1996 — is said to have replied: “Don’t worry, ma’am, I thought it was one of the horses.”

One hopes the King’s horses will be less flatulent this week.

— Ian King

CNBC’s Arjun Kharpal reports on the potential outcome of Trump’s U.K. visit with tech CEOs.

The U.K. is falling out with big pharma over drug pricing. CNBC’s Ritika Gupta discusses the issues with Jimmy Muchechetere, global healthcare and industrials equity research analyst at Investec.

Anthony Gardner, former U.S. ambassador to the EU under Obama, discusses Trump’s second state visit to the U.K., including the U.K.-U.S trade talks, the nuclear deals and the ongoing Russian invasion to Ukraine.

— Holly Ellyatt

U.K. equities have been trading rangebound near all-time highs. Over the past week, the FTSE 100 has given up some of its gains to fall about 0.5%.

Meanwhile, Sterling has strengthened against the U.S. dollar over the past seven consecutive trading days, gaining 1.7% against the greenback.

Elsewhere in the U.K. government bond market, the 10-year gilt yield was trading about 4 basis points higher than last week at 4.65% but significantly below the 4.8% reached in early September.

Sept. 17: U.K. inflation data for August

Sept. 18: Bank of England rate decision

Sept. 19: GfK consumer confidence data

— Holly Ellyatt