Trump's tariff war seen redirecting investments to energy in Brazil

The tariff war led by the Donald Trump administration could redirect investments to Brazil's energy sector, experts told BNamericas.

This is especially true for the renewable generation segment, given that China – the main target of the tariffs – is the world's largest manufacturer of solar panels and batteries.

In addition, investments previously earmarked for wind and solar projects in the US may leave the country due to the difficulties imposed by Trump, whose focus is on fossil fuels and nuclear energy.

In the oil and gas sector, projects are unlikely to be delayed, but there may be impacts on the pace of industrialization related to oil activities.

Effects on the electrical equipment industry – both positive and negative – may also occur.

Below, BNamericas shares the views of four specialists on the subject:

Gustavo Cruz, chief strategist at investment firm RB Investimentos

"While tariff issues create a more turbulent global environment and lead many investors to pause decisions, we have seen a redirection of resources that were previously allocated to the United States toward other markets. European, Latin American and even Brazilian stock markets have benefited from this trend.

"Moreover, the interest rate reduction scenario in several regions – already underway in Europe, the United Kingdom, and, to a lesser extent, in the US – favors the search for assets in alternative markets, which could include Brazil.

"But for long-term projects like those in the energy sector, the main factor remains the domestic environment. Investors primarily assess legal certainty, return predictability and exchange rate stability. These elements weigh more heavily than the current state of the US economy."

Ivens de Oliveira, delegate of São Paulo-based economics think tank Corecon-SP

"The import surcharges on Chinese-made products, recently raised by the US government, will impact the energy sector, considering that China has emerged in recent years as a global producer and supplier of lithium batteries and photovoltaic panels, for example.

"This will lead to increased import costs for such components, resulting in higher production costs and, consequently, price hikes for technologies considered green and therefore cleaner in the US.

"For Brazil, this could be an opportunity to become a key global supplier of clean energy by expanding exchange with countries seeking affordable energy alternatives, which could also boost and attract investments to the sector."

Telmo Ghiorzi, executive president of oil industry goods and services companies association Abespetro

"The oil sector is not expected to suffer negative impacts. Firstly, because the US continues to encourage the oil industry. Secondly, because oil demand remains stable. Even in the most ambitious energy transition scenarios, oil will remain relevant in the energy matrix.

"Furthermore, Brazilian oil is relatively low-cost and has low emissions in its production process, making it attractive to investors and consumers. There are, therefore, no reasons to fear a reduction in the pace or volume of investment in the oil sector.

"Brazil's challenge remains the same: How to transform our abundance of natural resources, including energy, into industrialization, more jobs, and more exports of high value-added goods and services?

"The effects of tariff disputes on geopolitics and the difficulties surrounding industrialization are still very uncertain. While these effects are unlikely to impact oil investments and production, they may slow down industrialization and the improvement of Brazil's socioeconomic indicators."

Alexei Vivan, president of electric energy companies association ABCE

"It is still too early to assess the impacts of the US import tariff increases on Brazil's electric sector. Beyond the uncertainty it creates, which affects and reduces overall investment appetite, the impacts will depend on whether the tariff is applied to Brazilian products, US interest rates, among other factors.

"The effects are likely to vary by segment within the electric sector. If the current tariff remains, Brazilian products such as transformers, which are heavily exported to the US, may become more competitive compared with those from countries with higher tariffs, boosting exports but potentially causing shortages in the domestic transformer market, benefiting local manufacturers.

"On the other hand, there may also be an increase in the supply of foreign equipment, especially from China, due to their reduced penetration in the US market. Increased competition in the domestic market for equipment, parts and components could make life harder for suppliers unable to export, but it would benefit generation, transmission and distribution projects, which are expected to receive significant investment through 2030."