Trump’s u-turning tariffs: What’s next for a tense energy sector?

In this week’s Power Playbook: Trump’s sweeping tariffs, followed by a 3-month period pause, has been dominating discourse this week, but what will it mean for an energy sector that’s holding it’s breath?

You’d have to have been under a rock for the last week and a half to not notice the market tango being tuned by US President Donald Trump’s tariff announcements.

Indeed, in a moment of audacious, public spectacle, Trump announced global tariffs on goods from across the globe, sending markets reeling in response.

As a result, “uncertainty” has been the word of the week.

As covered by Paul Gerke on Smart Energy International’s sister-site Factor This, Monday got off to a deep red start, shooting back up to the green at rumours of a 90-day pause.

Then, the White House whispered, “fake news”, and companies returned to the red.

Following that, on Wednesday, as countries mulled their relative positions in what was quickly turning into an international trade war against the US, the 90-day pause turned out to be not-so-fake.

Lo and behold, stocks soared.

According to Reuters reportage, the pan-European STOXX600 jumped 5.4% at 1108 GMT yesterday, after losing 12.5% since the tariffs were announced. For context, STOXX600 has as its constituents some of the continent’s biggest energy tech companies, such as A2A, ABB, EDP, Electricite de France, Endesa and Enel, amongst others.

And just this morning at 10:09 am GMT, the very same STOXX600 was down 0.19%.

To say the least, things are changing at breathtaking pace and all on a very public stage.

More from the Power Playbook:
Germany’s special fund: A renewed bid to be energy transition’s champion
Energy innovation and its startups are riding waves – let’s break it down

Coal

The impact of Trump’s actions aren’t limited to stocks. And his tariffs aren’t the only thing that has warranted concern this week.

Tuesday saw POTUS issue an executive order to revive the country’s coal sector, a clear push away from the renewable gains the country had been making under the IRA.

This, alongside his aggressive trade tactics, begs the question: what will this mean for US clean energy investors. Additionally, will European investors remain, or look elsewhere to do business?

This again reinforces the uncertainty we’ve all been feeling the last week and a half as we witness a monumental shift in the geopolitics of energy and trade.

New partnerships for Europe?

So, what does this mean for Europe and the rest of the world, as the US plays a dramatic hand to the table?

Perhaps it’s time for new partnerships, and a diversification of strategy.

Days following Trump’s tariff announcement, the EU announced a new strategic partnership with countries in Central Asia, including financing for projects in critical raw materials (€2.5 billion), water, energy and climate (€6.4 billion), among others.

Developments within critical raw material could be a boon for the energy sector, especially considering how Trump’s tariffs unfold.

They have long been a pain point and a key area of competition with the likes of the US and China, who have overtaken the continent on the road to net zero.

To add oil to the trade fire, one of China’s responses to the US tariffs was to place export restrictions on crucial rare earth elements, reports Time.

We know the criticality of such materials within the energy sector. Europe is clearly looking to diversity and Central Asia may not be the only part of the continent they look to.

Indeed, on Tuesday, European Commissioner Ursula von der Leyen held a call with Chinese Premier Li Quiang on the 50th anniversary of diplomatic ties between the EU and China.

Von der Leyen emphasised China's critical role in addressing possible trade diversion caused by tariffs, especially in sectors already affected by global overcapacity.

So perhaps, it is through strengthened ties and a diversification of partnerships that the global energy market will further develop.

Quick fire conjecture aside, the market and investment landscape is only going to continue to shift.

Trump’s massive tariffs on China will remain following their retaliation but there is significant space yet for the situation in Europe to evolve.

And as energy companies are now no doubt conducting wide audits across their supply chains, I wouldn’t be surprised to see stocks continue dip and soar as priorities are re-evaluated and decisions take place on the public stage.

But the question of the day, as we await an end to the 90 day pause on Trump’s tariffs, is whether the market will gain clarity going forward.

I do not have the answer and, unfortunately, time will tell is a cliché I will have to rely upon.

But what do you think? How will the next 90 days play out and what will be the key developments affecting the global energy market and its players?

Reach out and let me know so that I can feature your thoughts in the Power Playbook.

Cheers,
Yusuf Latief
Content Producer
Smart Energy International

Follow me on Linkedin