Hello from Washington, where all eyes are once again on the inflation numbers after the consumer price index accelerated unexpectedly over June. The numbers will rekindle the fierce debate about the risk of runaway prices, fuelled by ultra-accommodative fiscal and monetary policy.

Our main piece today is on the UK-US trade relationship following a five-day trip to America by UK trade minister Liz Truss. Charted waters examines whether geopolitical tensions have affected foreign investor interest in Chinese stocks.

Somewhat surprisingly, UK trade minister Liz Truss is in Washington. Earlier this week we wrote from Brussels about odd changes of direction in UK trade policy as Britain leaves the EU. Today, we want to pick up on that theme in the context of the transatlantic relationship, where there’s been not so much a change of direction, but a slow acceptance that a trade deal is pretty much dead, and a subtle reframing of ambition.

This will be Truss’s first trip across the pond since Joe Biden was installed in the White House, so this time she meets his US Trade Representative Katherine Tai, and not Bob Lighthizer. It’s not their first meeting, though, which is why the trip is a little surprising — they met in London relatively recently. There, Truss was handed a bit of a gift by Tai, who had flown to both Brussels and London and surprised diplomats by proposing that both sides dropped their Airbus/Boeing tariffs and moved on with life.

But while the prize of tariffs on Scotch whisky being jettisoned by Washington has delivered Truss a win, a slow grind now lies ahead.

To put it bluntly, there have been no trade talks between the UK and US since the Trump administration left, and Team Biden has made clear again and again the it’s uninterested in striking any fresh deals. The Trade Promotion Authority has run out, so the UK stands very little chance of getting anything done. Truss has been smartly briefing about this for a little while now, including recently in the UK’s Sunday Telegraph newspaper, where a well-timed piece ahead of her visit to DC announced that a trade deal before 2023 would be tricky. (This is not news to anyone in DC, or anyone who follows trade, but it does get ahead of those stories her press people probably dread categorically announcing the deal is dead). The Telegraph reports that Truss is now “playing the long game” and accepts that a deal before the midterm US elections is off the cards. This is obviously a huge shift from the days when UK prime minister Boris Johnson was touting a swift deal with the US as one of the biggest prizes of Brexit, and a departure from the days when UK officials hoped a deal could be near-completed with Trump and then “Bidenised” (that is, the workers’ rights and green stuff could be added in).

So what will Truss try to get out of a US visit? It’s worth noting that the US’s big priority is getting allies such as the UK on to the same page when it comes to China. There is still a lot of detail to be thrashed out after the Airbus/Boeing talks were resolved — not least of all what the various vague commitments to work together on tackling non-market economies will actually look like. UK officials have said the Truss-Tai meeting will focus on what can be done to combat “market-distorting trade practices”.

On the UK side, with the Scotch whisky industry no longer hammering at her door, Truss is free to advocate for a different British nation — Wales. The lamb produced by its famous sheep farmers has been banned from the US since the mad cow disease scare of the late 1980s, and Truss has been trying to lobby for that to be overturned.

There’s also a lot of talk of digital trade. Truss was due to speak to Democrats on the Hill and tech industry representatives about how a UK-US agreement could “set gold-standard rules on digital trade”, and the Department for International Trade has been touting the great value of the UK’s tech industry. She’ll also travel to the West Coast to meet tech folk there. This is relatively interesting, given the possibility that the US could strike a standalone digital trade deal with the UK, as it did with Japan last year. There are plenty of trade watchers in DC who think these deals are the low-hanging fruit when it comes to striking agreements (that stop short of being full trade pacts) with Asia — the UK might be pushing on an open door if it wants to get something done.

The other interesting thing to note is Truss’s newfound appreciation for trade unions, which seems at odds with the history of her political party (the Conservative party), but is likely to go down well with Tai and her “worker-centred trade policy”. While in DC, Truss met AFL-CIO union president Richard Trumka to discuss protecting manufacturing and benefiting workers, apparently.

All in all, Trade Secrets is told not to expect any big announcements from this trip, which seems more about Truss wanting to make friends in Washington and on the West Coast than anything else. Perhaps playing the long game is the move. Especially when it seems there is little choice but to do so.

Earlier this week we looked at the possible ramifications if Beijing followed through on plans to allow Chinese savers to invest up to $50,000 abroad. Today we look at the other side of the coin — foreign investors’ interest in Chinese stocks. We thought that demand may have been tempered somewhat by the ratcheting up of geopolitical tensions, notably during Donald Trump’s time as US president.

However, as the chart below shows, foreign demand for onshore stocks actually rose when Trump was in the White House. As for 2021? It looks set to be another bumper year. Claire Jones

Line chart of net purchases via stock connect ($bn) showing offshore investors surge into China

There’s an interesting report from the US’s Government Accountability Office, which finds most companies don’t have visibility over their “conflict minerals” supply chains. Expect pressure in this area to rise for companies with operations on both sides of the Atlantic in the coming years.

Joe Biden is set to warn US companies of the increasing risks of operating in Hong Kong. Brussels has finally unveiled its Fit for 55 drive. While the name continues to drive us nuts, we applaud the EU’s ambitions of slicing emissions by more than half by 2030. We enjoyed this review of John Shovlin’s Trading with the Enemy. The book, which looks at the frosty relations between France and Britain in the 18th century, serves to prove that geopolitical tensions between major trading nations are nothing new.

Nikkei reports ($, subscription required) that Fujifilm Holdings has warned the Japanese government that a research arm of the Chinese military may claim intellectual property rights over the anti-flu drug Avigan as a Covid-19 treatment. Publishers are braced for censorship and police interference at Hong Kong’s annual book fair, once a symbol of free expression but now a microcosm of the National Security Law. Aime Williams and Claire Jones