Energy Security and Long-Term LNG Deals

Japan secured a 27-year LNG supply agreement with Qatar, ensuring stable energy for power generation and industrial growth. This move supports Japan’s energy transition and mitigates risks from volatile global markets, benefiting sectors like data centers and advanced manufacturing.

Defense export surge and offsets

Korean shipbuilders and defense firms are competing for mega-deals (e.g., Canada’s submarine program, Saudi R&D cooperation). Large offsets and local-production demands can redirect capacity, tighten specialized supply chains, and create opportunities for foreign partners in co-production and sustainment.

Capacity constraints and productivity ceiling

Business surveys show utilisation still elevated (around 83%+), signalling tight capacity and lingering cost pressures. Without productivity gains, growth can translate into inflation and wage pressures, affecting project timelines, construction costs, and the reliability of domestic suppliers for global value chains.

USMCA review and tariff brinkmanship

The mandatory USMCA review and renewed U.S. tariff threats create high uncertainty for North American supply chains, especially autos, metals and agri-food. Firms should stress-test rules-of-origin compliance, pricing, and contingency routing as policy shifts can be abrupt.

Red Sea shipping and insurance costs

Red Sea insecurity continues to distort trade lanes, with heightened risk for vessels linked to Israeli ports and periodic rerouting around the Cape. Elevated war-risk premiums and longer transit times affect inventory, freight budgeting, and supplier reliability for Israel-connected supply chains.

Kritische Infrastruktur und Sicherheitspflichten

Das Kritis-Dachgesetz verschärft Vorgaben für Betreiber kritischer Infrastruktur (Energie, Wasser u.a.): Risikoanalysen, Meldepflichten für Sicherheitsvorfälle, höhere Schutzmaßnahmen und Bußgelder. Das erhöht Capex/Opex, IT- und Physical-Security-Anforderungen sowie Anforderungen an Zulieferer und Dienstleister.

Energy security and LNG contracting

Shrinking domestic gas output and delayed petroleum-law amendments increase reliance on LNG; gas supplies roughly 60% of power generation. PTT, Egat and Gulf are locking long-term LNG deals (15-year contracts, 0.8–1.0 mtpa). Electricity-price volatility and industrial costs remain key.

Coal output controls, export risk

Jakarta is signaling coal production limits for 2026 (proposal: 600m tons vs 790m in 2025), though top miners may be exempt. Annual RKAB approvals create uncertainty, thinning spot liquidity and complicating long-term export contracts for Asia’s import-dependent buyers.

Tariff escalation and legal risk

U.S. tariff policy remains volatile, with high effective tariff rates and active litigation over emergency authorities. Companies face sudden duty changes, pricing pressure, and contract disputes, while investment timing hinges on court outcomes and negotiated exemptions across sectors.

UK-EU Relations and Trade Frictions

Despite the Trade and Cooperation Agreement, UK-EU trade faces ongoing frictions, including customs checks, sectoral disputes, and unresolved issues in energy and services. These tensions add complexity and costs to cross-border operations.

Higher-for-longer interest rates

The Federal Reserve is pausing further rate cuts with inflation still pressured partly by tariffs. Elevated funding costs and a stronger risk premium weigh on capex, real estate, and leveraged trade finance, while FX volatility complicates pricing, hedging, and repatriation strategies.

Local content procurement intensifies

Local-content policies are deepening: PIF-linked spending reached SAR591bn ($157bn) in 2020–24, and government procurement increasingly scores local value-add. Foreign firms face higher compliance costs, partner-selection risk, and incentives to localize manufacturing, services, and workforce.

FX volatility and yen defense

Yen weakness and intervention signalling (rate checks, possible US coordination) heighten hedging costs and pricing uncertainty for importers/exporters. Policy risk rises around election-driven fiscal expectations, complicating repatriation, procurement contracts, and Japan-based treasury management.

Gigafactory build-out accelerates

ProLogium’s Dunkirk solid-state gigafactory broke ground in February 2026, targeting 0.8 GWh in 2028, 4 GWh by 2030 and 12 GWh by 2032, with land reserved to scale to 48 GWh—reshaping European sourcing and localisation decisions.

China competition drives trade sensitivity

Rapid gains by Chinese EV brands across Europe heighten sensitivity around battery and component imports, pricing, and potential defensive measures. For France-based battery projects, this raises volatility in demand forecasts, OEM sourcing strategies, and exposure to EU trade actions.

Infrastructure Delays Challenge Competitiveness

Major infrastructure projects, such as the Fehmarnbelt tunnel, face significant delays and cost overruns. Persistent issues with transport and logistics modernization threaten Germany’s long-term competitiveness and the efficiency of European supply chains, impacting international trade and investment.

Expanding sanctions and enforcement

EU’s proposed 20th package broadens restrictions on energy, banks, goods and services, adds 43 shadow-fleet vessels (≈640 total), and targets third‑country facilitators. Heightened secondary‑sanctions exposure raises compliance costs and transaction refusal risk for global firms.

Automotive Sector Policy Shifts

The automotive industry is navigating trade tensions, policy uncertainty, and a flood of cheap imports, particularly from China. The government is considering tariff adjustments and new energy vehicle policies, with the sector’s future hinging on reform momentum and global market access.

Rare earths processing and project pipeline

Government promotion of 49 mines and 29 processing projects, plus discoveries in gallium/scandium and magnet rare earths, supports Australia’s shift from raw exports to midstream processing. Opportunities are significant, but permitting, capex, and processing technology risk remain decisive.

Foreign Investment Faces High Uncertainty

Foreign direct investment in Ukraine remains subdued, with FDI at only 0.9% of GDP in late 2025. Investors are cautious due to security risks, regulatory instability, and infrastructure damage, though reconstruction initiatives offer selective opportunities for risk-tolerant capital.

Internal Unrest and Political Crackdown

Mass protests over economic hardship and government repression have resulted in thousands of deaths and ongoing internet blackouts. Political instability and human rights concerns heighten unpredictability for foreign investors and may trigger further international punitive measures.

Trade balance strain with neighbors

Pakistan’s trade deficit with nine neighbors widened 44.4% to $7.68bn in H1 FY26, driven by import growth (notably China) and weaker exports. This pressures FX demand and can prompt import management measures affecting raw materials and intermediate goods availability.

Fiscal consolidation and tax uncertainty

France’s 2026 budget targets a ~5% of GDP deficit and debt around 118% of GDP, relying on higher levies on large corporates and restrained spending. Political fragmentation and 49.3 use heighten policy volatility for investors, pricing, and hiring.

Semiconductor reshoring and export controls

Taiwan’s chip sector faces simultaneous pressures: US tariffs on certain advanced chips, tighter tech controls toward China, and major offshore fab investment. Firms must redesign compliance, IP protection, and capacity allocation while managing customer qualification and margin impacts.

Downstreaming and Industrial Policy Challenges

Indonesia’s downstreaming success in nickel, driven by Chinese investment and favorable market conditions, is difficult to replicate for other minerals like copper. High capital costs and thin margins threaten resource depletion and discourage new exploration, raising concerns about the sustainability of the industrialization model.

Supply Chain Stability Improves, Risks Remain

Only 7.5% of German firms report supply chain difficulties, a significant improvement from previous years. The auto sector especially benefits, but ongoing geopolitical tensions and critical dependencies—such as on semiconductors—require continued vigilance and risk management for international businesses.

Ports, logistics and infrastructure scaling

Seaport throughput is rising, supported by a 2030 system investment plan of about VND359.5tn (US$13.8bn). Hai Phong and Ho Chi Minh City port master plans aim major capacity increases, improving lead times and resilience for exporters, but construction, permitting and last-mile bottlenecks persist.

Expanding U.S. secondary penalties

Washington is tightening enforcement on Iranian trade through new sanctions targeting oil/petrochemical networks and a 25% tariff threat on countries trading with Iran. This elevates compliance costs, raises counterparty risk, and may force rapid supplier requalification.

Labour shortages, managed immigration

Severe labour scarcity is pushing wider use of foreign-worker schemes, but with tighter caps and complex visa categories. Proposed limits (e.g., 1.23 million through FY2028) could constrain logistics, construction and services, lifting wages and automation investment while complicating staffing for multinationals.

Monetary policy amid trade uncertainty

With inflation around 2.4% and the policy rate near 2.25%, the Bank of Canada is expected to hold rates while tariff uncertainty clouds growth and hiring. Financing costs may stay elevated; firms should stress-test cash flows against demand shocks and FX volatility.

Environmental and Social Risk Management

Large-scale battery projects face heightened scrutiny over pollution and safety risks, with calls for independent risk assessments. Environmental compliance is becoming a decisive factor for project approval, affecting investment timelines and stakeholder relations.

Cyber resilience as supply-chain risk

Recent disruption highlighted by the Jaguar Land Rover cyber incident continues to shape operational risk expectations. Firms operating in the UK should strengthen vendor security, incident response, and business continuity to protect manufacturing output, logistics flows, and customer delivery commitments.

Continental Infrastructure and African Integration

Egypt prioritizes infrastructure-led economic integration across Africa, leading projects like the Lake Victoria-Mediterranean corridor. These initiatives enhance intra-African trade, create new supply chain routes, and position Egyptian firms as key players in continental development.

EU market access with green compliance

An India–EU FTA conclusion and stricter EU climate/traceability tools (e.g., CBAM-type reporting) increase both access and compliance burdens for exporters in steel, aluminum, chemicals and textiles. Firms should invest in emissions data, auditing, and supplier traceability.

Energy Independence and Import Reduction

The government is aggressively pursuing energy independence by reducing fuel imports through refinery upgrades, biofuel mandates, and new gas infrastructure. These efforts aim to lower import bills, stabilize the rupiah, and create new opportunities for energy sector investment.

Mercosur-EU Trade Agreement Delays

The ratification of the Mercosur-European Union trade agreement faces legal and political hurdles, with implementation potentially delayed up to two years. This uncertainty affects market access, tariff reductions, and strategic planning for exporters and investors in Brazil.