The geopolitical tension in the world, fueled by US President Donald Trump in the first weeks of the year – with the invasion of Venezuela to arrest dictator Nicolás Maduro and the promise of annexing Greenland , among other threats – has cast doubt on the 3% growth projection for the global economy in 2026, announced by UBS bank at the end of last year.
According to Dutch economist Arend Kapteyn , chief economist and global director of Economic and Strategic Research at the investment bank, Trump's impulsive actions increase the risk that the recovery of global economic confidence – hard-won in the second half of 2025 after absorbing the shock caused by the American tariffs announced in April – simply will not consolidate.
“And without trust, there is no investment,” warns Kapteyn, in this interview given to NeoFeed before his arrival in the country, where he will participate, starting Tuesday, January 27, in the Latin America Investment Conference, a two-day event by UBS in São Paulo.
Even the world's richest country is under threat. Kapteyn notes that AI investments accounted for 90% of US growth in 2025. Therefore, for the American economy to maintain a robust growth level in 2026, other sectors need to start investing.
“That’s why geopolitical events are important: other sectors will only invest if they believe that demand will be strong and that the environment is stable,” he says. “If there is uncertainty, companies simply don’t invest.”
Kapteyn is an expert in times of economic instability like the present. He began his career at the Dutch Central Bank and spent eight years at the International Monetary Fund (IMF), where he was a senior economist, working on crisis resolution in many of the Fund's emerging market programs. He worked at private banks before joining UBS in 2016.
Regarding Brazil, he assesses that the apparent fragility of Brazilian public debt stems less from fiscal imbalance and more from exceptionally high real interest rates . "Brazil is experiencing a 'bad equilibrium': distrust in public finances puts pressure on the exchange rate, fuels inflation, and forces the Central Bank to maintain high interest rates, creating a cycle that is difficult to break," he warns.
According to him, unlike fragile economies that depend on strong fiscal adjustments, the country could quickly reduce real interest rates if it regained investor confidence in economic management, noting that the next government has an opportunity to correct course.
“If a credible economic plan emerges, one that the market trusts, the country enters a virtuous cycle: confidence improves, the exchange rate strengthens, inflation falls, and the Central Bank can reduce interest rates,” he adds, emphasizing that the Brazilian problem is primarily one of credibility.
UBS's global chief economist also addressed the suspension of the entry into force of the European Union-Mercosur agreement , which he hopes will be temporary, and the strength of China 's "new economy" — with artificial intelligence, green energy and solar panels.
"These sectors already account for a quarter of economic growth, which is expected to advance 5% in 2026, offsetting the persistent weakness in the real estate sector and the impact of US tariffs on traditional exports," he points out.
The economist states that Trump is unlikely to incite a trade war with China in the short term. "The American government is focused on containing the cost of living—and raising tariffs would increase the price of products," he says. "This focus tends to keep the relationship relatively stable until the midterm elections, although the scenario could change afterward."
Read below the main excerpts from Kapteyn's interview:
To what extent could geopolitical tensions — such as the Greenland crisis — compromise UBS's projection of 3% global growth in 2026?
The risk is real. Last year, the announcement of tariffs in early April triggered a global confidence shock that kept growth around 2% annualized until the end of September. Recovery only came in the second half of the year, when the environment calmed down and confidence improved, although it remained below normal in the US.
What has changed?
UBS's current projection assumes a scenario without new shocks. However, recent tensions involving Greenland increase the risk that this recovery in confidence will not consolidate. And without confidence, there is no investment. It is important to remember that not all shocks have the same weight. But the Greenland crisis and Supreme Court decisions on Fed governance, for example, could have a significant impact on expectations.
"Tensions involving Greenland are hindering the recovery of confidence after the impact of the tariffs. And without confidence, there is no investment."
Could this environment of uncertainty alter the Federal Reserve's interest rate cut schedule?
It's unlikely. The Fed reacts to inflation and employment data, not isolated events. In December, the US central bank seemed comfortable keeping interest rates stable in the first half of 2026 and, barring surprises, is only expected to cut rates in the second half of the year. Only a clear deterioration in the labor market or a truly disruptive event would change that plan.
The American economy performed well in 2025, despite the impact of import tariffs. Could geopolitical risks have a different effect in 2026?
There was a major tariff shock in 2025, which should have caused a lot of damage, but that was offset by a technological boom linked to AI, essentially driven by investment. Today, there is a single sector—AI—that is driving virtually all investment growth in the US. And also consumption, most of which comes from the wealthiest 20%, who hold 80% of financial assets—and three-quarters of those gains come from technology stocks. In other words, the wealth effects of technology drive consumption; investment in technology drives investment. Beyond that, very little is happening—and that's not sustainable.
Why isn't it sustainable?
We estimate that about 90% of US growth in 2025 was linked, directly or indirectly, to AI. The problem is that, to repeat this performance, investment in technology would have to increase even further. If it only repeats last year's level, the contribution to growth falls to zero—because what matters is the variation, not the level. Therefore, to maintain growth of 2% to 2.25% in 2026, other sectors need to start investing. Even if investment in technology continues to rise, it will not be enough to sustain the 2025 pace.
How can the US escape this trap?
That's why geopolitical events are important: other sectors will only invest if they believe demand will be strong and the environment stable. There are fiscal incentives that could help, and the Fed's interest rate cuts should also stimulate investment. But companies only invest when they are optimistic and when the environment is calm. If there is uncertainty, they don't invest. Our projection anticipates a rotation from the technology sector to other sectors—but it's still unclear whether this will happen.
What is the best strategy for Latin American countries to deal with the resurgence of American influence in the region?
The more assertive actions of the United States in the region, invoking the logic of the Monroe Doctrine, generate concern because it creates legal and political uncertainty, which affects investor confidence—including that of the Chinese. Therefore, the best strategy for countries in the region—including Brazil—is to seek balance: maintaining trade relations with both sides while trying to remain neutral. Just as in Europe, aligning exclusively with the US would mean losing access to China, the region's main trading partner.
But don't the US tend to pressure Latin American countries to reduce China's commercial influence in the region?
I doubt the US has the capacity to pressure all countries simultaneously. Considering the size of the markets and the volume of trade, I imagine the main focus of the United States will continue to be Mexico, especially in the renegotiation of the USMCA. Canada and Mexico should be pressured to harmonize tariffs on China with those in the US.
Brazil is facing a fiscal crisis, high debt, and high interest rates, although inflation remains under control. What is UBS's projection for the Brazilian economy in 2026, considering that it will be a presidential election year?
What strikes me about the dynamics of Brazilian debt is that, on paper, it seems quite fragile—in the sense that, if there is no fiscal improvement, the debt tends to continue rising. But, looking beneath the surface, what really explains this dynamic is the level of real interest rates. Real interest rates in Brazil are much higher than in any other country we analyzed. And, in fact, there has been very little fiscal deterioration.
Like this?
What exists today is what I would call a "bad equilibrium": there is a lack of confidence in public finances, which puts pressure on the exchange rate, then puts pressure on inflation, and the Central Bank needs to react. This creates a cycle in which real interest rates end up being extremely high.
How to reduce real interest rates?
If it were possible to convince the market and investors that economic policy would remain under control, then, in theory, real interest rates could fall rapidly without the need for a major fiscal adjustment. This is very different from most countries. Normally, when we analyze debt sustainability, fragile countries need to make more fiscal adjustments. In Brazil, the solution involves reducing real interest rates—and real interest rates depend on confidence in fiscal management. It's a circular argument: lack of confidence, and this fuels the problem. That's why the election is important.
In what sense?
I won't comment on candidates or parties, but if a credible economic plan emerges, one that the market trusts, the country enters a virtuous cycle: confidence improves, the exchange rate strengthens, inflation falls, the Central Bank can reduce interest rates—and suddenly, the debt dynamics improve significantly. In our vulnerability ranking, Brazil appears at the top. But, structurally, this exaggerates the size of the necessary adjustment because a large part of the problem is essentially a matter of confidence.
"In Brazil, the solution lies in reducing real interest rates, which depends on confidence in fiscal management."
After 26 years of negotiations, the European Union-Mercosur agreement was suspended for legal review due to pressure from the agricultural sector. Was this new delay expected?
The delay was surprising, especially given the timing, as ratification would send an important signal. Even so, the expectation is that it will only be temporary. Agricultural resistance has historical roots: for decades, the sector received a large share of the European budget and high subsidies to compensate for its low competitiveness. Furthermore, farmers are politically influential and capable of mobilizing disruptive protests, which led governments, over 50 to 70 years, to protect them with trade barriers. Although these subsidies have decreased, European agriculture has modernized and operates on a much larger scale, allowing for a reduction in some protection—but not its elimination.
UBS estimates China will grow by 5% this year. How will the performance of traditional sectors and new technologies influence the growth outlook for the Chinese economy in 2026?
The projection that China will grow by about 5% in 2026 was made despite the persistent weakness in the real estate sector and the impact of US tariffs on traditional exports. What sustains this pace is the strength of the "new economy" sectors—such as artificial intelligence, green energy, and solar panels—which already account for approximately a quarter of growth and fully compensate for the loss of dynamism in older sectors. Although aggregate growth appears stable, the composition has changed: traditional sectors are shrinking, while new ones are gaining traction and making the economy structurally healthier, even though official statistics do not fully capture this transformation.
Is China's technological advancement, especially in energy and AI, influencing international investors' interest in the Chinese stock market?
Yes. The appetite for Chinese stocks has grown significantly in the last year and a half, driven by the perception that China is the leading alternative to the US in AI and emerging technology sectors. Although the Chinese stock market primarily represents internet and consumer companies—and not the entire economy—it has attracted investors seeking diversification and exposure to Chinese innovation. The increased presence of European and American investors at a recent event we held in the country reinforces this trend of capital reallocation towards China.
"The appetite for Chinese stocks was driven by the perception that China is the leading alternative to the US in AI."
How is the trade relationship between the United States and China likely to evolve in the coming months, especially with regard to the technological dispute and tariffs?
Despite tensions surrounding AI chips, an immediate escalation of the trade war is not expected. Under the Trump administration, there was even a relaxation of restrictions on Chinese access to American chips, influenced by lobbying from US technology companies that want to maintain global leadership by selling to China. Although tariffs may rise again, nothing should formally change until October, partly because the US government is focused on containing the cost of living—and raising tariffs would increase the price of products. This focus tends to keep the relationship relatively stable until the US midterm elections, although the scenario could change afterward.
