Gaza Conflict Drives Regional Instability

The ongoing conflict in Gaza and Israel’s military operations have resulted in persistent regional instability, affecting supply chains, humanitarian access, and investor sentiment. Ceasefire agreements remain fragile, and reconstruction is tied to complex security and governance conditions, impacting trade and operations.

US Tariffs and Trade Policy Uncertainty

Despite 20% US tariffs on Vietnamese exports, trade volumes to the US have reached record highs. However, ongoing tariff threats and negotiations inject volatility into Vietnam’s export-led growth model, compelling businesses to diversify markets and adapt to shifting global trade policies.

Strategic Diversification Away from U.S. Dependence

Canada is actively seeking to double non-U.S. exports by 2035, driven by repeated U.S. tariffs and trade unpredictability. This diversification strategy is reshaping investment priorities, market access, and supply chain decisions for Canadian and international firms operating in the country.

Green Energy Transition Accelerates

South Korea is rapidly advancing its green energy agenda, including large-scale investments in green ammonia and retrofitting coal plants for ammonia co-firing. These initiatives are reshaping the energy sector, creating new opportunities and compliance requirements for international investors.

Labor Market Reform and Wage Pressure

2026 brings decisive labor reforms, including stricter inspections, higher minimum wages, and possible workweek reductions. These changes raise compliance costs and affect competitiveness, especially for SMEs and export-oriented sectors, while informal employment remains a persistent challenge.

Regional Destabilization and Security Threats

Iran’s weakened alliances and regional proxies, combined with threats of retaliation against US and Israeli interests, increase the risk of conflict spillover. The situation poses substantial risks to energy infrastructure, shipping routes, and regional supply chains.

Energy Infrastructure Under Relentless Attack

Russian strikes have caused catastrophic damage to Ukraine’s energy grid, triggering rolling blackouts, heating and water outages, and mass evacuations in major cities. The resulting instability severely disrupts industrial operations, logistics, and daily business continuity, heightening operational risks for all sectors.

Energy Security and Nuclear Revival

Japan has restarted the Kashiwazaki-Kariwa nuclear plant, boosting energy self-sufficiency and emissions targets. This move, amid regional security tensions, signals a shift toward stable domestic energy sources and reduced reliance on fossil fuel imports, affecting industrial competitiveness.

Sovereign Wealth Fund and State Intervention

The Danantara sovereign wealth fund, managing $1 trillion in assets, is central to President Prabowo’s industrialization and investment agenda. While intended to boost efficiency and co-investment, increased state involvement and leadership changes have raised questions about governance, fiscal discipline, and market independence.

Trade Policy Shift to Strategic Diversification

India is moving from broad liberalization to selective, strategic trade engagement. Recent agreements with the UK, UAE, and others, plus supply-chain diversification, aim to build resilience amid global protectionism and realign India’s role in global value chains.

Regulatory and Compliance Pressures

A wave of new regulations—including the Chair Law, digital labor rights, and whistleblower portals—has increased compliance demands. Enhanced inspections and evolving labor, environmental, and investment rules require businesses to strengthen risk management and adapt to a more stringent regulatory environment.

Economic Reform and Investment Momentum

Recent reforms, improved energy reliability, and enhanced infrastructure have strengthened South Africa’s economic outlook. The country has exited the FATF grey list and received a credit rating upgrade, attracting renewed interest from global investors and supporting capital inflows.

Trade Policy Protectionism and Import Controls

France has suspended imports of certain South American products over non-compliance with EU standards and is pushing for stricter border controls. This signals a more protectionist stance, increasing compliance costs and uncertainty for international suppliers and food sector operators.

Rising Regional Geopolitical Influence

Saudi Arabia is recalibrating its foreign policy, forming new defense alliances with Egypt, Turkey, and Pakistan, and asserting itself in Yemen and the Horn of Africa. This shift increases regional autonomy but also introduces new risks and uncertainties for international business operations.

Political Uncertainty and Governance Risks

Upcoming municipal elections and ongoing political realignment introduce governance risks, affecting policy stability and business confidence. Service delivery failures and coalition instability in major metros remain concerns for international investors and supply chain operators.

Semiconductor Reshoring and Taiwan Deal

A landmark US-Taiwan trade agreement lowers tariffs to 15% and secures $250 billion in Taiwanese semiconductor investment, with TSMC expanding US operations. This accelerates domestic chip manufacturing, reshapes supply chains, and heightens strategic rivalry with China, affecting global tech sector dynamics.

Uncertain Path to Palestinian Statehood and Reform

The phased peace plan envisions Palestinian reforms and eventual statehood, but Israeli opposition and internal Palestinian divisions stall progress. The lack of political clarity deters long-term investment and complicates regulatory forecasting for international firms.

Labor Market and Immigration Uncertainties

US labor market data shows mixed signals: job growth has slowed, unemployment remains low, and wage growth persists. Immigration policy remains restrictive, impacting talent availability and operational costs for multinational firms, especially in technology and healthcare sectors.

Export-Led Growth Under Global Pressures

Vietnam’s export-driven economy faces mounting US tariffs (up to 20%) and EU trade measures, threatening key market access. The government is actively diversifying export destinations to mitigate risks, but global trade tensions remain a significant operational challenge.

Infrastructure and Resource Constraints

Taiwan faces challenges in scaling advanced manufacturing due to land, water, and power limitations. These constraints affect expansion plans for high-tech industries and may drive further overseas investment, influencing long-term industrial competitiveness.

Labor Reform and Wage Increases

Mexico’s 2026 labor reforms include a 13% minimum wage hike, stricter workplace inspections, and a planned reduction of the workweek to 40 hours. These changes improve worker protections but increase compliance costs and operational complexity, especially for export-oriented manufacturers.

India’s Strategic Response to US Trade Pressure

India is recalibrating its economic strategy in response to US tariffs, focusing on boosting domestic manufacturing, attracting FDI, and diversifying export markets. The 2026 Union Budget emphasizes capital expenditure, fiscal discipline, and incentives for manufacturing to position India as a resilient, long-term investment destination.

Nearshoring Drives Industrial Expansion

Mexico’s nearshoring boom is doubling industrial space demand, with vacancy rates near 1% and rents rising 16%. US firms increasingly shift supply chains to Mexico for cost, proximity, and resilience, fueling investment in manufacturing, logistics, and workforce upskilling.

Humanitarian Crisis and Workforce Displacement

Widespread infrastructure damage and harsh winter conditions have forced hundreds of thousands to evacuate urban centers, straining labor availability and disrupting local markets. The humanitarian crisis compounds business continuity risks and complicates workforce planning for international firms.

AI and Tech Export Boom

Taiwan’s exports surged 26% to $743.7 billion in 2025, driven by AI and high-performance computing demand. Major tech firms like TSMC and Foxconn posted record profits, but concerns linger over an AI bubble and overdependence on tech exports.

Geopolitical Tensions and Regulatory Risks

Canada’s evolving trade strategy heightens exposure to geopolitical risks, including US-China rivalry, cybersecurity concerns, and regulatory divergence. Businesses must navigate shifting alliances, compliance challenges, and potential retaliatory measures as Canada balances economic pragmatism with security and values.

Deepening Turkey–UK and EU Trade Relations

Turkey’s trade with the UK hit $24 billion, with ambitions for $40 billion. EU trade reached $233 billion. Ongoing negotiations to expand free trade agreements into services and investment are set to further integrate Turkey into European supply chains.

Supply Chain Diversification and Resilience

Amid US tariffs and rising protectionism, China has diversified export markets and supply chains, boosting trade with ASEAN, Africa, and Latin America. However, supply chain ‘reallocation’ through third countries keeps China central to global manufacturing, complicating true decoupling efforts.

UK Government Pursues Diplomatic Resolution

Prime Minister Starmer has ruled out immediate tariff retaliation, emphasizing dialogue and alliance unity. The UK seeks to avoid escalation, but faces political pressure to defend national interests, balancing economic stability with transatlantic and European alliances.

Vision 2030 Megaprojects and Real Estate

Massive Vision 2030 projects like NEOM and the Red Sea Project are transforming Saudi Arabia’s real estate market, projected to reach $137.8 billion by 2034. New laws allowing foreign property ownership and AI-driven innovations are accelerating FDI, urbanization, and infrastructure development, reshaping business opportunities.

Urban Mobility and Infrastructure Investment

Major infrastructure projects, such as the Riyadh Metro expansion, are improving urban connectivity and supporting economic diversification. These investments, aligned with Vision 2030, enhance logistics, workforce mobility, and the overall business environment, but require sustained funding and efficient execution to realize their full impact.

New Tariff Regimes and Trade Policy Volatility

The US has imposed sweeping tariffs, including 25% on trade with Iran and advanced AI chips sold to China. These measures create uncertainty for multinationals, disrupt established supply chains, and may provoke legal challenges and WTO disputes.

Semiconductor Sector Faces Geopolitical Pressure

South Korea’s semiconductor industry is under pressure from evolving US tariff policies and investment demands, as well as competition with Taiwan for favorable US trade terms. These dynamics threaten Korea’s global market share and could force further US-based investment by Korean firms.

Critical Minerals and Resource Security

The US government’s $2.5 billion push for domestic critical mineral production is reshaping investment in mining and advanced manufacturing. New contracts and legislation aim to reduce import dependency, enhance national security, and support resilient supply chains.

Critical Minerals Strategy Reshapes Trade

Australia’s $1.2 billion critical minerals reserve, focused on antimony, gallium, and rare earths, aims to reduce reliance on China and stabilize supply chains. This initiative underpins new trade agreements, attracts investment, and enhances Australia’s role in global technology and defense supply networks.

Administrative Delays and Bureaucratic Risks

The rapid rollout of new shelter regulations has strained local planning offices, causing project approval delays. This increases operational risk for developers and international investors, with potential for missed deadlines and higher holding costs.