External financing and reform

Ukraine’s fiscal stability remains tightly linked to EU, IMF and World Bank disbursements tied to reforms. Recent legislation unlocked €2.7 billion, but missed benchmarks still threaten billions more, directly affecting sovereign liquidity, public procurement, reconstruction spending and payment reliability.

Defense Industry Investment Surge

Ukraine is becoming a major defense-industrial platform with expanding joint production abroad and at home. Recent deals include Germany’s €4 billion package, 5,000 AI-enabled drones, and several hundred Patriot missiles, creating opportunities in manufacturing, technology partnerships, and dual-use supply chains.

Energy Nationalism and Payment Stress

Mexico’s energy framework continues to favor Pemex and CFE, with permit delays, tighter fuel rules and more centralized regulation. U.S. authorities say Pemex still owes over $2.5 billion to American suppliers, raising counterparty, compliance and investment risks for energy-linked businesses.

Critical Minerals Supply Chain Push

Canberra has created a A$1.2 billion strategic reserve covering rare earths, antimony and gallium, aiming to underpin domestic processing, support offtake agreements, and strengthen allied supply chains. The policy improves resilience, but midstream capacity and energy costs remain major constraints.

Steel Trade Protectionism Intensifies

From July, the EU will cut duty-free steel quotas by 47% and raise tariff barriers, putting UK exports at risk. With the EU taking 1.8 million tonnes of UK steel annually, manufacturers face margin pressure, rerouting risks and urgent need for quota arrangements.

US-China Decoupling Deepens Further

Direct US-China trade continues to contract, with China’s share of US imports falling to 7% from 23% in 2017 and the 2025 bilateral deficit down 32%. Businesses should expect more rerouting, dual sourcing, tighter controls, and sustained geopolitical exposure.

Energy Security and Fuel Exposure

Australia’s acute fuel dependence remains a top operational risk, with roughly 90% of liquid fuels imported and around a quarter sourced from Singapore. Middle East disruption, higher freight costs and government-backed emergency cargoes raise transport, manufacturing and logistics risks.

Import Costs Hit US Buyers

Recent analyses show foreign exporters absorb only about 5% of US tariff costs, leaving American firms and consumers to bear most of the burden. Higher landed costs, margin compression, and selective price increases will continue shaping procurement, pricing, and contract strategies.

LNG Exposure Threatens Operations

Energy security is a major operational vulnerability: about one-third of Taiwan’s LNG previously came from Qatar, while onshore reserves are only around 11 days, rising to 14 next year. Any prolonged disruption could affect power-intensive manufacturing, including semiconductors and chemicals.

Strategic Defence Industrial Expansion

AUKUS is widening opportunities for advanced manufacturing and export-linked suppliers, with an extra A$21 million for submarine supplier qualification and around 5,500 jobs tied to SSN-AUKUS construction in South Australia. Compliance, nuclear standards and long lead times will shape participation.

Inflation Pressures Keep Rates High

March IPCA rose 0.88%, lifting 12-month inflation to 4.14%, while the 2026 Focus forecast climbed to 4.71%, above the target ceiling. Higher fuel and food costs are narrowing room for Selic cuts, keeping borrowing costs elevated for trade and investment.

Oil dependence still shapes risk

Despite diversification efforts, oil remains central to fiscal stability and external balances. Analysts cited oil above $100 per barrel as important for budget equilibrium, meaning hydrocarbon price swings will continue to influence public spending, payment cycles, and the pace of business opportunities across sectors.

Economic Security in Auto Supply

Japan revised clean-vehicle subsidy criteria to place greater weight on battery and rare-earth supply resilience. The policy favors localization and trusted sourcing, encouraging investment in domestic EV components while reducing vulnerability to external supply and geopolitical disruptions.

West Bank settlement escalation

Approval of 34 new West Bank settlements heightens geopolitical, sanctions and reputational risk for foreign companies. The move increases prospects of international scrutiny, compliance complications and stakeholder pressure, especially for firms exposed to infrastructure, finance or land-linked activities in contested areas.

Semiconductor Push Deepens Industrial Policy

India is intensifying semiconductor ambitions through ISM 2.0, with reports of ₹1.2 lakh crore in planned support and multiple plants advancing in Gujarat. This strengthens long-term electronics localisation, supplier ecosystems and export potential, though execution and technology-dependence risks remain significant.

Energy Costs Erode Competitiveness

South African industry still faces severe energy vulnerability through elevated electricity and diesel costs. Mining groups report electricity tariffs up nearly 1,000% since 2007 and fuel shocks are lifting operating costs, margins, inflation risks and backup-power dependence across sectors.

Political Fragmentation Delays Reform

A divided parliament is constraining budget decisions and structural reform, creating uncertainty over 2027 fiscal consolidation and future regulation. For international firms, this raises policy volatility risks around taxation, subsidies, labor rules and the pace of business-friendly reforms.

Energy Market Liberalisation Progress

Power reliability has improved markedly, supporting production and investor sentiment, but South Africa still faces major generation and grid investment needs. Planned spending exceeds R2 trillion for generation and R440 billion for transmission, creating both opportunity and implementation risk.

Digital Regulation and Platform Liability

Brazil’s newer digital child-safety framework imposes stronger platform duties, including age verification, content controls, and potential fines of up to US$10 million. Although sector-specific, it signals a broader regulatory trend toward stricter data, compliance, and online-service obligations for technology businesses.

Regional War and Security Risk

Israel’s confrontation with Iran and continued Gaza volatility remain the dominant business risk, disrupting demand, labor supply and planning. The Bank of Israel cut 2026 growth to 3.8% from 5.2%, while reserve call-ups, missile threats and uncertainty raise operating costs.

Energy Infrastructure Damage Exposure

Strikes on South Pars and petrochemical facilities threaten domestic power supply and export output. With South Pars tied to roughly half of petrochemical production in some reports, disruptions could tighten regional chemicals, fertilizers, plastics and industrial feedstock supply chains.

Energy Cost Volatility Returns

Renewed oil and gas price shocks are lifting inflation and manufacturing costs, with institutes estimating a roughly €50 billion hit over 2026-27. Energy-intensive sectors, logistics chains, and location decisions are again vulnerable, especially amid low gas reserves and policy uncertainty.

Coalition Budget Politics Increase Uncertainty

The Government of National Unity is pairing reform messaging with heightened policy sensitivity around fiscal choices, fuel levies and growth delivery. For investors, coalition management raises uncertainty over budget execution, regulatory timing and the consistency of business-facing reforms across sectors.

Critical Minerals Strategic Realignment

Canberra is leveraging lithium, rare earths, manganese and other minerals to deepen ties with Europe and allied markets, reduce supply-chain dependence on China, and attract downstream processing investment, creating major opportunities alongside tighter scrutiny over strategic assets and offtake.

Labor Restrictions Disrupt Logistics

Immigration and licensing changes are tightening labor supply in freight, agriculture, and construction. New CDL rules could eventually affect nearly 194,000 immigrant truck drivers, while farm and worksite enforcement is worsening shortages, raising transport costs, project delays, and food-sector operating risks.

Arctic Logistics Constrain Supply

Russia’s Arctic export strategy is constrained by shortages of Arc7 ice-class tankers and delayed domestic shipbuilding. Novatek has launched a new engineering unit, but near-term capacity remains limited, threatening LNG project scalability, delivery reliability and long-run infrastructure competitiveness.

War Economy Crowds Out Business

Russia’s economy is increasingly split between defense-linked activity and the civilian sector. High military spending, elevated borrowing needs, and state pressure on private capital are crowding out investment, reducing credit availability, and worsening the operating environment for nonstrategic businesses.

US-China Tech Decoupling Deepens

Washington’s proposed MATCH Act would further restrict semiconductor equipment, servicing and allied exports to Chinese fabs including SMIC and YMTC. Tighter controls threaten production continuity, accelerate localization drives, and complicate investment decisions across electronics, AI and industrial technology supply chains.

Buy Canadian Procurement Frictions

Canada’s new procurement rules prioritizing domestic content in contracts above C$25 million are becoming a bilateral flashpoint. The U.S. has flagged the policy as a trade barrier, raising risks for foreign bidders, public-sector suppliers, and firms reliant on integrated North American procurement markets.

Suez and trade-route vulnerability

Egypt remains exposed to conflict-driven shipping disruption through the Red Sea, Bab el-Mandeb and wider regional routes. Higher insurance, freight and energy costs threaten canal-related revenues, delivery schedules and sourcing economics, with spillovers for exporters, importers and supply-chain planners.

CUSMA Review and Tariff Risk

Canada faces acute trade uncertainty ahead of the July CUSMA review, with U.S. officials warning of a hostile negotiating environment. Sectoral tariffs on steel, aluminum, autos and lumber remain, undermining investment planning, cross-border sourcing, and long-term market access certainty.

Textile Competitiveness Under Strain

Textiles, which generate roughly 60% of merchandise exports, face falling orders, high energy prices and supply-chain disruption via the Strait of Hormuz. Export declines and rising labour, gas and financing costs weaken Pakistan’s manufacturing competitiveness and supplier resilience.

War-Driven Security Disruptions

Israel’s conflict environment remains the dominant business risk, with missile threats extending to Haifa and other logistics hubs. Persistent hostilities raise insurance, security, and contingency costs, while threatening trade flows, asset protection, workforce mobility, and investor confidence across sectors.

Domestic Demand Remains Weak

China’s persistent property stress and subdued consumption continue to push policymakers toward export-led growth, intensifying global concerns over overcapacity and dumping. For foreign businesses, this supports lower-cost sourcing but heightens external trade friction, margin pressure, and volatility in sectors exposed to Chinese industrial surpluses.

LNG volatility affects regional operations

Cyclone-related outages at Western Australian facilities and Middle East disruptions have tightened LNG markets, with affected assets representing up to 8% of global supply. Higher prices improve exporter margins but raise procurement, energy, and continuity risks for Asia-Pacific manufacturers and utilities.

Tax Burden Likely To Rise

IMF-linked budget negotiations point to a proposed Rs15.6 trillion FY2026-27 tax target, versus roughly 11.3% tax-to-GDP. Potential measures include broader GST, fewer exemptions, digital invoicing and tighter audits, increasing compliance costs and affecting margins across manufacturing, retail and logistics sectors.