External Sector Fragility

Pakistan’s external position improved through March, supported by remittances rising 8.2% and a $72 million current-account surplus, but April swung to a $324 million deficit after regional conflict. Businesses remain exposed to oil-price spikes, freight volatility, and foreign-exchange pressure.

Critical Minerals Value-Chain Shift

Beijing appears increasingly focused on retaining more value domestically by channeling critical minerals into Chinese-made downstream products rather than raw exports. This favors in-country manufacturing and could pressure foreign firms to localize production in China to secure strategic material access.

Industrial Policy Redistribution Debate

The government is debating whether AI windfall profits at major tech firms should be shared with suppliers and workers. Potential changes to supplier pricing, bonuses and labor frameworks could support smaller firms, but also increase policy uncertainty for large investors.

China Dependence in Exports

Brazil’s trade profile remains heavily tied to Chinese demand for soybeans, iron ore, oil, and other commodities. This underpins export earnings and logistics flows, but also leaves suppliers, miners, shippers, and investors exposed to Chinese demand swings, pricing shifts, and geopolitical trade disruptions.

Fiscal Slippage and Rates

Election-year spending bills worth R$111 billion annually, and up to R$270 billion or more over coming years, are heightening fiscal uncertainty. That is sustaining high borrowing costs, complicating hedging, delaying investment decisions, and raising currency and refinancing risks for foreign operators.

Non-Oil Growth and Economic Buffers

Despite regional shocks, Saudi Arabia retains low government debt, ample reserves, and a large sovereign wealth fund. The IMF expects 2026 growth of 3.1%, with resilience supported by robust non-oil activity, giving multinationals a comparatively stable regional base for expansion and operations.

Trade Diplomacy And Hedging

Indonesia is using active diplomacy to attract investment, secure technology transfer, and balance relations among major powers. This creates openings across manufacturing, energy, and defense-linked sectors, but also means commercial conditions can be shaped by strategic bargaining and evolving geopolitical alignments.

Administrative Reform And Special Zones

Authorities are pushing development-oriented governance, streamlined procedures, and experimental institutional models in high-tech parks, free-trade zones, and financial centers. For international firms, implementation quality will shape approval timelines, land access, compliance burdens, and the attractiveness of expansion projects.

Defense expansion boosts industry

France is debating a higher military spending path, with government plans lifting defense outlays to €436 billion by 2030 and senators pushing further. This supports aerospace, electronics, and dual-use manufacturing, but intensifies fiscal trade-offs and procurement reprioritization across sectors.

Energy Transition Policy Uncertainty

Conflicting signals over net zero, industrial power costs, and North Sea development are raising uncertainty for investors. Debates over Rosebank, fossil-fuel licensing, and support for energy-intensive industry affect long-term decisions in manufacturing, chemicals, metals, and energy infrastructure supply chains.

Legal certainty concerns persist

Business confidence is being affected by concerns over institutional changes, including judicial reform, weaker autonomous oversight, and broader rule-of-law questions. For international investors, these factors raise perceived contract-enforcement risk and can slow FDI, particularly in regulated and infrastructure-heavy sectors.

Border Trade and Labor Disruptions

Closed Thailand-Cambodia crossings are disrupting more than 100 billion baht in annual border trade while constraining worker flows. Thai construction and agriculture face labor shortages, and firms in border provinces confront lost sales, higher sourcing costs, and weaker local operating conditions.

Export-Led Growth Vulnerability

Weak domestic demand, deflationary pressure and a depressed property sector are reinforcing China’s reliance on exports to sustain growth. That increases the likelihood of prolonged trade friction and more aggressive external commercial behavior, while also dampening consumer-market upside for foreign firms seeking stronger onshore demand.

USMCA Review and Tariff Uncertainty

Mexico’s top business risk is USMCA uncertainty as Washington keeps auto, steel and aluminum tariffs and pushes stricter rules of origin. With more than 80% of Mexican exports bound for the US, prolonged annual reviews would weaken investment planning and cross-border supply chains.

Automotive Rules-of-Origin Pressure

Washington is pushing stricter North American auto content rules, including a proposed 50% U.S.-content threshold and 82% regional content. That would reshape cross-border manufacturing economics, pressure Canadian suppliers, and influence future plant allocation, sourcing strategies and capital spending across the integrated auto corridor.

War Economy Fiscal Strain

Russia’s war spending is pressuring public finances and crowding out civilian investment. Reports indicate the 2026 budget deficit reached 5.9 trillion rubles by April, with possible financing gaps near 3-4 trillion, increasing tax, borrowing and payment risks across the domestic economy.

EU-China trade confrontation

Escalating frictions with Europe now rank among the biggest external business risks. The EU’s goods deficit with China reached about €360 billion in 2025, while tougher tariffs, subsidy probes, telecom restrictions, and procurement barriers threaten exporters and investors.

Supply-Chain Due Diligence Tightens

The US tariff dispute has intensified scrutiny of Australia’s modern-slavery regime, which currently emphasizes disclosure more than enforcement. Businesses should expect stronger due-diligence expectations, possible import controls, and higher supplier-tracing costs, especially for goods sourced through Southeast Asia and China-linked networks.

State-Led Defense Industrial Upside

Even as public finances tighten, defense and aerospace are among the sectors still benefiting from stronger strategic spending and export support. This creates selective upside for manufacturers, suppliers, and dual-use technology firms aligned with Europe’s rearmament and resilience priorities.

Energy Infrastructure Vulnerability

Russia continues targeting power and gas assets, including Naftogaz facilities and DTEK infrastructure, after destroying 9 GW of generation last winter. Blackouts across Kyiv and multiple regions increase production stoppage, backup-power costs, and operational uncertainty ahead of winter.

Defence Industrial Expansion

India is accelerating defence manufacturing with expanded procurement powers exceeding Rs 1.25 lakh crore annually, rising private-sector participation and new export deals. This supports domestic industrial deepening, supplier opportunities, and technology partnerships, while reducing exposure to fragile foreign defence and dual-use supply chains.

China pivot reshapes payments

Russia’s trade reorientation toward China is deepening, with bilateral trade above $200 billion and much settlement now in rubles and yuan. Companies face a more fragmented financial architecture, elevated currency-conversion risks, and dependence on politically sensitive non-Western payment channels.

Infrastructure Expansion Reshapes Logistics

Vietnam is accelerating expressways, ring roads, ports, rail and urban transport to cut logistics costs and support double-digit growth ambitions. For investors, improved connectivity should ease distribution bottlenecks, though project execution, financing access, and procurement transparency remain important variables.

Regional conflict and maritime disruption

Conflict linked to Iran and threats to Hormuz and Bab el-Mandeb are disrupting shipping, raising insurance and freight costs, and increasing delivery risk. Saudi firms benefit from bypass routes, but broader trade, aviation, and investor sentiment remain vulnerable.

Political Divisions Complicate Policy Signals

Germany’s cautious balancing between export interests and EU economic security is generating policy ambiguity for investors. Differences within Berlin and across the EU over China, industrial protection, and cybersecurity measures may delay decisions while increasing regulatory volatility for cross-border business operations.

Defense industrial expansion reshapes economy

Netanyahu’s push for a more self-reliant ‘super-Sparta’ model includes planned defence-industry investment of NIS 350 billion over a decade. This may benefit aerospace, cybersecurity, and military suppliers, while redirecting capital and policy attention away from civilian sectors and social spending.

USMCA Review and Tariff Risk

Canada faces elevated uncertainty ahead of the July 1 USMCA review as Washington signals annual reviews, not renewal. Ongoing disputes over autos, steel, aluminum, dairy and procurement could disrupt cross-border investment planning, sourcing decisions and tariff exposure management.

Energy Shock Hits Industry

Middle East conflict has lifted fuel, freight, and input costs across Thailand, squeezing manufacturers and exporters. April capacity utilization fell to 56.4%, while machinery output dropped 12.9% year on year and fertilizer production plunged 28% amid raw-material shortages.

Critical Inputs Supply Dependence

German industry remains highly vulnerable to concentrated dependence on Chinese chips, rare earths and other critical inputs. EU discussions on mandatory supplier diversification reflect mounting concern that even short-lived disruptions could halt production lines across automotive, machinery and advanced manufacturing sectors.

Agricultural Regulation and Food Costs

Emergency agriculture legislation has introduced uncertainty around price floors, pesticide-linked import restrictions, water storage, and public procurement preferences. Food, retail and agribusiness firms may face higher compliance burdens, inflationary pressures, and possible clashes with EU single-market rules.

Digital Rules Shape Competitiveness

Vietnam is committing about US$25 billion for science, technology, and digital transformation during 2026-2030, while aiming to support 500,000 SMEs. Yet data-localization rules, limited domestic technology absorption, and higher logistics frictions still constrain productivity and digital supply-chain integration.

Logistics Reform and Freight Bottlenecks

Transnet reform is advancing, including private operation of Durban Pier Two, which handles about 46% of cargo volume, and wider private rail access. Yet weak freight capacity still constrains mining exports, delivery reliability, inventory planning, and port-centered investment decisions.

Energy Security And Power Expansion

Reliable power remains a strategic business issue as Vietnam expands LNG, grid connectivity and regional energy cooperation. Projects such as the over US$2.2 billion Quynh Lap LNG power plant should improve supply, but delays, transmission constraints and demand growth still threaten industrial continuity.

Reconstruction and Aid Access Uncertainty

Gaza reconstruction remains blocked by disputes over disarmament, governance and Israeli withdrawal, while aid flows remain constrained. This delays donor-backed projects, construction demand normalization and cross-border commercial recovery, while keeping humanitarian scrutiny high for firms with regional operations or counterparties.

AUKUS-Driven Industrial Realignment

AUKUS continues reshaping Australia’s industrial and infrastructure landscape, with major spending on submarine, defence, and maritime facilities. While it creates long-term opportunities in advanced manufacturing, logistics, and technology, execution risk, US dependency, and policy debate complicate investor timelines and sovereign capability planning.

Gaza War Security Overhang

Israel’s stalled Gaza ceasefire remains the dominant business risk, with military control reportedly expanding from 53% to 60% and targeted at 70%. Persistent conflict raises insurance, logistics, labor-mobility and reputational costs for investors, suppliers, shipping and regional counterparties.