(Editor's Note: S&P Global Ratings believes there is a high degree of unpredictability around policy implementation by the U.S. administration and responses--specifically with regard to tariffs--and the potential effect on economies, supply chains, and credit conditions around the world. As a result, our baseline forecasts carry a significant amount of uncertainty. As situations evolve, we will gauge the macro and credit materiality of potential shifts and reassess our guidance accordingly [see our research here: spglobal.com/ratings].)
This report does not constitute a rating action.
Key Takeaways
- We expect only a limited immediate impact on the global infrastructure sector from changes to U.S. trade policy and the resulting ripple effects. Long-term prospects, however, remain uncertain.
- North American infrastructure entities are resilient for now, but capital expenditures and new projects could slow. So far, the impact on Asia-Pacific infrastructure entities, in general, has been minimal, because of favorable funding conditions and their mostly domestic focus.
- Infrastructure projects in Europe, the Middle East, and Africa are somewhat insulated from the direct effects of tariff shifts but could feel the secondary economic effects. Those secondary effects may also be a factor for Latin American entities, but many of them secured long-term financing before the tariff tumult began.
The global infrastructure sector is typically resilient to market events given how essential it is, the long-term nature of investments, and its generally investment-grade rating quality. However, the sector could be vulnerable to increasingly protectionist U.S. trade policy and the resulting market ripple effects--including investor risk aversion and a flight to safety.
Indeed, economic uncertainty, supply chain disruptions, and rising financing costs are straining the sector, across regions. Despite these challenges, S&P Global Ratings expects only a limited immediate impact on the sector, particularly for domestically focused utilities and projects.
During our review of rated infrastructure entities across the globe, several factors emerged as potentially the most significant sources of credit pressure:
Access to liquidity: Companies or projects--especially those at the lower end of the rating scale--may face delays or higher costs as part of refinancing near-term debt maturities or maintaining regular access to working capital instruments amid potentially unfavorable market conditions. Foreign exchange rates, hedges, and margin calls could also pressure liquidity positions. Companies that operate with negative free operating cash flow and rely on ongoing funding might feel these effects, as well.
Global economic uncertainty: Weaker global and regional economies, higher inflation, and higher interest rates could weigh on demand, margins, and investment via capital expenditures (capex). Investors are more risk averse in the face of uncertainty, which could test lower-rated issuers or issuers located in emerging markets.
Global supply chain disruptions: Many infrastructure entities support the global supply chain--namely, ports, toll roads, and airports. If there are significant shifts in global supply chains, lower demand could hurt these entities. Supply chain shifts could also be meaningful for the power and midstream energy industries given China’s dominance with respect to several types of power equipment technology.
The increased cost of goods and materials: Higher inflation may strain the affordability of goods, squeeze operating margins, and delay capital expansion.
Regulatory changes or federal cuts: A changing policy environment in the U.S. could mean changes to government-sponsored infrastructure spending. If U.S. federal grant funding is cut (like funding from the Inflation Reduction Act or the Infrastructure Investment and Jobs Act), or if certain tax credits are repealed, this could hurt many companies in the power sector and have a significant impact on the renewables sector, in particular. We also anticipate regulatory pressure on utility companies if higher pass-through prices reach levels that regulators find unacceptable.
North America
North American infrastructure assets face high tariffs, supply chain disruptions, regulatory risk, GDP pressure, and potential challenges in accessing the market for liquidity or for their capital expansion plans.
The sector remains resilient for now, but if the tariffs persist and weaken the economy beyond our most recent forecast, it could hamper many infrastructure companies and projects. With the increasing cost of goods, uncertainty around oil and gas prices, and high interest rates, we expect that the pipeline of new projects and capex plans will slow in the near-to-medium term.
Supply chain disruptions and the rising cost of goods--particularly the cost of battery energy storage systems--will weigh on the unregulated-power sectors in the U.S. and Canada. Because of their past experience, we think they can brace themselves from the recent tariff announcements--more so than most sectors. For instance, many of these companies had rechanneled their supply chains domestically or offloaded tariff risk to suppliers.
Additionally, the power sector is poised to benefit from a significant supply-demand gap, with new power purchase agreements reflecting increased tariff costs. But notably, tariffs will impact battery energy storage systems from China; if significant tariffs resume after the current pause, the estimated tariff by January 2026 is 173.4%, which could potentially double their cost.
The tariffs' effects on export markets could harm the midstream and downstream energy sectors in North America. If the reciprocal tariffs from China are imposed again after the current 90 day pause, they could significantly disrupt U.S. exports of liquid petroleum gas--primarily propane exports--given that China is a very significant importer. This could affect pricing and logistics.
We believe the global trade dispute may also become a headwind for the industry’s organic growth plans and dampen the momentum that midstream companies had at the beginning of the year with a more favorable regulatory backdrop. While most of these companies maintain strong balance sheets and adequate liquidity, those with high leverage or limited liquidity may face heightened refinancing risks due to a limited ability to access capital markets on favorable terms.
Investor-owned regulated utilities are managing increased costs from tariffs, which could pressure customer bills and which could ultimately make the regulatory environment more difficult for them, potentially weighing on credit quality. Additionally, the utilities industry consistently operates with high cash flow deficits. Because of this, these companies need consistent access to the capital markets at a fair price in order to fund their robust capital needs.
About 40% of the industry operates with minimal financial cushion from their downgrade thresholds, meaning that a substantial portion of the industry has less than 100 basis points of financial cushion from their funds from operations-to-debt downgrade trigger. As such, rising leverage would likely result in weakening credit quality.
For transportation infrastructure entities in the U.S. that rely on availability payments, the effects from tariffs are relatively minor. Furthermore, for projects under construction, the fact that materials have already been ordered mitigates the exposure to the steel and aluminum tariffs. The construction contracts have also helped to mitigate this exposure.
If tariffs persist at a significant level, we think reduced cargo movement and a longer-term economic slowdown could affect some transportation assets, including ports, toll roads, airports, and other assets with market risk. This could materially strain ports and toll road assets that rely on cross-border trade. Recent data from Container Atlas indicates that daily bookings of ocean containers going from China to the U.S. are down 20% from a year ago amid evolving tariff levels. In addition, a proposal by the Office of the U.S. Trade Representative to levy fees on Chinese-built vessels' port calls (aimed at subsidizing the U.S. shipbuilding industry) could also disrupt port volumes and logistical trade channels.
Availability-based social infrastructure assets in North America will be resilient to tariffs, in our view, while volume-based assets could have exposure. Depending on the depth and duration of the stress, tariffs could hurt availability-based infrastructure like hospitals if key counterparties to those entities experience credit erosion. Market-based assets like hotels and some education facilities could see declines in occupation and enrollment rates due to a weaker economy.
Asia-Pacific
Much like North American infrastructure entities, their Asia-Pacific counterparts are facing many headwinds, although they may be in a less vulnerable position because of favorable domestic funding conditions and strong government support. However, if the trade tensions continue between the U.S. and China, slower GDP growth, higher interest rates, and uncertainty about foreign exchange risk could affect Asia-Pacific infrastructure assets.
Entities in Northern Asia, Australia, and New Zealand will likely be able to manage their way through the turmoil with more stable economies and access to capital. Interest rate volatility and currency volatility could further increase the dependence of South Asian and Southeast Asian infrastructure companies on domestic banks and less developed capital markets--where funding remains available at competitive rates for investment-grade companies. Lower-rated credits in those markets may find it difficult to access markets at a reasonable price.
The trade conflict will also affect Asian ports. Most of these ports have enough liquidity headroom to absorb demand risks in 2025, but if tariffs persist, they will squeeze these ports' bottom lines (see Asian Ports To Face Their Stiffest Test, April 28, 2025).
Across Greater China (mainland China, Hong Kong, Macao, and Taiwan), the transportation infrastructure and utilities sectors have been resilient, though ports are notably vulnerable because of their exposure to export activities. The diversity of trade routes and these ports' financial buffers will enable them to withstand the short-term impacts from tariffs, but longer-term disruptions in trade patterns, especially with Southeast Asia, could hinder growth. A slowing economy may dampen demand for toll roads and energy utilities, with potential revenue declines. However, the generally favorable domestic funding conditions and manageable liquidity risks suggest that the overall credit profiles of the region's infrastructure entities remain robust.
The current market uncertainty will likely have less of an effect on the utilities and transportation infrastructure sectors in Korea and Japan, given the countries' strong domestic financial markets and stable regulatory frameworks. In the longer term, weakening economies dampening energy demand, higher inflation and interest rates, or shifting oil prices could pressure the more levered power-generation companies in these markets.
Transportation infrastructure operators in the two countries are largely insulated from direct tariff effects because of their domestic focus. However, global economic conditions could soften travel volumes. This is somewhat mitigated by the operators' manageable long-term plans and debt levels, with additional support from robust cash flow generation.
We think Southeast Asian transportation entities will deal with similar challenges in terms of the tariffs' long-term impact on demand, but they could potentially be insulated from some of the more acute economic effects that the Chinese and U.S. economies will face. We expect that most of these entities will be resilient given strong financials, particularly for ports.
Regulated utilities in the region are largely insulated since most enjoy cost pass-through (to varying degrees), including borrowing and, in some cases, even for currency risk. However, higher inflation, rising funding costs, and increased foreign exchange risk could pressure these entities because of uncertainty around rehedging costs.
We believe the transportation infrastructure and utilities sectors in Australia and New Zealand will be relatively insulated from global economic fluctuations in the near term. But a potential slowdown in Asian economies could lead to subdued demand, affecting volumes in the airport, port, road, and rail sectors.
S&P Global Ratings believes any secondary impacts may take nine to 12 months to materialize. This would enable entities to adjust capex, reduce dividends, and take advantage of their strong relationships with Asian banks and their own sound liquidity to navigate through the market uncertainty.
Europe, The Middle East, And Africa (EMEA)
The EMEA region is more sheltered from the direct impact of tariffs, but it will feel the effects of weakened economies around the world and higher inflation, and the region's infrastructure entities may experience added strain if they have operations in North America. The region is facing affordability concerns, higher inflation, and weakening GDP growth, which could hamper lower-rated credits and entities that rely on the capital markets for liquidity access.
The Middle East is mostly insulated from these risks, but supply chain imbalances could affect credit dynamics, particularly in the renewables sector.
In Europe, transportation infrastructure companies are grappling with refinancing risks, particularly companies that have significant maturities in 2025. A weaker economy may lead to reduced mobility, affecting usage patterns and financial expectations.
While infrastructure assets generally have the ability to charge consumers for the increased costs from tariffs, there's a growing concern that further inflation could strain consumers. The ability to manage capital expenditures under these conditions, particularly for airports and ports, will be crucial for maintaining credit stability.
In the current volatile macro environment, interest rates, refinancing risks, and liquidity are key risks for European utilities, which are typically highly leveraged. LNG and power price volatility and inflation could weigh on the earnings and liquidity of European operations. Within this subsector, the most acute pressure is on European utilities with significant operations in the U.S.--particularly offshore wind--because they could face changing regulations and higher capex (due in large part to reduced tax credits). Overall, however, we expect these companies to remain mostly stable, as most of them contain their capex and refinance early.
Our expectation is that infrastructure projects across the Middle East will continue to be resilient to the current market volatility, supported by strong sovereign credit profiles and stable domestic funding conditions, as well as limited refinancing exposure and high-interest rate hedging. Most of the assets we rate are government-related entities and are considered strategic for their respective sovereigns. However, supply chain imbalances could challenge the timing or cost of capex.
This is particularly true in the Middle East's energy sector, where key components such as photovoltaic modules and inverters are globally traded and are highly exposed to supply-demand pressures and price fluctuations. Projects in Gulf Cooperation Council member states--which are home to some of the world’s largest utility-scale solar projects--are especially vulnerable to these dynamics given their reliance on China for critical solar equipment.
Despite these potential pressures, we expect infrastructure projects in the Middle East to remain resilient, supported by their strong fundamentals, robust financial structures, and strategic importance to their respective sovereigns.
Latin America
Like infrastructure entities in other regions, those in Latin America are positioned to withstand immediate market uncertainty, with many issuers having secured long-term financing ahead of anticipated volatility. However, different countries are facing different risks. Some risks are related to systemic economic pressures from high interest rates or volatile foreign exchange costs; other risks are specifically related to the recent global trade pressures.
We think the power generation sectors in Chile and Brazil will attract increased investment in 2025, but we will closely monitor the risk of supply chain disruptions and the cost of goods. Chile's innovative approach to capacity payments for large-scale batteries positions it as a leader in renewable energy storage. This could potentially alleviate curtailment issues until key transmission projects, like the Kimal-Lo Aguirre line, are completed (by 2030). Brazil's integrated utilities are ramping up investments in nonconventional renewables--especially in the northeastern part of the country, where solar and wind potential is high.
Macroeconomic stress could raise affordability concerns for Latin American utilities and toll roads and could prompt governments to impose consumer protection measures. With respect to regulated utilities, we saw cost protection regulations come into play in Brazil, Chile, and Colombia amid recent affordability concerns (see "Latin American Electric Utility Regulatory Framework: Signs Of Increased Political Interference," Jan. 9, 2025). Brazilian regulated electricity utilities are particularly susceptible to interest rate risk. However, inelastic demand and inflation-linked revenues, along with robust cash reserves, should result in resilient cash flows.
Similarly, we believe there's a risk of temporary toll rate freezes for Latin American toll road operators. Some roads and airports in Mexico and airports in the Caribbean are prone to more direct effects from shifts in global supply chains, given what has historically been a high proportion of traffic to and from the U.S. (For our sensitivity analysis with respect to Mexican toll roads, see From Tariffs To Traffic Volumes: Potential Economic Effects On Mexican Toll Roads, Feb. 5, 2025).
A decline in global trade could directly affect ports, but all rated port facilities in the region, including the Panama Canal, have low leverage. We believe this gives them a cushion to absorb a decline in traffic without an impact to the ratings in the near term.
A Complex Landscape Of Risks
As countries continue to adjust their trade policies, the global infrastructure sector is navigating a complex landscape of risks, characterized by rising financing costs, supply chain disruptions, and economic slowdowns. The immediate impact on the sector will be limited, in our view, but its long-term prospects remain uncertain. Vigilance and strategic management will be crucial for the sector to maintain credit stability across various regions and subsectors.
Related Research
- European Infrastructure Companies Are Showing Resilience Amid U.S. Tariff Uncertainty, April 29, 2025
- Asian Ports To Face Their Stiffest Test, April 28, 2025
- From Tariffs To Traffic Volumes: Potential Economic Effects On Mexican Toll Roads, Feb. 5, 2025
- Latin American Electric Utility Regulatory Framework: Signs Of Increased Political Interference, Jan. 9, 2025
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