Baht volatility and monetary easing

The baht has weakened toward 32 per US dollar on risk-off flows and higher oil import costs (energy imports ~5–6% of GDP). The Bank of Thailand cut rates to 1% and may ease further, influencing hedging needs, import pricing and funding conditions.

Tariff Regime Legal Volatility

Supreme Court limits on broad presidential tariffs have not reduced trade risk; Washington shifted to temporary 10%-15% Section 122 duties and accelerated Section 301 probes. Importers face refund disputes, pricing instability, and fast-changing sourcing economics through mid-2026.

Logistics reform amid driver shortage

Japan is legislating logistics reforms to address the trucking labor crunch, subsidizing relay cargo facilities and tightening operational practices. Firms may face higher domestic distribution costs, new contracting standards, and pressure to redesign warehousing networks and delivery lead times.

Fiscal policy uncertainty: debt brake

A coalition dispute over reforming Germany’s constitutional debt brake is creating budget uncertainty. SPD seeks an “investment booster” for rail, roads and grids; Chancellor Merz rejects more borrowing. Delays or stop‑start spending affect infrastructure delivery and investor confidence.

Ukraine Strikes Disrupt Export Infrastructure

Ukrainian drone attacks on hubs including Tikhoretsk, Novorossiysk and Primorsk are disrupting Russia’s oil logistics. February oil exports fell 850,000 bpd to 6.6 million bpd and revenues dropped to $9.5 billion, increasing supply uncertainty for traders, refiners, and regional transport operators.

Steel Protectionism Reshapes Inputs

London has pivoted toward industrial protection, cutting steel import quotas 60% from July and imposing 50% tariffs above quota while targeting 50% domestic sourcing. Manufacturers, construction firms and foreign suppliers face higher input costs, procurement shifts and new market-access barriers.

Selective maritime corridors and diplomacy

Iran is reportedly allowing passage for certain third-country shipping after negotiations (e.g., India’s LPG carriers), effectively creating “safe corridors” close to Iran’s coast. Trade flows may hinge on diplomatic engagement, political signaling, and opaque rules—complicating logistics planning and charters.

Labor enforcement and visa tightening

Saudi Arabia is intensifying labor/residency enforcement—over 21,320 arrests in one week—and tightening employment visas amid fraud concerns. Firms face higher compliance, onboarding uncertainty for expatriates, and potential wage/skill‑mix shifts, affecting project delivery and service operations.

US–Taiwan tariff deal uncertainty

Implementation of the US–Taiwan Agreement on Reciprocal Trade (ART) remains exposed to shifting US legal authorities and new Section 301 probes. While exemptions cover thousands of product lines, firms must plan for tariff reclassification, compliance burden, and renegotiation risk.

EV battery materials scaling setbacks

The liquidation of Viridian Lithium’s ~€295m Alsace refinery project highlights Europe’s difficulty competing with China on battery materials amid slower EV demand. Investors should expect policy churn, consolidation, and greater supply-chain reliance on non‑EU refining in the near term.

China Dependence Recalibrated Pragmatically

Berlin is re-engaging China despite de-risking rhetoric as trade dependence remains high. China was Germany’s top trading partner in 2025, with imports at €170.6 billion and exports at €81.3 billion, creating both commercial opportunity and concentration risk.

Tourism weakness hitting demand

Tourism, worth about 20% of GDP, remains vulnerable as higher airfares and Middle East-related rerouting weigh on arrivals. International visitors reached 7.49 million by March 11, down 4.4% year on year, affecting consumer demand, retail activity and services investment.

Nickel quotas reshape EV chains

Indonesia’s tighter nickel production quotas and RKAB approvals are lifting ore, NPI and sulphate prices and could swing the global market to deficit in 2026. EV, stainless and battery investors face feedstock price volatility, permitting risk and project delays.

Agricultural Access Still Constrained

Despite the EU pact, key agricultural exports remain capped by quotas, including roughly 30,600 tonnes of beef and limited sheepmeat access, constraining upside for agribusiness exporters while preserving uncertainty for processors, logistics providers, and long-term market development strategies.

Import substitution and tech degradation

Sanctions constrain access to parts, software updates, and advanced components; many firms substitute by lowering quality and efficiency. “Local” products still depend on imported critical systems, increasing downtime and cost inflation, and undermining reliability of industrial supply chains and maintenance regimes.

China-free defense and dual-use supply chains

After China tightened dual-use export controls affecting Japanese entities, Tokyo is debating “China-free” defense supply chains and broader economic-security screening. This may expand compliance obligations, raise component costs, and accelerate localization or friend-shoring for sensitive industries.

Severe Inflation And Rial Stress

Iran’s domestic economy is under acute strain from very high inflation, currency weakness, shortages, and falling purchasing power. Reported inflation near 48.6% and food inflation above 100% undermine consumer demand, supplier stability, contract pricing, and payment reliability for any business with Iran exposure.

Hormuz Transit Control Risks

Iran’s de facto IRGC-controlled transit regime in the Strait of Hormuz has sharply reduced normal vessel traffic, imposed clearance and disclosure requirements, and reportedly involved yuan-denominated tolls, materially raising shipping, insurance, sanctions, and legal exposure for global traders.

Lira Volatility and Tightening

Turkey’s lira remains under heavy pressure near 44 per dollar as inflation stayed around 31.5% and policy rates were held at 37%, with funding costs pushed toward 40%. Currency instability raises import costs, hedging expenses, financing risk, and pricing uncertainty for foreign investors.

Semiconductor push and incentives

New funds and Budget measures expand chip and electronics incentives: a planned ₹1 trillion (~$10.8B) support vehicle plus ISM 2.0 funding and near-zero duties on ~70 semiconductor inputs/capital goods. This accelerates India-based supply chains, but execution and talent remain constraints.

Judicial reform and contract enforceability

Ongoing judicial overhaul debates elevate perceived rule-of-law and dispute-resolution risk for investors. Concerns about court independence and procedural changes can affect contract enforcement, regulatory challenges, and M&A confidence, increasing the value of arbitration clauses and stronger counterparty diligence.

Sanctions Waivers Reshape Oil Trade

Temporary U.S. waivers for Russian cargoes already at sea have revived purchases by India and China, sharply narrowing discounts and in some cases creating premiums. This is reconfiguring trade flows, compliance risk, shipping decisions, and energy procurement strategies across Asia and Europe.

Financial system instability and cyber risk

War-related disruptions and cyberattacks on banks and data centers have impaired payments, liquidity and business continuity. High inflation and currency intervention signals elevate convertibility and transfer risk, complicating invoicing, payroll, repatriation and supplier financing for firms with Iran exposure or regional dependencies.

USMCA review and tariff risk

Mexico’s top business risk is the 2026 USMCA review, covering $1.6 trillion in regional goods trade. Washington is pushing tighter rules and could threaten withdrawal, while existing U.S. tariffs include 25% on trucks and 50% on steel, aluminum and copper.

Lira management and reserve use

Authorities are leaning on state-bank FX interventions and market curbs (e.g., short-selling limits) to stabilize the lira, reportedly costing sizeable reserves. This supports near-term trade settlement but increases tail risks of abrupt depreciation or tighter macroprudential controls.

Labor shortages and wartime mobilization

Tight labor markets, migration constraints and war recruitment deepen shortages across industry and public services, pushing wage inflation and productivity pressure. Businesses encounter higher operating costs, staffing instability, and greater reliance on automation, outsourcing, or politically managed labor programs.

Middle East energy shockwaves

Strait of Hormuz disruptions and Iran conflict have trapped Japan-linked ships and forced emergency oil releases. Japan sources ~95% of crude from the Middle East; Qatar LNG outages cut ~20% of global supply, lifting fuel costs and forcing procurement reshuffles.

Maritime chokepoints and freight risk

Simultaneous constraints around Hormuz and Red Sea/Suez are extending voyages 10–14 days and raising shipping costs 30–50%. Japan-linked vessels face insurance and security constraints, complicating automotive, food, and energy logistics and inventory planning for import-reliant sectors.

EU CBAM carbon compliance squeeze

From Jan 2026, EU importers must buy CBAM certificates (€60–100/tonne CO2) for embedded emissions. Research shows Thai EU-bound CBAM-goods exports fell 14% after 2020 announcement and 24% after 2023 rollout, with disproportionate impacts on SMEs lacking decarbonisation capacity.

Automotive Base Under Pressure

Germany’s auto sector is undergoing structural stress from weak demand, costly electrification, supplier insolvencies and Chinese competition. Industry revenue fell 1.6% in 2025, employment dropped 6.2%, and supply-chain disruptions could intensify as restructuring accelerates.

Auto Sector Faces Policy Shock

Autos remain Japan’s most commercially significant export vulnerability, with negotiations focused on reducing current 25% US tariffs on vehicles and parts. Prolonged uncertainty could disrupt production footprints, supplier contracts, and capital allocation across North American and Japanese automotive supply chains.

Oil market volatility and fiscal impact

Oil prices surged amid regional attacks and shipping constraints, while Saudi finances face lower oil revenues and a larger 2025 deficit (SR276bn). Volatility affects energy‑intensive industries, FX/liquidity planning, government spending cadence, and contracting risk for suppliers tied to public projects.

Critical Minerals Supply Chain Buildout

Ottawa is accelerating strategic mining finance and allied supply-chain positioning, including a roughly C$459 million debt package for Quebec’s Matawinie graphite project. For investors, Canada is strengthening downstream resilience in batteries, defense, advanced manufacturing and non-China critical mineral sourcing.

Sanctions volatility and waivers

Russia’s trade outlook is dominated by evolving US/EU/UK sanctions, including temporary US waivers allowing some already‑loaded crude to reach buyers. This increases compliance uncertainty, raises due‑diligence costs, and can abruptly shift energy flows, pricing and counterparties.

Escalation risk to energy infrastructure

Strikes have hit Iranian fuel depots and logistics sites while Kharg Island—handling about 90% of Iran’s oil exports—remains a critical vulnerability. Any attack or interdiction could remove up to ~1.6 million bpd, potentially pushing crude above $100 and raising regional force majeure risk.

Trade Pattern Shifts Across Markets

February exports rose 4.2% to ¥9.57 trillion, but demand diverged sharply by destination. Shipments to China fell 10.9%, while exports to Europe rose 17%, signaling a rebalancing of market opportunities and logistics priorities for internationally exposed Japanese firms.