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At the moment, the company from Santa Catarina – the only one in its sector with shares traded on the Brazilian stock exchange (B3) – is seeking to reconfigure its export agenda, directing part of its sales from the USA (25% of the total) to neighboring Mexico, which does not impose tariff restrictions.
With 25% of its exports destined for the USA, the multinational manufacturer of industrial motors and equipment Weg (WEGE3) – headquartered in Jaraguá do Sul (SC) – is the Brazilian company most exposed by the Trump administration’s decision to tax, by an additional 25%, sales from the segment to that country. With this measure, the situation of the industry from Santa Catarina, already delicate with the application of a 10% rate (section 122) a year ago, became even more uncertain. The company is the only one in the sector with shares traded on the Bovespa (B3).
The order of the day is to accelerate production in US factories
While assessing the risk of an even more forceful ‘tariff shock’, Weg seeks support in the opinion, even if preliminary, of Citi, which defines the impact of the measure as moderately negative in the short term. Facing the tariff challenge presented, the Brazilian company decided to accelerate the production of its factories in the USA, an adjustment that, however, requires time, precisely the most scarce item at this moment.
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In any case, the market’s assessment is that only on the upcoming July 15th will the ‘final impact’ of the new tariff be known, preceded by a public hearing on the 6th of the same month. Until then, the pressure falls on strategic items, such as competitiveness and profit margins. In the first session after the announcement of the taxation, the Brazilian company’s common shares fell by 2.3%, to R$ 42, on Monday (2.6).
Mexico is a fundamental alternative
In a study signed by analysts Lucas Marquiori, Fernanda Recchia, and Samuel Alkmim, BTG Pactual classified the impact of the ‘Trumpian’ tariff as ‘slightly negative’, emphasizing that low voltage electric motors (up to 200 HP) make up the majority of exports to the US market. Meanwhile, motors with power greater than 200 HP, as well as some types of transformers, are covered by section 232, as they are primarily directed to Mexico.
In fact, since the first edition of the tariff announced by the Republican, Weg has been seeking to relocate a significant part of its production capacity from the USA to Mexico, a measure that will serve to mitigate future protectionist measures from Washington.
Catarinense company should prioritize domestic market
Another alternative gaining strength is the prioritization of the domestic market, with increased investment in manufacturing within the country itself. In this regard, the director of Solar, BESS, and Building at Weg, Harry Neto, stated that the company should participate in the future battery auction, together with strategic partners, as a supplier of equipment and EPC (Engineering, Procurement, and Construction) services.
Instead of directly competing for the auction assets, the company intends to work together with investors and companies in the electric sector, who are responsible for the operation of the projects. “WEG does not keep the asset because we do not compete with our clients. We go along with the partner as a supplier of equipment and services, performing the full EPC of the battery,” Neto added.
