BOJ Tightening and Yen Volatility

The Bank of Japan faces a difficult balance between inflation control and growth protection as external shocks raise import costs. With markets pricing a possible rate increase and policy rates still at 0.75%, financing costs, yen volatility, and hedging needs remain elevated.

Energy Security Drives Contingency Planning

Taiwan remains highly import-dependent for energy, with roughly one-third of LNG previously sourced from Qatar and 98% of energy needs imported. Firms should monitor fuel supply resilience, inventory policies, and energy costs as Taiwan secures alternative LNG from Australia and the United States.

Alternative Payments Accelerate De-Dollarisation

Sanctions on Russian banks have pushed counterparties toward yuan-based settlement channels and China’s CIPS network, whose average daily volume reached 921 billion yuan in March, up nearly 50% month on month. Businesses face changing payment rails, settlement risks, and treasury management implications.

Nearshoring Accelerates to Mexico

U.S. trade policy is accelerating nearshoring and regionalization, especially toward Mexico and North America. Logistics firms report rising cross-border demand, more use of bonded and Foreign Trade Zone facilities, and redesign of distribution networks as companies seek resilience against policy and sourcing shocks.

Tourism Growth Offsets Regional Volatility

Domestic tourism reached 28.9 million trips in Q1 2026, up 16%, with spending at SR34.7 billion. Strong religious and leisure demand supports hospitality, aviation, retail, and services, but regional tensions still threaten wider GCC travel flows and revenues.

China Dependence Rebalancing Dilemma

Germany continues balancing de-risking rhetoric with deep commercial exposure to China, illustrated by major corporate commitments such as BASF’s €8.7 billion Guangdong complex. For multinationals, this creates strategic tension around market access, technology exposure, resilience, and future regulatory scrutiny.

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.

Steel and Aluminum Trade Shock

Mexico’s metals sector faces severe strain from U.S. tariffs and anti-transshipment scrutiny. Industry data show steel capacity utilization at 55%, exports down 53% in 2025, and finished steel production down 8.1%, raising costs for manufacturers reliant on integrated North American inputs.

Generics Exemption Creates Short Window

Generic drugs, biosimilars, and associated ingredients are exempt for now, but the administration will reassess within one year. This offers temporary relief for lower-cost supply chains, yet creates planning uncertainty for exporters, distributors, procurement teams, and investors exposed to future tariff expansion.

Regional Conflict and Shipping Disruption

Middle East conflict is disrupting trade routes, raising shipping insurance, and complicating customs and energy logistics. Egypt has responded with exceptional customs measures for returned shipments and energy-saving controls, but ongoing regional instability still threatens import schedules, export reliability, and operating continuity.

U.S.-China Managed Decoupling

Direct U.S.-China goods trade continues to contract, with the 2025 U.S. goods deficit with China down 32% to $202.1 billion. Companies face ongoing pressure to localize, diversify sourcing, and manage exposure to rare earths, pharmaceuticals, and politically sensitive sectors.

Oil Boom Lifts External Accounts

Oil exports to China nearly doubled to US$7.19 billion in Q1, supported by Middle East disruption and pre-salt output. Higher crude revenues strengthen Brazil’s trade balance and FX inflows, but deepen commodity reliance and expose planning to geopolitical price swings.

Carbon Border Levy Frictions

France is pressing Brussels to pause the EU carbon border levy on imported fertilisers, but the Commission has resisted. The dispute highlights rising compliance costs for carbon-intensive sectors and uncertainty for agrifood, chemicals, steel, and import-dependent supply chains.

Settlement Expansion External Pressure

Approval of 34 new West Bank settlements has intensified criticism from the EU and other partners. This raises medium-term risks of diplomatic friction, selective sanctions, ESG scrutiny, and compliance complications for firms with exposure to Israeli entities or contested territories.

Trade Remedies Narrow Inputs

Vietnam is tightening trade defenses, including temporary anti-circumvention measures on Chinese hot-rolled steel that extend a 27.83% duty. This protects domestic industry but raises input risks for manufacturers reliant on imported materials, potentially increasing sourcing costs and complicating regional procurement strategies.

Hormuz Selective Transit Regime

Iran has turned the Strait of Hormuz into a permission-based corridor, with daily traffic falling from roughly 135 vessels to as few as six. Selective access, proposed tolls, and route controls are reshaping shipping economics, contract certainty, and regional market power.

Dual Chokepoint Escalation Risk

Iran-linked pressure on the Houthis raises the possibility that Bab el-Mandeb and the Red Sea could be disrupted alongside Hormuz. This would threaten the main Gulf bypass route, intensify rerouting around Africa, and deepen delays for energy, container, and bulk supply chains.

Rising Labor and Regulatory Costs

Businesses are absorbing higher wage bills, labor-market softening, and new worker-related compliance costs. Combined with limited pricing power, these pressures can compress margins, delay expansion, and reduce the attractiveness of labor-intensive UK operations and investments.

Europe Faces Refined Products Loophole

EU buyers still received 14 fuel cargoes in March from refineries in Turkey, India and Georgia using Russian crude feedstock. This refining loophole keeps Russian molecules in European supply chains, creating regulatory uncertainty for importers, commodity traders and downstream manufacturers.

EU Gas Exit Reshapes Flows

The EU bought 97% of Yamal LNG exports in Q1, taking 69 cargoes worth about €2.88 billion, yet phased restrictions are advancing. Spot-contract bans begin immediately, with broader LNG and pipeline gas prohibitions set by 2027, reshaping regional energy logistics.

EV and Green Export Frictions

China’s dominance in EVs, batteries, and other green sectors is intensifying accusations of overcapacity and subsidy-driven competition. Trade partners are increasingly investigating Chinese exports, raising the likelihood of tariffs, local-content rules, and market-access barriers that could reshape automotive, battery, and clean-tech investment strategies.

EU Funding and Reform Bottlenecks

Ukraine’s macro stability still depends on external financing, with a €90 billion EU loan and IMF disbursements tied to delayed reforms. Missed legislative deadlines, tax changes, and customs appointments create liquidity risk, policy uncertainty, and slower reconstruction financing for investors.

Regional Shipping Links Strengthen

The new New Caledonia–Vanuatu cargo service using the 1,900-ton Karaka should improve imports of machinery and essentials while supporting exports such as kava, cocoa, and copra. Better maritime logistics can ease cruise provisioning constraints and enhance reconstruction and tourism-linked supply reliability.

US Tariff Exposure Intensifies

Washington’s 2026 tariff shift, including a temporary 10% Section 122 surcharge and Section 301 probes, raises major uncertainty for Vietnam’s export-led model. Manufacturers face higher landed costs, stricter origin scrutiny, and pressure to diversify markets, sourcing, and compliance systems.

Electricity Market Reform Delays

Power-sector liberalisation remains the biggest operational variable. South Africa has delayed its wholesale electricity market to Q3 2026, even as 10 traders are licensed and 220GW of renewable projects advance, affecting tariff visibility, energy procurement strategies and industrial expansion timing.

China Plus One Accelerates

Multinationals are continuing to shift incremental production to Vietnam, Mexico, Malaysia and India, even where China remains operationally indispensable. Recent trade disruptions showed firms using offshore capacity as insurance, while redirected flows lifted US deficits with alternative suppliers and reshaped regional manufacturing networks.

Regulatory Streamlining and Licensing

The new administration plans an omnibus bill within a year and a 'super licence' within 180 days to remove outdated rules and accelerate approvals. If implemented effectively, this could lower market-entry costs, shorten project timelines, and improve operating predictability.

Defence Spending Delays Distort Investment

Delays to the UK’s Defence Investment Plan and a reported £28 billion funding gap are creating procurement uncertainty for defence, aerospace and advanced technology suppliers. While spending is set to rise, unclear timing is already affecting order books and investment planning.

Rupiah Pressure and Inflation Risks

Bank Indonesia is expected to hold rates at 4.75% as inflation reached 3.48% in March and the rupiah weakened about 3% this year, briefly breaching 17,000 per dollar. Higher imported energy costs raise hedging, financing, and pricing risks for foreign businesses.

Operational Risk Extends Into Shipping

The maritime environment around Russian trade is becoming more hazardous, with vessel seizures, convoy rerouting, suspected sabotage, and infrastructure security concerns. Businesses face longer routes around northern Europe, greater spill and compliance risks, and higher exposure across shipping and port operations.

U.S. Tariff Exposure Intensifies

Vietnamese exporters face rising U.S. trade risk after a temporary 10% Section 122 surcharge and Section 301 probes targeting overcapacity and labor enforcement. Electronics, apparel and furniture supply chains may need origin controls, tariff engineering and sourcing adjustments.

Buy Canadian Policy Expands

Ottawa is using procurement and defense policy to build domestic industrial capacity, targeting 70% of defense contracts for Canadian firms and aiming to double non-U.S. exports. The shift may support local suppliers but could trigger trade friction and compliance complexity.

Logistics Security Infrastructure Risks

Finland’s business model remains exposed to transport-security vulnerabilities, with about 95% of foreign trade moving through the Baltic Sea. Border disruption with Russia and calls for stronger rail redundancy underline the importance of logistics resilience for machinery imports, exports, spare parts, and servicing.

Critical Minerals Diversification Accelerates

Chinese restrictions on rare earth exports are pushing the US, Europe, Japan and others to fund mining, recycling and processing alternatives. That will gradually reduce dependence on China, but near-term shortages and higher prices still threaten automotive, defense, electronics and energy supply chains.

Closer EU Economic Alignment

The government continues to emphasize a closer relationship with the EU as part of its growth strategy. Any incremental regulatory or trade facilitation progress could improve market access, reduce frictions for supply chains, and support investment decisions tied to continental operations.

Bipartisan Shift Toward Protectionism

US trade strategy has moved away from broad liberalization toward tariffs, industrial policy, and narrower security-led agreements. This bipartisan shift suggests persistent barriers and compliance burdens beyond any single administration, requiring firms to plan for structurally higher intervention in cross-border trade and investment.