Steel protection and industrial costs

UK steel policy remains commercially significant as safeguard measures and domestic rescue efforts reshape input pricing. Support for British Steel has reached £484 million, while Scunthorpe reportedly costs £1.3 million daily, highlighting cost pressures for manufacturers and construction supply chains.

Defense Build-Up Reshaping Industry

Rising defense expenditure is becoming a major industrial and procurement driver, with spillovers into manufacturing capacity and supplier networks. Germany’s defense budget is set to exceed €100 billion annually, while policymakers seek to use automotive production expertise and accelerate procurement across strategic sectors.

Russian Gas Dependence Versus EU Demands

Turkey, Gazprom's second-largest customer importing over half its pipeline gas from Russia, is negotiating new contracts. The EU demands non-Russian supply under future agreements, but Ankara says rapid replacement is economically impossible, complicating energy diversification and trade.

EU trade deal advances

Thailand and the EU concluded four more FTA chapters and related annexes in late-June talks, bringing roughly two-thirds of the 24-chapter pact to closure. Remaining issues span agriculture, industrial goods, procurement, digital trade, services, investment, and regulatory rules.

Deepening Dependence on China and Russia

China buys ~90% of Iranian crude at discounts and anchors the $400 billion partnership and Belt and Road projects, while Tehran courts a formal bloc. This alignment, plus rising IRGC influence, raises secondary sanctions exposure for firms engaging Iran.

AI-Driven Economic Boom

UBS and Citi raised Taiwan's 2026 GDP forecast to 9.9%, the highest in 16 years, on AI-fueled export momentum. Q1 GDP grew 14.5% year-on-year, the stock market hit $4.95 trillion (world's fifth-largest), and Goldman Sachs expects a current-account surplus above 20% of GDP.

Energy Security and B50 Biodiesel

Indonesia launches a 50% palm-oil B50 biodiesel mandate July 1, projected to save Rp157 trillion in imports but diverting 16-18mt of palm oil, tightening global supply. Higher oil prices lift coal and CPO export earnings, while PLN faces coal-supply and power-reliability strains.

Robust Macroeconomic Growth Momentum

Vietnam grew 8.02% in 2025 and targets double-digit growth for 2026-2030, with GDP near $514-527 billion. Trade-to-GDP approaches 170% and exports exceed $400 billion, positioning Vietnam to overtake Thailand as ASEAN's second-largest economy.

China-Plus-One Supply Chain Magnet

Vietnam is the leading beneficiary of supply-chain diversification, with the IMF naming it a key 'connector' economy. Samsung, Intel, Apple, LG, Amkor and Foxconn anchor production, while Japanese auto-parts orders relocate from Indonesia, deepening Vietnam's role in global production networks.

Papua Conflict Threatens Stability

Continuing conflict and militarisation in Papua pose security, human-rights and operational risks around mining, infrastructure and strategic projects. Displacement reportedly exceeds 107,000 people since 2018, increasing scrutiny, reputational exposure and possible disruption to transport, labour and site access.

CUSMA Review and Tariff Uncertainty

Canada’s July 1 CUSMA review is overshadowed by U.S. refusal to renew immediately, implying annual reviews and prolonged uncertainty. Section 232 tariffs on autos, steel, aluminum and lumber, plus unresolved non-tariff barriers, are disrupting investment planning and cross-border supply chains.

Chinese competition pressures carmakers

Renault plans 800 engineering departures in France and site closures while retraining 2,500 staff and hiring in AI, software and electrification to compete with Chinese rivals. Faster development cycles and cost pressure will reshape sourcing, labor relations and investment priorities.

Chronic Slow Growth and Structural Weakness

The IMF projects just 1.5% growth in 2026, Southeast Asia's slowest, versus Vietnam's 7.1%. High household debt, ageing demographics, and a large 48%-of-GDP informal economy weigh on outlook. Vietnam may overtake Thailand as ASEAN's second-largest economy, eroding investor confidence in Thailand's competitiveness.

Frozen Assets and Liquidity Constraints

Iran is estimated to have about $100 billion in restricted overseas assets, with possible phased access under negotiations. Until broader financial channels reopen, payment friction, foreign-exchange shortages, and banking isolation will continue to complicate trade settlement, repatriation, and market entry decisions.

Talent and Labor Shortages Deepen

TSMC says talent is its biggest shortage, while Taiwan still faces gaps in water, labor, land, and power. With 26.3 million vacancies reported across industry and services and migrant workers above 870,000, employers face rising competition, training costs, and execution risk.

Infrastructure push supports confidence

Cabinet linked improved competitiveness, from 64th to 54th in the 2026 World Competitiveness Yearbook, to better government efficiency and infrastructure management. More than R1 trillion in planned public investment and summit-backed partnerships may improve transport, water and digital operating conditions.

Defense industry revenue rules

New export rules earmark 20% of revenues from finished defense goods and technologies and 30% from component exports for Ukraine’s defense-industrial development fund. For investors and suppliers, this creates clearer fiscal terms but also mandatory state-linked revenue capture affecting margins and structuring.

Regulatory and labor compliance risks

The EU’s antitrust probe into Sanofi and heat-related labor disputes at Stellantis plants show rising compliance and operational risks. Companies in France face closer scrutiny over market conduct, worker safety, and plant resilience during increasingly disruptive climate conditions.

México negocia sin Canadá

Las rondas formales avanzan principalmente entre Washington y Ciudad de México, con Canadá rezagado. Este formato bilateral puede acelerar acuerdos puntuales, pero también introduce asimetrías en reglas regionales y aumenta la incertidumbre para empresas que dependen de cadenas trilaterales integradas.

Stronger IP enforcement push

Vietnam is intensifying intellectual property enforcement after being placed on the US Special 301 priority watch category. Authorities cite legal amendments, backlog clearance and more than 1,400 infringement cases handled recently, signalling tighter compliance expectations for manufacturers, technology firms and brand owners.

Energy and LNG Export Expansion

G7 partners endorsed Canada as a major alternative energy supplier as roughly 20% of global crude previously moved through Hormuz. Ottawa is promoting LNG projects, TMX expansion and possible new pipelines, creating opportunities in energy infrastructure, exports and energy-intensive industrial investment.

Carbon border costs hit exporters

Manufacturers, especially autos, face a growing carbon-cost burden from South Africa’s R190-per-tonne carbon tax and the EU’s CBAM from January 2026. With roughly 80% of electricity generated from coal, exporters risk weaker competitiveness, margin pressure and supply-chain reconfiguration.

Bond markets limit policy

Investor sensitivity to UK fiscal credibility remains high after the 2022 gilt shock. With debt at £2.98 trillion, or 95% of GDP, and debt interest around £110 billion, market reactions can quickly influence borrowing costs and policy space.

Soaring Public Debt and Fiscal Crisis

France's public debt hit a record €3,536 billion (117.5% of GDP) in Q1 2026, with the Cour des comptes calling finances 'alarming.' Debt-servicing tops €70bn—the largest budget item—threatening austerity, market sanctions, and reduced state investment capacity.

China Trade and Payments Shift

Indonesia expanded local currency settlement with China and Hong Kong, covering bilateral trade that reached US$154.5 billion in 2025, plus cross-border QRIS links. Reduced dollar dependence may ease transaction frictions, but also deepens commercial exposure to China-centered demand and policy dynamics.

Strait of Hormuz Threatens Supply Chains

US-Iran strikes over the Strait of Hormuz disrupted global shipping and oil flows, pushing fuel prices up. Iran demands 48-hour transit permission and threatens tolls, with UK maritime agencies monitoring vessel safety and potential higher household bills.

Maritime Energy Dispute Delays

UNCLOS conciliation over the 26,000 sq km Gulf of Thailand overlapping claims area affects offshore energy prospects estimated at roughly 10–12 trillion cubic feet of gas and major oil volumes. Non-binding proceedings may prolong investor caution over contract certainty and resource access.

Europe-China Trade Frictions Deepen

EU-China trade tensions are intensifying across EVs, batteries, solar, medical devices and procurement. With the EU’s 2025 goods deficit with China at about €360 billion, Brussels is considering tougher protections, increasing tariff, compliance and retaliation risks for multinationals serving both markets.

B50 Mandate Reshapes Trade

Indonesia plans to launch B50 biodiesel on 1 July, targeting savings of about Rp157.28 trillion in diesel imports. This supports palm oil demand and energy security, but could alter feedstock pricing, logistics costs and fuel procurement across transport and industry.

US Tariff Regime Favors Pakistan

Trump's Section 301 tariff overhaul positions Pakistan at a 10% rate versus India's 12.5%, granting competitive export advantage in the US market—stalling the India-US trade deal and enhancing Pakistan's textile and export attractiveness.

China's Critical Minerals Coercion Escalates

China has cut rare earth, tungsten, dysprosium and terbium exports to Japan since late 2025, blacklisting 80 entities by June 2026 over Taiwan remarks. Auto and magnet makers face shortages; Nomura estimates up to 1.3% GDP drag, threatening manufacturing continuity.

Tax Digitization Reshapes Compliance

The new finance bill mandates electronic filing, machine-readable statements, and expanded tax-monitoring systems, with fines up to Rs2 million and possible prison terms for violations. This raises compliance costs but may gradually improve transparency, documentation, and the formal operating environment.

China Decoupling and Transshipment Screening

The U.S. seeks to block Chinese goods from USMCA benefits via ownership traceability rules threatening Mexico's $27 billion accumulated Chinese FDI, targeting alleged triangulation of Chinese products through Mexico as a backdoor into American markets.

China Trade Reliance and Cautious Thaw

India-China ties are normalizing via border trade reopening (Lipulekh), NSA talks, and eased investment curbs, yet a large trade deficit and dependence on Chinese rare earths, magnets, and components persist. A WTO panel over India's PLI and IT tariffs adds friction.

Deepening Saudi-China Strategic Alignment

Bilateral trade reached $107.5 billion in 2024, with China as Saudi Arabia's largest partner and top crude buyer. Riyadh's post-war hedging toward Beijing—spanning energy, technology, drones, and supply chains—reshapes investment flows and raises Western-alignment compliance considerations for firms.

Market volatility and currency swings

Israeli assets have turned sharply more volatile. The TA-35 fell more than 12% in dollar terms in June, the broader exchange roughly 20% over the past month, and the shekel about 3.1%, complicating hedging, valuation, import costs, and capital-allocation decisions.