Is the US turning its back on Europe?

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1:06This is Political Currency with Ed Balls and George Osborne.

1:19So we are remote this week, but just two days ago we were in the studio. We are putting together a brilliant Christmas package of shows, special EMQs, another what if. If you remember back in August, we did that. What would have happened if history had turned out differently? And we're doing that again for this Christmas. Also, a couple of interviews with very senior political figures, which I think will be good. We don't have to keep that a secret, do we? Is that a Christmas secret? It's not like a present under a tree. Can't we reveal now? I think we can. I think we can. So who did you speak to?

1:53I spoke to Bridget Philipson. I've recorded the interview. She's such an interesting member of the cabinet. and, you know, not just education secretary, but, you know, she ran to be the deputy leader of the Labour Party and almost succeeded despite being the leadership candidate. And I spoke to my politician of the year 2024, not just for his election success in terms of seats gain, but also a brilliant election broadcast that he did about his family and his son and his life. And that's the Liberal Democrat leader, Ed Davey. And it was good. It was emotional and challenging and thought-provoking.

2:31And I think you will enjoy it. Got us in the Christmas spirit, didn't it, as well? Although, I have to say that the... I mean, Ellie may be up for the Producer of the Year in the Political Podcast Awards. But I thought her procurement of mince pies was a bit rank. I mean, you know, they weren't the best, were they? That's a bit rude. I know, didn't they? If I'd been asked, I would have baked some and brought them in. Okay, well, you can do that for next week. However, the reason why Ellie's up for producer of the year is not for her mince pie procurement. You're right, don't rub it in. What have you been up to?

3:05Come on, have you been, oh, I imagine you've been endless state banquets and grand Christmas do's in Downing Street and, you know, living the life of a top political spouse. I've not been to a Christmas do in Downing Street since before you were Chancellor. And the last... Oh, did you not get my invite? No. And the last state banquet I went to was Donald Trump. So no. But I was last night back in Lancaster House for the second time in a matter of a few days. Because of course, we were there for the Chris Martin Sarcoma UK quiz. I'm actually going next Monday, I'm going to present an award at the DFE awards ceremony and to have a chat with the permanent secretary.

3:46but last night was the annual foreign office shindig for all of the ambassadors and the diplomatic corps and the journalists who write about diplomacy and so i was back there in my spousal role and i'm stood to watch yvette's speech and there was a very yorkshire theme to the event there was um whitby crab not duke of york theme well no no i'm about to i'm about to get to that point because there were whitby crab rolls pontefereck cakes a yorkshire brass band all in Lancaster House. And you're thinking to yourself, is this the Wars of the Roses being reenacted? But then Yvette revealed in their speech, I actually didn't know this, but it was really cool, that in fact, when in the beginning of the 19th century, Lancaster House was built, it was originally commissioned by the second son of George III, the Duke of York.

4:38It was originally called York House. And then he passed away and it ended up with somebody else taking it over and it became Lancaster House. But originally it was York House. So last night in the Wars of the Roses re-enacted, the whites won. I don't think Andrew Windsor Mountbatten or Mountbatten Windsor, whatever his name is, is going to be taking possession of that house anytime soon, is he? No, I think that ship has most definitely sailed. Most definitely sailed. And were you handing around the Ferrero Rocher at the ambassador's reception? Yvette did say, she did say in her speech, that having grown up in the 1980s, she assumed when she arrived there would be trades of Ferrero Rocher.

5:20I mean, there were a lot of ambassadors and high commissioners and, you know, heads of mission. And the great thing about, you know, the modern world of diplomacy is these ambassadors and these, they're continually taking selfies. I mean, selfie after selfie. I guess, you know, that's how you keep your team back home in touch with what's going on. It's actually really nice. Do you know that old Margaret Thatcher story? So she would bring in to her study in Downing Street the kind of new British ambassador to Paris or the new British ambassador to Washington. And there would be a globe. She'd have one of those old globes like you used to get in a kind of 18th century library in the corner of her study.

5:57And she would say to the ambassador, so just remind me, which one's your country? And the gullible British diplomat would point to France or point to America or point to China or whatever. And she would go, no. And she put a finger on the United Kingdom and go, that's your country and don't forget it. Anyways. How about you? Did you have any sort of Christmassy events this week? Yes, I went to a much humbler event, which was Mike Bloomberg's Christmas party. Okay. You know, very nice. Thank you very much. I bet it was really humble. The kind of humble event a billionaire throws. It was a lovely event and lots of really interesting people because it assembles a very interesting crowd.

6:37So thank you, Mike, for that. Listen, we need to get on with our podcast, don't we? First of all, I think we're going to discuss, aren't we, the US national security strategy, which has been published in the last week or so, and the European response to it, because it has really set the cat among the pigeons. And it's all in the context of these ongoing negotiations around the peace deal, if that's the right way to describe it, between Russia and Ukraine, or at least an attempt to end the conflict and indeed European wrangling around how to treat Russian assets that have been sanctioned. So we're going to be dealing with that first.

7:12Then we're going to move from American foreign policy to the domestic agenda, the midterms coming up later in 2026. Last night, the US Federal Reserve cut interest rates in the US, but controversially with a divided vote, one Fed member wanting a bigger cut, two wanting no cut at all. Unusual for the Fed to divide. And that is, I think, reflecting the mild stagflationary challenge of the American economy. And the question is, what kind of political challenge is that going to throw up in 2026 for the president? And how much are we in Britain and Europe facing the similar kind of pressures that the US economy is facing at the moment?

7:53There was a poll actually this week of who's the most influential politician in Europe? And the answer was Donald Trump. And the reason we're focusing both on US foreign policy and domestic economic policy is it's going to have a huge impact on the UK over the coming year. And of course, we're also and have been for many, many decades, consumers of American entertainment and cinema shaped our culture, shaped the culture of the whole world. And we're going to have a quick look at what's going on in Hollywood and the battle for Warner Brothers between Paramount and Netflix. and what that says about modern technology, modern industrial policy, and indeed, whether it matters what goes on in Hollywood over here on the other side of the Atlantic.

8:34So quite a kind of American-themed show. Next week, by the way, we're thinking we're going to do a big review of British politics. So we will be returning home next week. But I think we can safely argue that everything we're talking about has a big impact on this side of the Atlantic. We should get on with item one. The new America First national security strategy rather arrived out of the blue, I think late in one evening at the end of last week. There was a similar document published in the first Trump administration. In fact, I think there is a legal requirement. There was a congressional act 30, 40 years ago requiring this to be published by every president during their presidency.

9:14But it did cause a bit of a storm. Yeah, I mean, it's only about 30-something pages long, and I don't want to turn people off this podcast, but I would actually recommend people who are interested in politics just read it. It won't take them long, take them 20 minutes to read it or so, because it's actually very clearly written. and I guess the theme of it or the sort of flavor of it is best summed up by a reply that Donald Trump gave in an interview he did, I think, alongside the publication of this strategy to Politico when he was asked about the fact that in this national security document it is scaling about Europe, about Western Europe, about its future.

10:04It, you know, essentially says it's facing an existential crisis and needs to get its act together. But rather than read out the words in the document, why not listen to the man himself? This is Donald Trump in his Politico interview. OK, I know the good leaders. I know the bad leaders. I know the smart ones. I know the stupid ones. You got some real stupid ones, too. But they're not doing a good job. Europe is not doing a good job in many ways. They're not doing a good job. They talk too much and they're not producing. We're talking about Ukraine. They talk, but they don't produce. I think they're weak, but I also think that they want to be so politically correct.

10:43I think they don't know what to do. Europe doesn't know what to do. They don't know what to do on trade either. I mean, I look at a lot of the trade situation that's going on over there. It's a little bit dangerous. But Europe, they want to be politically correct, and it makes them weak. That's what makes them weak. We should just contrast this to the first two paragraphs of the actual document. The first sentence is, over the past nine months, we have brought our nation and the world back from the brink of catastrophe and disaster. And the second paragraph, no administration in history has achieved so dramatic a turnaround in so short of time.

11:24I think Donald Trump's boasting about his achievements stands in marked contrast to his undiplomatically frank view of European leadership. Yeah, and there's an interesting paragraph in the document where he says, or rather, he writes the forward and then there's the kind of administration document behind it. It says this, President Trump's foreign policy is pragmatic without being pragmatist, realistic without being realist, principled without being idealistic, muscular without being hawkish, and restrained without being dovish. It is not grounded in traditional political ideology. It is motivated above all by what works for America, or in two words, America first.

12:08And it goes through the different regions of the world. And look, the ambition is absolutely clear, which is to be the strongest, most militarily powerful, most economically dominant nation on earth, to retain a technological edge over all of the rivals. And then it goes through the regions. I mean, one of the things that's been really controversial is it doesn't signal out Russia as a huge threat in the same way that, you know, a document, I think, from the UK or France or whatever would. But I guess I'm going to be a little bit provocative here because it's caused absolute outrage. Before you do, George, given that you chose to read that out, could you just explain to me, you know, because obviously you've highlighted this, what does it mean to say pragmatic but not pragmatist?

12:57I think what he's trying to say is, you know, this is not the foreign policy of a sort of, you know, globalist elite. Realistic without being realist? Yes. Honestly, does it mean anything? Well, it might not. And that's actually what I'm coming on to. Because I guess the question I've got is, it's written in a way, and it's very clearly written. And also, it's quite interesting. At the beginning, it explains what a strategy is, which is, I think, quite a clever device. But I was asking myself, okay, it's obviously very different from what a President Obama would have said, or indeed a President Bush, maybe Bush Jr.

13:37and Sr. But how different is it in practice? I mean, to what degree are we kidding ourselves if we say that American presidents have in the past, you know, been bound into a sort of global order that they haven't put America first? And I was just thinking over, you know, my lifetime, a set of decisions that America has made, which are essentially pretty kind of unilateral. I mean, the most obvious of which was the Iraq War. Now, I know Britain took part in it, but, you know, they defied the United Nations. France and Germany attempted to, you know, veto them at the UN, but they went ahead with the Iraq War.

14:17You know, if you look at my teenage years, there was the Grenada invasion by Ronald Reagan, the taking out of General Noriega in Panama, which is actually not unlike, you could argue, what kind of looks like it might be happening in Venezuela. and then even you go back to when I was born, there was the Vietnam War and go back to before I was born, there was Suez. And those are a series of presidents like Eisenhower, Nixon, Reagan, Bush, who essentially have operated on an America First principle. And if you just sort of try and dig behind the language and the rhetoric and the very provocative message to the Allies, that Donald Trump delivers.

15:02I guess the question is, in practice, how different is it from what's gone before? The interesting thing about the document is it sort of seeks to critique the past, to critique past American foreign policy. It's very dismissive of American foreign policy being kind of too globalist, allowing kind of international migration, institutions which become un-American, cooperation which undermines the American national interest. But look, I think I agree with you that at every stage in the post-war period, there has always been an American first policy, and they have shaped and driven doctrine and institutions to achieve outcomes which, as it happens, have often been good for the West more generally, but were undoubtedly America first.

15:55So I kind of agree with you that maybe they do protest a bit too much. It's also, it's slightly odd when you think of the Trump approach to foreign policy and politics more generally, to think that a big statement of doctrine and philosophy matters. Because actually, the thing about Donald Trump is he is the realist and the pragmatist. I mean, he will do what he thinks is the right thing to do at any point in time to get the best outcome as he sees it. I'm not sure if he's going to be hugely referring back to his national security statement as a sort of a set of guiding principles which will shape the individual decisions he takes.

16:33If you look at the way in which he's approached China or Russia and Ukraine, I mean, the interesting thing is to get outcomes. He often seems to move from very different principle positions almost hour by hour or day by day. So I'm not sure if I fully understand the purpose of this document, although I'm going to revise that. I think there is actually a purpose to this, but it may not be the purpose which ostensibly it sets out to deliver, which is a big statement of American foreign policy. I think it's actually all really about domestic American politics in the next election. And that's the lens through which you have to see it.

17:09Lots of Europeans have been very shocked by this. There's actually, as we speak, an urgent question going on in Parliament from a Labour MP, Mike Weston, demanding a government response to this document. But I would say that the thing to do is to stay calm and try to understand what's going on here. If you look within the document, it is kind of well-written, but it's also a bit contradictory in different sections. It slightly feels like different people had their bit. So there is clearly a strong Southern America focus in American foreign policy. It's called the new Trump version of the Monroe Doctrine.

17:47We will take control of the threats and the opportunities around the Americas and Russia, China, get out of our backyard from the administration, which is currently has just taken hostage a Venezuelan oil tanker because they are trying to crack down on the drug trade. This to me is like classic Marco Rubio showing that at the State Department, he's a strong man sorting things out in his backyard. That is part of his political appeal. And, you know, as a Florida senator... He's a Cuban-American, isn't he? That is the Rubio bit. But by the way, that's not so different from the Bay of Pigs, the Cuban Missile Crisis, the involvement in Nicaragua.

18:28I agree. The Sandinistas, all of that from previous administrations, right? Not disagreeing at all. You then go to China. What was really interesting about China is that there's very little about China, the political or security threat. It's much more about the economic relationship. And that feels to me like Scott Besant, the Treasury Secretary's bit, that he's kind of set out his stall, which is, I need kind of growth and dynamism in the American economy. And actually, going to war with China is a bad thing. We should double down on the economic relationship. I mean, it's surprising how little there is about the China challenge, but that maybe reflects that Treasury perspective.

19:08However, there's actually a rather classic American doctrine here, which is we're going to build a military capable of denying aggression anywhere in the first island chain. That's basically China can't attack Taiwan. And we're not going to allow anyone to take control of the South China Seas. That again is pretty classic, like the United States is not going to give up its control or its hegemonic position in East Asia. Totally agree. So there is consistency and continuity. But actually compared to the first Trump administration, China's statement of policy, this is less aggressive and more economically opening up.

19:45I wonder actually whether the real Trump doctrine is what he wants is a big political accommodation, the G2, America and China, and let us find an economic accommodation. Let's understand each other's security needs, but let's not have conflict and aggression. That's kind of what feels to me as to like the underpinning in all of that. He's got a big state visit to China in 2026, which is probably going to be the sort of geopolitical, the known geopolitical highlight of the year. Then you go to Europe. That is where all the headlines have come. And I mean, you know, it's actually quite stunning when you first look at it.

20:21I mean, this is what the document says about Europe. It talks about economic decline in Europe. But then it says, but Europe's real problems are even deeper. This economic decline is eclipsed by the real and more stark prospect of civilizational erasure. It goes on to say, should present trends continue, the continent will be unrecognisable in 20 years or less. What it basically says, I mean, this is sort of white ethnic nationalism, is basically saying that white Christian Europe is going to disappear. There's going to be civilisational erasure. And it actually says in the document that part of American foreign policy is to intervene to, it says, to cultivate resistance to Europe's current trajectory within European nations.

21:10I mean, that is, at first sight, a step beyond the way in which American presidents would have talked about Europe. I mean, they wouldn't have been talking about intervening within European politics to stop civilisational erasure. Of course, George, in the 40s, they would have been intervening to stop the rise of communism. And then in the 2000s, to stop the rise of terrorism. So there is a continuity there. But the language is very different and much more about race. And of course, what it does is it actually, and this is my third kind of influence. If there's Rubio in America and there's Besson in China, this here is the J.D.

21:50Vance section. He made that speech at the Munich Security Conference at the beginning of the year. And that was the first time we heard the language which is so strongly echoed in this document. Let's just have a quick listen. The threat that I worry the most about vis-a-vis Europe is not Russia. It's not China. It's not any other external actor. And what I worry about is the threat from within. the retreat of Europe from some of its most fundamental values, values shared with the United States of America. See, this is the point where I think you could say, oh my goodness, this is a massive break with the past.

22:28This is a different American approach to foreign policy intervening because they think that we are becoming less like them, civilizational erasure. And I think there would be some European leaders popping up and saying, this is a catastrophe, It's a call to arms. It's a disaster. When I look at that, that says to me that this is actually a document about the next presidential election. This is J.D. Vance setting out his stall in the same way that Marco Rubio was setting out his stall when it comes to Latin America. If you're in opposition, you have to run against failures within the government you're taking on.

23:03And so Trump won the last election by pointing out Biden's failures on immigration. Very hard to run in the next presidential election against the government because they are the government. So what do they have to do? They have to set up a bogeyman, the threat. If you elect a Democrat president, we will go like the Europeans. We will go down the road of civilizational erasure. we will kind of lose our essential American-ness. I just read this and think that this is the Vans pitch for 2028. Okay, very good observation. But I would say some of the questions that this document and Donald Trump's interview with Politico has raised and some of the reaction you've had from European leaders, you know, the Germans outraged and so on.

23:54interesting the british downing street you know didn't want to get into this fight at all uh so the statement from keir starmer's spokesperson was you know we keir starmer has a good relationship with donald trump and looks forward to continuing to work with him on issues of mutual interest you know they weren't getting into the civilization the civilizational erasure debate by the way quite rightly you know because we are not the audience the audience is american voters who jd vance and others are trying to scare and they need an external vaguement. I just don't think we should take this too seriously.

24:28We should engage with Donald Trump issue by issue on trade or on Ukraine or on the Middle East. But if you read this language and think this is actually an outward facing national security strategy telling us how America is going to behave, I think it's much, much more internal and political. Okay, but it does echo quite a lot of European self-doubt and soul-searching about Europe's inability to coordinate, Europe's weakness in terms of cooperation on military power. I mean, as the document points out, European allies enjoy a significant hard power advantage over Russia, and yet they've not been able to deter Russia in Ukraine, or didn't deter Russia from invading Ukraine.

25:11Which is your continuity point, because actually American administrations have been saying versions of that for years. for years, and rightly so. And actually, you know, it turns out Donald Trump, by a different rhetorical approach, is forcing European leaders to realise they've got to get their act sorted out. So I agree with you on that. And is it so different, all the stuff they're saying about Europe becoming unrecognisable from Keir Starmer's language about an island of strangers? I mean, is that, like, I know Keir Starmer backed off that language, but you've had other prominent left-wing politicians, and of course politicians on the right, talking about how rapidly our societies are changing, how mass immigration is, you know, destroying our sense of nationhood and all that kind of thing.

25:54I mean, you know, so, you know, I'm just saying that quite a lot of the things he's saying are being echoed by European politicians. Well, they are certainly being echoed by American politicians as well. You see, the thing is, if you take the phrase Muslim no-go areas, Donald Trump has said this. I remember going to Mar-a-Lago with the BBC back in 2017 and a Trump supporter saying to me within the Mar-a-Lago place, she said, you know, you're from London. Are you safe there? Aren't there Muslim no-go areas? I think Donald Trump may believe there are Muslim no-go areas in London. Ed, don't you think it goes further than that?

26:29I'm very struck on my trips to America, how you get people who are not at all kind of rabid Trumpian people who say, my God, the situation is so bad in London. And you haven't got this. Cunningham has been taken over by Sharia law. I know. This is among, this is not among, you know, you get kind of Democrat voices saying this to you as well. Yes, but I don't think J.D. Vance believes that, do you? J.D. Vance is, you know, an international, well-traveled person. He spends, you know, the summer having meetings with you in the Cotswolds and meeting David Lammy in Chevening. Unlike Donald Trump, he's probably walked the streets.

27:02In no way does J.D. Vance think there are Muslim no-go areas in London because it's obviously nonsense. And we all just think it's a bit of a joke. You know, they can't be serious. But actually, as you say, enough people believe it in America is now sufficiently widespread that if you want to play politics domestically, actually using the European bogeyman is a quite effective way of saying, you know, if you can say, don't vote Democrat because we'll end up like the Europeans, that's actually not a bad argument in American politics, even though we actually think it's a little bit. I mean, look, I accept your point that growth is slow, But actually, I would feel safer walking the streets in London than I would in American cities.

27:43And those people you're talking about who think there's no-go areas wouldn't understand that for a second, but it's true. I'm not sure he does walk the streets of London, but Michael Bloomberg was saying to me yesterday how clean he thought the city was and how well run it looked and so on, having spent some days here in London. But, I mean, we should sort of draw this to a conclusion. But isn't it interesting, you know, the kind of hard case of all this is Ukraine, because we've got these peace negotiations going on that are being conducted by essentially, you know, Donald Trump's peace negotiator and his son-in-law.

28:17So Wyckoff and Jared Kushner is being done directly with the Americans, and then they're speaking to the Ukrainians. And Europe is sort of, Europe, including the UK, is kind of playing, you know, a secondary role is the politest way of putting it. I mean, yes. Are you sure about that? Zelensky was in London this week in Downing Street, you know, with the French and German leaders as well. The European Union is inching years after the conflict started towards using frozen assets, Russian frozen assets, to try and provide, to raise a loan that they can then provide aid to Ukraine with. Although that is something as well, by the way, Donald Trump is not very keen on.

28:58It's just, you know, where's Europe's plan? Where's Europe's response? Where is, and Europe, I'm including the UK here, where is our plan for the Ukrainian peace? Where's our plan for the Ukrainian post-war resettlement? And doesn't kind of Trump have a point here, which is if we can't collectively get our act together, and he makes a similar point about our allies in the Indo-Pacific as well, then it is going to be America first, or America doing what it likes and everyone else playing catch-up. I'm just surprised that George Osborne, the pro-European remainer, goes to this position. I would love there to be more coordination.

29:34And I think if we were in the EU, we'd be able to play much more of a coordinating leading role. And I fully applaud Keir Starmer's attempts to kind of try and create a common European position. I'm just saying that it's a bit late. You know, we've had three or four years to come up with Europe's Ukraine plan. You are right on the growth agenda. and when it comes to European security, cooperation and funding, I mean, it was pretty woeful in your time, the time I was in government and today. So you are right, that has not been addressed. But if you take the particular issue of Ukraine and this negotiation, go back to the original peace plan two weeks ago.

30:13In that peace plan, Ukraine was not going to join NATO, not going to join the European Union. There was going to be no foreign troops on the ground in Ukraine. there was going to be not only Ukraine giving up to Russia territory, which Russia had taken, but giving up more territory than Russia had taken at that point. It was going to cede territory it was currently holding. And actually, the current deal on the table, as far as we can see, is a substantial rolling back from that position. As of today, who will reject this deal? It won't be Zelensky who will reject it, it'll be Putin, because this is not a deal which is in his interests.

30:52Has that happened because Donald Trump has been persuaded by Zelensky? Or has it happened because Donald Trump and the American negotiations in those conversations with European leaders have been persuaded that this is a bad deal, which would not only be bad for Ukraine and for Europe, but for America too? I think in the Middle East, it's really hard to make that case. But in Ukraine, I think you can make the case that the position has shifted quite a long way. I would pray and aid the Ed Balls doctrine that it's always domestic, domestic, domestic. I think you'll find it was the Republican reaction in places like the Senate to that original Russian, you know, the original 28-point plan that looked like it had been drafted quite a lot by Moscow that actually sent the administration into reverse.

31:38And Marco Rubio, the state secretary, saying very critical things about it that weekend. So look, I agree with you. All I'm saying is that the deal shifted during these European talks. And the Osborne thing is to say, yeah, but as a matter of principle, Europe must be irrelevant. I just think you spent too long with J.D. Vance. I think that's the problem. Not long enough, you'll say. He's got in your head. Well, I think you need to spend more time with him and persuade him. You and David Lammy need to do a number on him. Because the thing is, unlike Donald Trump, he doesn't believe this rubbish, but he says it because he thinks it's good American politics.

32:15And the worst thing which we could do is take it too seriously and get all wound up about it and get all angry and have urgent questions and demand summits and have condemnations. You roll your eyes and think, actually, you know, what I want to do is be pragmatic, not a pragmatist. I want to be a realist, but not just realistic. Which way round it was. Anyway, you know what I mean. Basically, that is the right place to be. Take Donald Trump on his own terms. Don't start reading his long security strategies and taking them as kind of gospel, because I don't think he does, so why should we? Very interesting.

32:50Anyway, I do recommend people read, even if they don't read the whole 30 pages or so, just read the first few pages. Work out the bits you think are Donald Trump, the bits of J.D. Vance, the bits of Marco Rubio, the bits of Scott Besson, the bits written by other parts of his political world. It feels to me like there's multi-authors to this document. Yeah, and have a nice Ferrero Rocher while you're taking it all in. Listen, we're going to turn next to the thing which, you know, to be fair, this strategy does talk about a lot and says underpins it, and that is the strength of the US economy and its impact and the impact of American monetary policy on our economy here and indeed on conditions in the global economy more generally.

33:32We're going to turn to the economy next.

33:43So welcome back. So we were talking about the 2028 presidential election. And clearly, having a bogeyman threat is part of the strategy. But in the end, when you are the incumbent, what matters most is what is happening on your watch, on the economy, to living standards. And this is, I think, the biggest and most interesting challenge for 2026, the midterms coming up at the end of next year. We saw in the US elections where people voted in November, it was good for the Democrats and the economy is hurting Trump at the moment. In that same interview with Politico about the national security strategy, Donald Trump was also asked about his economic record.

34:25And this is how he replied. But I do want to talk about the economy, sir, here at home. And I wonder what grade you would give A plus A plus A plus plus plus plus. Well, it's interesting because I talked to a supporter of yours. Her name is Melanie from Westmoreland County, PA, and she loves you. She gave you overall an A plus plus. But here's what she said about the economy. She said, quote, quote, groceries, utility, insurance, and the basic cost of running small business keep rising faster than wages. She also says that not enough is being done. Mr. President, this is one of your supporters.

35:03Okay, good. And I love her because you said I got an A-plus on everything, I guess. I don't know what you have to understand. The word affordability. Prices were at an all-time high. When I came in, prices are coming down substantially. Look at energy. You and I discussed before the interview energy. Energy has come down incredibly. when energy comes down everything because it's so much bigger than any other subject but energy has come down incredibly prices are all coming down it's been 10 months it's amazing what we've done i love the uh a plus plus can you imagine a british politician and then the interviewer says the supporter gives you an a plus overall but the economy is going really badly and he says i know an a plus for everything i love her and you think Yeah, I'm not sure you're listening, Donald.

35:49I mean, obviously, the context of this is sticky inflation in the US, and it's been one of the issues behind the thinking at the Fed. Of course, that campaign we discussed in New York City for the Morality of New York, where the winner went on the affordability issue, which is how they describe cost of living. And, of course, here in the UK and in other countries, cost of living remains a big issue. But let's just turn to the Federal Reserve has cut rates again by a quarter point. And I think there's an expectation that that's broadly it. It's not quite the same as the UK. It's just got a range, isn't it?

36:24So it's now sort of 3.5 % to 3.75 % interest rates in America set by the Fed. Not much of an expectation there'll be further rate reductions, possibly one quarter point reduction next year. And this is the third cut in a row. But the Fed itself, which is not 100 miles apart from the way the Monetary Policy Committee operates, there's a group of 12 independent people. But they tend to operate, I guess, more by consensus. They don't like revealing split votes as much as the Bank of England is happy to do. And three of the 12 people didn't vote for a cut. And that's the first time, I think, in four or five years that we've had such a kind of big divergence.

37:03And this all is taking place against the backdrop. I mean, literally, this happened yesterday, and on the same day, Donald Trump was interviewing candidates to be the next chair of the Federal Reserve, which is a contest being kind of played out very much in public, because Donald Trump's talking about it a lot. Let's start first about the Fed decision. What struck you as unusual about it or were noteworthy about it? If you put the Fed politics aside and just talk about the economy, the thing which is striking is the real sense of uncertainty, which is shaping the Fed's communications. I think they've got a real dilemma.

37:42On the one hand, you have a labour market, which looks like it's slowing down, unemployment rising. Donald Trump's been saying they should do more interest rate cuts. His supporter on the Fed board, Stephen Mirren, who's currently on leave from Trump's Council of Economic Advisors, He voted for a half-point cut. But on the other hand, and this is why I said mild stagflation earlier, stagflation tends to mean unemployment and inflation high at the same time. It's what happened in a big way in the 1970s in Britain. The problem is that inflation in America has stayed persistently high, been slow to come down, still stuck above 3%.

38:21The Fed's goal is 2%. So if inflation is staying sobly high, why are they cutting interest rates when inflation has not come down. And in his press conference yesterday, that kind of dilemma between is the economy slowing too much, unemployment going up, do I need to cut interest rates more? Or is inflation being stubborn to come down? And should we not be cutting interest rates? What the chair of the Fed, Jerome Powell, essentially did was pin the blame on Donald Trump. And what he said was, the story with inflation, and you know, we're well aware this is a story at this point, is that if you get away from tariffs, Inflation is in the low twos.

39:00Right. So it's really tariffs that are causing most of the inflation overshoot. If it wasn't for the big rise in tariffs, which Donald Trump has put in place, which have the impact of raising prices for American consumers. If you put a tariff on an import coming from China, all that means is the American consumer pays the price to the Chinese plus the tariff to the American government. and what Powell is saying is ex-tariffs, inflation is actually lower that's the case for cutting but he's worried that the tariff effect is keeping inflation higher and the worry they will have is if that gets kind of locked into expectations then you end up with a bigger inflation problem that's why he's being cautious Let me ask Ed Balls, the economist is tighter monetary policy the right response to essentially a supply side constraint caused by tariffs.

39:53I mean, isn't that, I mean, you're kind of hitting demand rather than... In first order terms, you would think that is just a one-off jump in the price level. And unless it persists, you should look through that and look at the underlying inflationary pressure. And what Powell is saying is actually he thinks the underlying inflation pressure is around 2 % close to the target. So that is the case for a cut. And they did do a cut yesterday of a quarter point. I think they are being cautious because they are worrying about whether or not you might have some second round impact of the tariff into kind of wage expectations.

40:27But, you know, I have some sympathy with the people who say, actually, ignore the tariffs, because if the economy is slowing down, you need to get interest rates down. And I think that's probably why interest rates will be coming down into next year. But then when you go to the politics, what is really interesting, I think, in the way which the debate has shifted in the US in the last year or so, there was a very good blog by Brad DeLong, former Harvard economist, I think he's now in California. Martin Wolf and Paul Krugman have been debating this in the Financial Times in recent weeks. It seems as though when you look into the surveys of American consumers, the thing which is really upsetting people is not affordability in terms of inflation is rising faster than wages.

41:06So I am relatively worse off. It's just the prices have gone up. So people are thinking, you know, I used to buy a burger for$2 and now it's going to cost me$3. Why has that happened? Who is to blame? And that sort of one-off impact of the rise in prices through the tariff, that may not have any long-term implications for monetary policy, but it seems to be biting politically very hard. And the latest opinion polling in the US says those people who think that the economy is the biggest issue, those people who are most worried about the cost of living are the ones who are most disillusioned or losing support for Donald Trump.

41:43And of course, his election win was against Joe Biden on the cost of living argument and the inflation that Joe Biden caused and all of those swing states in the industrial north in Michigan and Pennsylvania, very cost of living elections. So independent of whether the economy slows and independent of whether interest rates come down, that rise in prices, which is upsetting people, and that is the direct impact of the tariff. Donald Trump will hope, I know, but look, I'm going to cut taxes. You know, his big, beautiful bill is using the tariff money to cut taxes. Maybe that's going to be okay.

42:18Maybe people will feel better. By the way, Americans, they're going to get the checks coming in the post for Americans. There's a fiscal stimulus. Exactly. Paid for by the tariffs. Coming early in the new year, American families are going to receive direct cash injections, and that will presumably boost consumption. And if you look at the cost of living squeeze in America into next year. I mean, very painful, very difficult. Income's only growing by 2 % a year. On the basis of the Office of Budget Responsibility UK forecasts for the next three years, it wasn't 2 % like in America. It's a quarter of a percent a year.

42:53So if you think the cost of living squeeze in America is politically painful, think how painful it is in Britain. Of course, the reason for that is in America, as you say, the tariff money is being used to cut taxes, Whereas in Britain, that quarter percent growth in real disposable household income is happening because of the tax rises, which can keep coming through because of the freezing of personal answers, which are now going to be extended into the next parliament. And of course, what Rachel Reeves and Keir Starmer want to say, no, no, no, but those tax rises, they were all done by Rishi Sunak and Jeremy Hunt.

43:23They weren't our tax rises. You know, these are the ones that they left for us. Not totally sure whether that's an argument you can win politically. I mean, there are sort of two observations on them. I mean, first of all, you know, as Trump picks the Fed chair, he's got a short list of five or six. He says he's got a front runner, but he's also now conducting these interviews. And I think one of the kind of big questions is, is the person he picks going to have not only be, you know, obviously they're going to have to be someone who says, I'm 100 % behind you, Mr. President. You're an A++++ president.

43:52I'm going to cut rates, you know, because that's basically what he's demanding of anyone who wants the job. So it's all very well saying, well, I'm not prepared to say those things, but, you know, he won't nominate. you. And he also says he wants to avoid what he would say, I don't agree with him necessarily, was the mistake of picking Jerome Powell last time, who told him a load of things, but then got in and did other things. Equally, Donald Trump's got to pick a candidate who's got enough credibility with markets and credibility with the FOMC, the committee in the Federal Reserve that sets the race.

44:22If the committee increasingly fractures, then actually the power of the chair becomes diminished. And then on the UK, I think the UK, which has been a bit of an outlier, will probably come into line on rates. Everyone's expecting the Bank of England to cut rates next week to 3.75%. It's the European Central Bank that's the outlier now at 2%, quite a lot lower. I would just say there are two other things going on in the global economy. Well, sorry, one domestic, and then something more broadly in the global economy. It's worth noting this week, we've been talking about tariffs and America first, that China has just racked up its biggest ever trade surplus.

45:00So anyone who thought that, you know, all these tariffs were going to be doing a huge amount of damage to Chinese exports and America was going to put China back in its box, that's not the case. It's just racked up a$1 trillion trade surplus. And although its trade with the US is$100 billion less than it was a year ago, it's hugely increased its trade with Southeast Asia and with Europe. And that's going to start causing political problems. In fact, Emmanuel Macron has started to say, look, this is not acceptable. And I think what he's really referring to, and the really dramatic change in Chinese exports, has been cars.

45:36Over the last couple of years, China has gone from a big importer of cars to a big exporter of cars. And you see that with the electric cars that are now very good products. because you see them around streets. And that is a massive threat to kind of the European car industry. So I think that's sort of one interesting thing. And then second, you know, I don't want to sound like a crack record, but Brexit, you know, this study, this American study by the US National Bureau of Economic Research, which is now widely accepted around the world as the best, most independent, you know, non-UK-based study, says that Brexit has reduced UK GDP by 6 % to 8%.

46:13investment has been reduced by 12 to 18 percent employment by three to four percent and productivity by three to four percent as well and it's in this context i just want to note that we were just talking about him earlier in the podcast david lammy has weighed in he's the justice secretary but he's also the deputy prime minister saying well maybe we should rejoin the customs union which i'm gonna say i was telling the labor government to do when they were still in opposition we have an EMQ question on that. I'm going to hold back my response to that until we get to our questions episode. But that study is very kind of important and powerful.

46:52Just reflecting upon what you said, I'm going to come back to this, which is in the end, when you're in government rather than in opposition, you have to take responsibility for the outcomes and the decisions you take. And the fundamental pillars of American economic credibility have always been, you know, sound statistics. Donald Trump sacked the head of Bureau of Labour Statistics in August because he didn't like the statistics he was producing. America's leadership around open trade and international commerce. And the US Treasury has, I'm afraid, allowed Donald Trump's tariffs to put a big hole in that strategy.

47:25And then the US Federal Reserve and its international standing. And I'm not sure if I was Donald Trump, I'd be playing fast and loose with the Fed when I was thinking about who to appoint. He needs to be careful there. The other thing is economics kind of dominates what you say. The reason why there's a US trade deficit with China is because the Chinese don't consume enough, save a lot, and then buy American debt because America's got a big deficit. And that hasn't changed and the tariffs won't change that at all. I don't think China's worrying at all about these tariffs. As you said, they're diverting some exports to Europe and Asia.

47:59The problem with the tariffs is it's raising prices for American consumers. I mean, they're the only ones who are really suffering from this other than like overall global trade slowing in the world economy, you know, you reap what you sow. And I'm not sure that Donald Trump is going to be able to talk his way out of economic reality that he has chosen to give American voters in 2026. And that's something which we'll keep a close eye on. Yeah, now look, we've talked about American foreign policy, American economic policy, let's turn to cultural policy or cultural influence because some of the biggest players in Hollywood are gearing up for a battle and it will have an impact over here and we're going to turn to that next.

48:48Welcome back. So some of the biggest players in Hollywood are fighting it out for control of Warner Brothers. I'm sure we've all heard of Warner Brothers. It's called Warner Brothers Discovery because it also has Discovery Channel, HBO, TNT Sports, CNN, and the like. And Netflix put in an offer, which was accepted, to buy Warner. And this was very much seen as the kind of new Hollywood taking over the old Hollywood. They were going to buy one of these great old Hollywood studios, although part of Warner would split out. So things like they weren't going to buy CNN. So they put their bid in. And the leadership of Netflix have been known really as sort of Democrats, Democrats supporting people.

49:33It's seen as a quite sort of Democrat-leaning company, or has been. But Ted Sarandos, who now runs it, who I've met a couple of times in my life, and, you know, he's a very impressive guy. But he was in the White House trying to persuade Donald Trump this was a good idea. Anyway, out of the blue, well, not out of the blue, I guess people saw this coming, has come a rival bid from Paramount Skydance. Again, you've probably all heard of Paramount Pictures, another great old Hollywood studio, which is now owned by Larry Ellison's son. Larry Ellison is the tech titan who founded Oracle. And his son, David Ellison, is a big player now in Hollywood.

50:14One of his business partners in this is Jared Kushner, who's Donald Trump's son-in-law. I think I'm getting this all right, but it's quite complicated. There's quite a lot of personal politics around the Trump family. There's quite a lot of, you know, which way do these different players lean? And Paramount has come in with a rival bid to buy the whole thing. So it doesn't want to break up the different bits of Warner Discovery. It wants to buy the whole thing. And look, either way, it's a big kind of concentration of power in Hollywood. It's a big agglomeration. It's not the first time this has happened.

50:53For example, you know, Disney bought 20th Century Fox about seven or eight years ago. But it's a big deal. It's only something that Donald Trump thinks he should weigh in on. There's a whole separate question, by the way, which is, is all of this irrelevant because of the rise of YouTube and TikTok and maybe the new new media is coming? But for the third time on this edition of the podcast, Let's hear from the president of the United States, because he's been having a busy week. Do you support the Paramount bid for Warner Brothers? I don't know enough about it. You spoke about Netflix last night, saying you have concerns about them.

51:30I know the companies very well. I know what they're doing. But I have to see. I have to see what percentage of market they have. We have to see the Netflix percentage of market, Paramount, the percentage of market. I mean, none of them are particularly great friends of mine. You know, I just I want to I want to do what's right. It's so very important to do what's right. If Paramount is supported by Jared Kushner, Mr. President, would that impact your decision? If Paramount is, I don't know. I've never spoken to him. He's really trying to work on gossip. I think gossip is primary thing. Did you believe that Donald Trump doesn't know his son-in-law is bidding for Warner Brothers?

52:10No, not for a second. I mean, Larry Ellison, the richest man in the world, big Trump supporter, a big supporter of Tony Blair as well, big funder of the Tony Blair Institute. His son is behind this deal with Jared, big consortium of, I think, quite a lot of Middle Eastern sovereign wealth fund money in there as well. No, undoubtedly, Donald Trump knows about this. And I think the reason why this becomes interesting is because it moves from business to politics. Just on the business first, I mean, you are right to say it's about the future, but it's also about legacy because warner owns huge amounts of legacy content which netflix wants to get his hands on and so all the episodes of friends or kind of batman or harry potter and i think if you are um netflix and you can get hold of all of that and then say you can only ever watch harry potter films or friends if you are a netflix subscriber we won't let it be available anywhere else.

53:08I mean, that is a powerful thing. The reason why there's worry about the Netflix deal, which has been accepted by Warner, is because it looks like it increases, you know, concentration in the market. It means that you have like a bigger, bigger players, question mark, should the competition authorities be worried about that? The counter argument, as you said, is if you think about Google and YouTube and, you know, a broader view of not just cable or streaming, but broader media availability, then it becomes less big a player. But anyway, it's been accepted by Warner. And of course, the trade unions and the Writers Guild have all condemned it.

53:46You then have this alternative bid comes in, which is rejected by Warner. They go for Netflix. So it's now a hostile bid from Paramount, from Ellison Jr. and jared kushner they say it's a better deal because there'll be much less concentration it's not a challenge to competition policy which is why it's significant that donald trump referred to market shares in that clip you just played but they also have a political pitch they say and i think if you look at the financial times today they're now saying this overtly that under the netflix warned deal cnn which donald trump is pretty hostile to thinks they're kind of bunch of lefties, run by Mark Thompson, former director general of the BBC now.

54:31That would be spun out into a kind of a new company, become more independent, along with Food Network and Discovery Channel. It would be called Discovery Global. And so that would give CNN a more independent identity. What the Paramount bid says is actually we're going to keep that in-house and we're going to merge it into CBS. CBS, which historically was also seen as a bit hostile to Donald Trump, well, at least he's hostile to them, but now has a new editor-in-chief, Barry Weiss, who is actually a big anti-woke Trump supporter. She set up something called the Free Press, which various British writers like Neil Ferguson have written for and so on.

55:10And you're right, now she's been brought in from the thing she set up to run CBS, which was seen as very liberal. And in this world, if Paramount gets its way with its hostile bid, suddenly CNN and CBS together, potentially, and I think that is the cell, becomes a right of centre media organisation. I'm not going to say the same as Fox News, but in that kind of space, that is a major reshaping of the political media market. So while it might be that there'd be less market concentration, the politics of American television and news shifts substantially. CNN doesn't become the a critic of Donald Trump but becomes a supporter.

55:56In a British context, if you were having this kind of conversation, there would be a competition discussion, but there would also be a political balance conversation within a regulated media environment. That's the role Ofcom plays. In America, there may be a competition policy discussion, but there isn't really any equivalent to that sort of regulated, independent broadcasting objectivity. And so - Although it's true, Ed, in competition policy in the UK, I mean, I remember this all from Farago around the Sky takeover, which eventually led to the Leveson report and the like a decade ago. But in competition policy, it'll happen if the Daily Telegraph is bought by the Daily Mail, which is currently on the cards.

56:42It does actually, unique amongst all the sectors of the economy, it's still the Secretary of State. who it's not ultimately a non-political decision. I mean, if the politician acts in a kind of quasi-judicial way, they're not supposed to show any kind of bias. But media takeovers remain the one bit of UK competition policy where a cabinet minister ultimately decides. That's right. Within our regulatory and off-com environment, the government would take an interest in this, a close interest, if it was happening in the UK. And I think the European competition authorities will, if there's a Netflix Warner deal.

57:18But in American politics, when the Paramount-Ellison-Kushner bid, easier on competition, got a bunch of Middle East money, a bit more complicating, but saying CBS and CNN become a new merged right-of-center television channel, are American politicians? Is Donald Trump taking an interest in this? Absolutely. He is a very, very close interest. Paramount is, I don't know. I haven't spoken about it. I think Jared's trying to work on Gaza. His primary thing is Gaza. Oh, yeah. Really? Did you also notice this week, you mentioned that Larry Ellison, the father of the guy who runs Paramount, is a huge supporter of the Tony Blair Institute.

58:04But did you notice that Donald Trump has kicked Tony Blair off the kind of Gaza board? I mean, I think everyone correctly sees that Tony Blair has been very influential in putting together the Gaza peace plan and was going to serve on the kind of authority that was going to govern Gaza. And in the last week, it's been announced that he's not going to partly because some of the Middle Eastern countries have directly lobbied Donald Trump to stop that happening. Well, if that's the case, I didn't know that. I think that's a bad outcome. I think it'd be better if Tony Blair was on the inside of this.

58:36But we did say when we first talked about that Middle East peace plan some months ago that Tony Blair had managed to succeed in uniting a pretty broad coalition of interests across the region, being worried about it. I thought that Donald Trump was going to stand by him, and I think the British government have. So that's surprising. I didn't know that. The other thing worth noting is that Larry Ellison, there's something called the Ellison Institute being created at Oxford University. Well, it's in Oxford. I think it's actually not directly connected to the university, but it's right in the middle of the town.

59:07And that is a huge investment in UK life sciences and it's had some teething problems getting off the ground but it will so so larry ellison through the tony bro institute through the ellison institute of oxford you know the ellison family but this way they're they're quite big players on this side of the atlantic as well as on that side of the atlantic so we started off with what we thought was a um you know kind of like a business hollywood kind of story i mean i should have said that the the unions and the writers guild who condemned the netflix war deal also then condemned the paramount war deal as well I don't think they're going to be happy with any of the outcomes.

59:42It turns out that there's more politics and intrigue and significance in all of this than first meets the eye. That's why sometimes you need to turn to page nine of the Financial Times and see what is really going on. Or just listen to political currency. That's all for political currency. This week we'll be back on Monday for Ex-Minister's Questions. Yeah, or you can hear it earlier in ad free if you become a member, of course, of our kitchen cabinet. or even it's the Christmas season, isn't it? And the season of Hanukkah and any religion and no religions. It's a good time to give a gift and you can gift the gift of a political currency subscription.

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