Retaliatory Tariffs and Trade War Risks

The EU is preparing a €93bn retaliatory tariff package and considering activating its ‘trade bazooka’ anti-coercion instrument. A tit-for-tat tariff spiral could significantly disrupt UK supply chains, raise costs, and depress cross-border investment, with global recession risks rising.

Ports and logistics corridor expansion

Egypt is building seven multimodal trade corridors, expanding ports with ~70 km of new deep-water berths and scaling dry ports toward 33. A new semi-automated Sokhna container terminal (>$1.8bn) improves throughput, but execution and tariff predictability matter.

Outbound investment screening expands

New U.S. outbound investment restrictions for semiconductors, quantum, and advanced AI create approval or notification burdens for cross-border deals and R&D. Companies must reassess Asia tech exposure, ring-fence sensitive IP, and build deal timelines around regulatory review risk.

Saudization and workforce constraints

Saudi Arabia is tightening localization rules, restricting expatriates from certain senior and commercial roles and raising Saudization ratios in sales/marketing. Multinationals must redesign org charts, compensation, and compliance processes, increasing operating costs and talent-transition risk.

Oil exports shift toward Asia

Discounted Iranian crude continues flowing via opaque logistics and intermediaries, with China and others adjusting procurement amid wider sanctions on other producers. For energy, shipping, and trading firms, this sustains volume but raises legal exposure, documentation risk, and payment complexity.

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.

Infrastructure Concessions Drive Investment Surge

A record wave of infrastructure concessions—50 auctions in 2023-2025—has attracted over R$229 billion in private investment, especially in ports, highways, and energy. This shift to private sector-led development is improving logistics but also exposes projects to regulatory, financial, and execution risks.

Domestic semiconductor substitution drive

Accelerating localization in semiconductor equipment and materials, alongside constraints on advanced foreign tools, is reshaping vendor ecosystems. Multinationals face procurement displacement, IP exposure, and evolving partnership terms, while China-based fabs prioritize domestic suppliers and capacity.

Severe Currency Collapse and Hyperinflation

Iran’s rial has plunged to over 1.4 million per U.S. dollar, fueling hyperinflation and eroding purchasing power. This economic crisis has triggered mass protests, disrupted domestic demand, and created severe payment risks for international exporters and investors.

Regional Trade Expansion and Diversification

Turkey is rapidly expanding trade with Gulf countries and the UK, with bilateral trade with Kuwait up 52% and UK trade targeted at $40 billion. These efforts reduce dependency on traditional partners and open new investment and supply chain opportunities.

Escalating Western Sanctions Enforcement

Western powers have intensified enforcement of sanctions on Russian oil exports, including direct maritime interdictions and seizures of shadow fleet tankers. This escalation increases legal, operational, and reputational risks for businesses involved in Russian energy logistics or trade, and heightens global supply chain volatility.

Suez Canal Disruptions Impact Trade

The Gaza conflict caused Egypt to lose $9 billion in Suez Canal revenue over two years, disrupting global shipping and supply chains. Recovery is underway, but ongoing regional instability remains a risk for trade flows and foreign exchange earnings.

Labor Market Saudization Intensifies

The government has raised Saudization rates to 60% in key private sector roles, including marketing and sales, and restricted senior positions to nationals. These measures impact expatriate hiring, increase compliance costs, and require strategic workforce adjustments for international businesses.

Russia-China Strategic Economic Partnership

Over $100 billion in joint projects with China span minerals, transport, and military technology. China supplies critical components and payment systems, helping Russia bypass sanctions. This deepening partnership shifts Russia’s trade orientation and impacts global supply chains and investment flows.

Trade surplus masks concentration risk

Indonesia posted a US$41.05bn 2025 trade surplus (up from US$31.33bn in 2024), with December exports up 11.64% to US$26.35bn led by palm oil and nickel. Heavy commodity dependence heightens exposure to policy shifts and price cycles.

Automotive profitability under tariffs

Toyota flagged that U.S. tariffs reduced operating profit by about ¥1.45tn and reported a sharp quarterly profit drop, alongside a CEO transition toward stronger financial discipline. For manufacturers and suppliers, this implies continued cost-down pressure, reallocation of investment, and trade-policy sensitivity.

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.

China duty-free access pivot

South Africa and China signed a framework toward duty-free access for selected goods via an “Early Harvest” deal by end-March 2026, amid US tariff pressure. Opportunity expands market access and investment, but raises competitive pressure from imports and dependency risks.

Surging Foreign Direct Investment Inflows

FDI in Saudi Arabia reached $280 billion by Q3 2025, up 10% year-on-year, with total foreign investments at SR3.2 trillion. Capital market liberalization and robust venture capital activity are making the Kingdom the largest VC market in MENA, further boosting international investor confidence.

Black Sea conflict logistics risk

Ongoing Russia–Ukraine war sustains elevated Black Sea war‑risk premia, periodic port disruption, and vessel damage reports. Businesses face higher insurance, longer routes, unpredictable inspection or strike risk, and tougher contingency planning for regional supply chains.

Macroeconomic instability and FX collapse

The rial’s sharp depreciation and near-50% inflation erode purchasing power and raise operating costs. Importers face hard-currency scarcity, price controls, and ad hoc subsidies, complicating budgeting, wage management, and inventory planning for firms with local exposure or suppliers.

European Strategic Autonomy Push

France is leading calls for greater European strategic autonomy in trade, defense, and technology, especially in response to US economic coercion and global instability. This shift impacts investment strategies, regulatory risk, and the future of transatlantic business cooperation.

Trade Policy Shifts and Bilateral Agreements

A forthcoming US-Indonesia trade agreement could quadruple bilateral trade, offering tariff exemptions for Indonesian commodities and US access to critical minerals. However, the deal’s structure and alignment with industrial policy will determine whether Indonesia can achieve balanced, sustainable trade growth.

Energy exports and LNG geopolitics

US LNG is central to allies’ energy security, but export policy and domestic political pressure can affect approvals, pricing, and availability. For industry, this shapes energy-intensive manufacturing siting, long-term contracts, and Europe-Asia competition for cargoes, with knock-on logistics and hedging needs.

UK–EU border frictions endure

Post‑Brexit customs and SPS requirements, the Border Target Operating Model, and Northern Ireland arrangements continue to reshape UK–EU flows. Firms face documentation risk, delays, and higher logistics overheads, driving route diversification, inventory buffers, and reconfiguration of distribution hubs serving EU markets.

Geopolitical Risk in Supply Chain Resilience

Australia’s supply chains for critical minerals remain vulnerable to global shocks, with current reserves sufficient for only weeks. The government’s producer-led strategy and strategic reserves seek to enhance resilience, but exposure to geopolitical disruptions persists, affecting manufacturing and technology sectors.

Macro resilience, currency strength

Israel’s shekel strength, low unemployment and expectations of further rate cuts support domestic demand and investment planning, while war risk premia remain. Foreign firms should hedge FX volatility, stress-test financing costs, and monitor credit-rating narratives and sovereign bond market access.

Defence exports and geopolitical positioning

Turkey’s defence industry is expanding exports and co-production, exemplified by a reported $350m arms agreement with Egypt and large-scale drone manufacturing capacity growth. This supports industrial upgrading and regional influence, but can elevate sanctions, licensing and reputational due-diligence requirements.

Regulatory Overhaul and Compliance

Significant regulatory changes are underway in the UK, including updates to employment law, financial regulations, and business compliance regimes. Companies must adapt quickly to avoid penalties and ensure operational continuity.

EU Green Deal and Carbon Border Adjustment

The EU’s Carbon Border Adjustment Mechanism (CBAM), effective from January 2026, imposes new costs and compliance requirements on Turkish exporters of carbon-intensive goods. Sectors such as steel, cement, and chemicals face increased regulatory scrutiny, affecting export competitiveness and supply chain strategies.

US-China Decoupling and Supply Chain Realignment

US-China trade relations have deteriorated, with tariffs and technology restrictions prompting companies to diversify supply chains. China’s exports to the US dropped 20% in 2025, but rerouting through third countries maintains indirect flows, complicating decoupling efforts and global sourcing strategies.

Escalating Cross-Strait Geopolitical Risks

China’s increased military pressure, including frequent air and naval incursions, raises the risk of conflict and supply chain disruption. Heightened tensions threaten business continuity, insurance costs, and regional stability, making contingency planning essential for international firms.

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.

Shipbuilding and LNG carrier upcycle

Korean yards are securing high-value LNG carrier orders, supported by IMO emissions rules and rising LNG project activity, with multi-year backlogs and improving profitability. This benefits industrial suppliers and financiers, while tightening shipyard capacity and delivery slots through 2028–2029.

Sanctions and secondary tariff enforcement

U.S. sanctions policy is broadening beyond entity listings toward “secondary” trade pressure, increasing exposure for banks, shippers, and manufacturers tied to Iran/Russia-linked trade flows. Businesses face higher screening costs, disrupted payment channels, and potential retaliatory measures from partners.

Supply Chain Resilience Amid Global Disruptions

Global supply chains remain in a state of permanent disruption due to geopolitical tensions, trade realignments, and energy volatility. Finnish businesses are adapting by diversifying sourcing and investing in digital infrastructure, but exposure to external shocks remains a critical risk factor.