Geopolitical Tensions Disrupt Trade

Escalating US–China and US–Venezuela tensions heighten global trade uncertainty, impacting Thai exports, energy prices, and supply chains. Businesses face increased logistics costs and market volatility, especially in energy-intensive and export-oriented sectors, requiring robust risk management and market diversification strategies.

US-Indonesia Trade Agreement Finalization

Indonesia is set to finalize a major trade agreement with the United States, reducing tariffs from 32% to 19%. This deal will boost exports, enhance market access, and strengthen bilateral economic ties, directly impacting trade flows and investment strategies.

Labor Reform and Compliance Pressures

2026 marks a pivotal year for labor reform enforcement, including stricter inspections, reduced workweek to 40 hours, and higher minimum wages. Companies must adapt to new compliance standards under USMCA commitments, affecting cost structures and operational flexibility, especially for SMEs.

ESG Compliance and Export Market Access

Stricter environmental, social, and governance (ESG) standards are becoming mandatory for export access, especially to the US and EU. Recent US bans on Vietnamese seafood due to environmental non-compliance highlight the growing importance of ESG for maintaining global market share and attracting sustainable investment.

Real Estate Market Correction and Recovery

Major Canadian cities have seen steep declines in real estate transactions and prices since 2021, with Toronto and Vancouver at multi-decade lows. While 2026 is forecast as a recovery year, high mortgage renewal rates and affordability issues will continue to influence investment and consumer demand.

Sanctions, Export Controls, and Geopolitics

The US continues to leverage sanctions and export controls as tools of foreign policy, targeting adversaries and sensitive sectors. These measures create compliance challenges and supply chain risks for global firms, especially in technology, defense, and critical materials.

Asian Markets Dominate Russian Energy

With EU demand collapsing, Russia’s energy exports to China and India surged but now face volatility as India reduces imports under Western pressure and China negotiates deeper discounts. This shift exposes international firms to price swings and evolving regulatory risks in Asian markets.

International ‘Board of Peace’ Governance Experiment

The US-led ‘Board of Peace’—involving multiple global actors—aims to oversee Gaza’s reconstruction and security. Israel’s recent agreement to participate marks a policy shift. However, questions over legitimacy, authority, and buy-in from Palestinians and Hamas create operational and reputational risks for international businesses.

Deepening Property Crisis Threatens Stability

China’s property downturn, the longest in modern history, has led to a surge in foreclosed assets and falling prices, especially in rural regions. This crisis undermines banking sector health, limits stimulus options, and poses systemic risks for economic and financial stability.

Geopolitical Uncertainty and Transatlantic Alliances

The UK’s foreign policy is challenged by unpredictable US actions and shifting global alliances. Diplomatic efforts to maintain strong US and EU ties are critical for security and economic stability, but volatility in American policy increases risks for UK business operations and investment.

Stagnant Manufacturing Competitiveness

Thailand’s manufacturing sector, especially automotive and electronics, faces declining output and competitiveness. Despite increased FDI, the country struggles to move up the value chain, risking long-term industrial stagnation and reduced attractiveness for high-tech investment.

Security Risks and Regional Tensions

Persistent cross-border terrorism, especially from Afghanistan, and heightened tensions with India threaten supply chains, infrastructure, and investor sentiment. Security alliances with China and Saudi Arabia aim to mitigate risks, but instability remains a critical factor for international business operations.

Industrial Policy and Market Intervention

The US is intensifying industrial policy through subsidies and intervention, particularly in energy and manufacturing. While supporting domestic sectors, these measures increase market volatility and complicate international investment decisions.

Infrastructure Reconstruction and Investment Challenges

Gaza’s reconstruction is estimated to require $50–70 billion, but funding pledges remain inadequate. The scale of destruction, combined with political and security risks, creates significant challenges for infrastructure, energy, and technology investors seeking stable returns in post-conflict environments.

Aggressive Land Reclamation and Regulatory Risk

The government’s plan to reclaim 4–5 million hectares from plantation and mining firms heightens regulatory and asset security risks. This campaign impacts palm oil, forestry, and mining, raising concerns about policy stability, compliance costs, and foreign investor confidence.

Legally Binding Security Guarantees

Ukraine’s allies have agreed to activate robust, legally binding security guarantees after a ceasefire, including military aid, multinational force deployment, and US-led monitoring. These measures aim to deter future Russian aggression and stabilize Ukraine’s business environment.

Critical Minerals and Rare Earths Competition

Ukraine’s vast lithium and rare earth reserves are drawing major foreign investments, including a $700 million lithium project. Control over these resources is a strategic priority for both Ukraine and Russia, with global implications for energy transition and technology supply chains.

Geopolitical Tensions With China Escalate

Japan faces heightened diplomatic and economic tensions with China, including export controls on rare earths and dual-use items. These frictions, triggered by Japan’s pro-Taiwan stance, threaten supply chains for high-tech and automotive sectors, raising operational risks for international businesses.

War-Driven Energy Infrastructure Crisis

Relentless Russian strikes have damaged Ukraine’s energy grid, causing blackouts for millions and threatening business continuity. Over 600 attacks in the past year have forced emergency imports and repairs, with export and industrial production severely impacted, undermining investor confidence and supply chain reliability.

Labor Market Weakness Amid Policy Shifts

Despite protectionist policies, US manufacturing jobs declined by over 70,000 since April 2024. The labor market remains sluggish, with low hiring rates and increased long-term unemployment, challenging the narrative of a domestic manufacturing resurgence.

Moderate Economic Growth, High Inflation

Brazil’s economy is projected to grow around 1.7% in 2026, with inflation remaining high at 12-12.75%. Fiscal stimulus and strong agriculture support growth, but high interest rates and external risks require cautious planning for investment and supply chain strategies.

Shift Toward High-Value Industries

Thailand is accelerating reforms to attract foreign direct investment in high-tech, green infrastructure, and wellness tourism, moving away from traditional manufacturing. This strategic pivot aims to boost long-term competitiveness amid declining FDI and rising regional competition, especially from Vietnam and Indonesia.

Semiconductor and Technology Autonomy Push

Japan is investing heavily in domestic semiconductor capacity, notably through Rapidus, to achieve self-sufficiency in advanced chips. This strategic pivot aims to reduce reliance on Taiwan and China, strengthen economic security, and attract global investment in high-tech manufacturing and R&D.

Sluggish Growth and Structural Reform

Thailand’s GDP growth is projected at just 1.5–2.0% for 2026, the lowest in three years, driven by weak exports, currency appreciation, and political uncertainty. This stagnation is prompting urgent calls for structural reforms, impacting investment strategies and business confidence.

Resilient Trade Surplus and Diversification

Despite US tariffs and weakening exports to the US, China posted a record $1.19 trillion trade surplus in 2025, driven by surging exports to Africa, Southeast Asia, and Latin America. This diversification mitigates Western pressure but raises new tensions over overcapacity and market access.

Regulatory Modernization and Investment Climate

Recent reforms, including streamlined mining licenses, improved investor protections, and digital property platforms, are enhancing Saudi Arabia’s regulatory environment. These measures aim to reduce red tape, increase transparency, and attract long-term international investment across sectors, though implementation and policy stability are closely watched by global investors.

Labor Reforms and Cost Pressures

Mexico’s 2026 labor reforms include a 13% minimum wage increase, mandatory social security for platform workers, and a proposed reduction of the workweek. These changes raise labor costs and compliance requirements, affecting competitiveness and supply chain strategies.

Energy Transition and Industrial Competitiveness

Germany’s energy transition, including the nuclear phase-out and delayed grid upgrades, has increased costs and weakened industrial competitiveness. High energy prices and labor shortages in electrification and renewables challenge Germany’s position in global manufacturing and exports.

Full Stock Market Liberalization

Saudi Arabia will fully open its stock market to all foreign investors in February 2026, abolishing the Qualified Foreign Investor regime. This landmark reform is expected to attract $9–10 billion in new capital, boost liquidity, and strengthen the Kingdom’s integration with global markets, though transparency and governance remain key concerns.

Intensified Technology Export Controls

China is strengthening legal frameworks and oversight on technology exports, particularly in AI, semiconductors, and rare metals. Tighter reviews and restrictions on foreign acquisitions and technology transfers reflect Beijing’s focus on national security and self-reliance, impacting cross-border investment and innovation flows.

CUSMA Uncertainty and Trade Diversification

The upcoming review of the Canada-U.S.-Mexico Agreement (CUSMA) introduces significant uncertainty for Canadian exporters and investors. With U.S. trade relations strained, Canada is accelerating efforts to diversify exports toward Europe, Asia, and the Global South, reshaping supply chains and investment strategies.

Debt Crisis and Military Economic Dominance

Egypt’s deepening debt crisis is exacerbated by the military’s control of vast financial reserves and key economic sectors, limiting fiscal flexibility, deterring private investment, and complicating IMF negotiations for structural reform and external financing.

Energy Transition and Nuclear Expansion

France’s €52 billion commitment to new nuclear reactors underscores its strategy for energy security and decarbonization. However, hardware shortages, dependence on Asian imports, and rising energy nationalism across Europe create operational and investment uncertainties for energy-intensive industries and infrastructure projects.

Japan’s Strategic US Alignment Deepens

Amid regional uncertainty, Japan is accelerating defense cooperation and supply chain realignment with the US, including a ¥80 trillion ($550 billion) investment plan. This shift is intended to reduce dependence on China and bolster economic and security resilience.

Labor Market Weakness Amid Economic Growth

While US GDP growth remains strong, job creation has slowed, with unemployment rising to 4.4%. AI-driven productivity gains and reduced immigration contribute to a decoupling of growth from employment, raising social and political risks for businesses dependent on domestic demand.

China-Japan Rare Earths Standoff

China’s sweeping export controls on rare earths and dual-use goods to Japan have escalated, threatening up to $17 billion in economic losses and severely disrupting high-tech supply chains. Japanese manufacturers face urgent pressure to diversify sourcing and invest in domestic alternatives.