Making sense of the forces driving global markets

By Jamie McGeever, Reuters Open Interest Markets Columnist 

Tariffs and worries over the Federal Reserve's independence battled against tech resilience in U.S. stock market trading on Thursday, while the Bank of England's narrow call to cut rates highlighted the dilemma facing many central banks right now.

More on that below. In my column today I explore whether U.S. President Trump's punitive tariffs on India and Brazil could inadvertently push the BRICS nations closer together and breathe new life into the bloc. 

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A day packed with policy decisions, economic data, corporate news, and twists in the global trade war and saga over President Trump's influence over the Federal Reserve ended with U.S. shares in the red on Thursday.

Optimism around the U.S. tech and artificial intelligence revolution abounds, and companies that are manufacturing in the U.S. or have committed to do so will escape Trump's new 100% tariffs on imported chips.

But the unpredictable and impulsive nature of Trump's tariff policy, the ultra-high duties imposed on some key trading partners, and the expected negative impact on growth and inflation may finally be starting to weigh on investors' minds.

Trump's interference in independent economic institutions is certainly worrying investors. These concerns intensified on Thursday after Bloomberg News reported that Fed Governor Christopher Waller is Trump's favored pick to replace chair Jerome Powell.

Waller voted last month to cut interest rates, and would be seen as sympathetic to Trump's desire to slash borrowing costs. Maybe too sympathetic. Trump also said on Thursday that Council of Economic Advisers Chairman Stephen Miran will fill a vacant spot on the Fed board until January. 

Earlier on Thursday, the Bank of England cut interest rates to 4%. But the 5-4 vote was so tight, the BoE's rate-setting committee held two votes for the first time since the BoE was granted independence in 1997 in order to reach a decision.

Growth is slowing, inflationary pressures are rising. It's central bankers' worst dilemma, one that many around the world are facing right now.

In Asia on Thursday, data showed that Chinese exports and imports in July were much stronger than expected as firms front-loaded activity ahead of Trump's tariff deadline later this month. Chinese stocks leaped nearly 2%, and the yuan rose too. 

Elsewhere in emerging markets on Thursday, Mexico's central bank cut interest rates and Indian Prime Minister Narendra Modi and Brazil's President Luiz Inacio Lula da Silva spoke by phone, covering a broad range of topics including Trump's punitive tariffs on both countries. 

More on that below.

U.S. President Donald Trump has the so-called 'BRIC' group of nations directly in his trade war crosshairs, slapping super-high tariffs on imports from Brazil and India, and accusing them of pursuing "anti-American" policies. 

Washington's relations with Brasilia and New Delhi have sunk to new lows. But this belligerence could backfire.   

The White House said on Wednesday that it will impose an additional 25% tariff on goods from India, citing New Delhi's continued imports of Russian oil. That brings the levy on most goods to 50%, among the highest rate faced by any U.S. trading partner.

Brazil also faces 50% tariffs on many of its U.S.-bound exports, not because of trade imbalances, but because of Trump's anger at what he calls a "witch hunt" against his ally, Brazil's former President Jair Bolsonaro, who has been charged with plotting a coup following his election loss in 2022. 

This breakdown in relations could be Trump's intention: push these countries to the brink so that they'll agree to trade deals that are heavily lopsided in Washington's favor. That strategy seemed to work with Japan and the European Union. 

But hitting these 'BRICS' economies with eye-watering tariffs could push them closer together, strengthening the resolve of a group that appeared to be losing whatever momentum, purpose and unity it had.