New Tariff Regimes and Trade Policy Volatility

The US has imposed sweeping tariffs, including 25% on trade with Iran and advanced AI chips sold to China. These measures create uncertainty for multinationals, disrupt established supply chains, and may provoke legal challenges and WTO disputes.

Investment Climate Amid Geopolitical Tensions

Geopolitical instability, including US-EU disputes and global conflicts, has led to increased market volatility and cautious investment. French markets have seen declines, and sectors like tech and industry face job cuts, prompting investors to adopt more defensive and selective strategies.

USMCA review and North America

The approaching USMCA review is heightening risk for automotive, agriculture, and manufacturing flows across the US–Canada–Mexico corridor. Threatened tariffs and rules-of-origin pressures incentivize nearshoring but complicate cross-border planning, inventory placement, and long-term supplier commitments.

Nearshoring and AI Supply Chain Integration

Mexico is rapidly becoming a strategic hub for North American nearshoring, especially in AI hardware assembly, data centers, and advanced manufacturing. Major investments by US tech firms and alignment with USMCA digital rules are deepening regional supply chain integration and resilience.

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.

Disrupted Grain Export Corridors

Russian attacks on Ukrainian ports have caused a 47% drop in agricultural exports year-on-year, severely impacting global supply chains. The Black Sea corridor remains vital but operates under constant threat, affecting food security and trade flows worldwide.

Regional Diplomacy and Trade Policy Uncertainty

Israel’s diplomatic maneuvering—balancing US, Egyptian, and broader regional interests—creates a fluid trade policy environment. Ongoing negotiations over border management, reconstruction, and security arrangements introduce unpredictability for cross-border trade, investment flows, and multinational business strategies.

China decoupling in advanced tech

Tightened export controls and new duties on advanced semiconductors/AI chips are reshaping global electronics supply chains. Firms face licensing, compliance, and redesign costs, while China accelerates substitution. Expect higher component prices, longer qualification cycles, and intensified scrutiny of technology transfers.

Massive International Financial Support Packages

The EU and US are advancing unprecedented financial support for Ukraine, including a €90 billion EU loan and an $800 billion US-backed recovery package. These funds aim to stabilize Ukraine’s economy and support reconstruction, but their disbursement and effectiveness depend on political consensus and conflict resolution.

Stable Growth and Investment Climate

President Prabowo projects economic growth above 5% with low inflation, driven by industrialization and the new sovereign wealth fund Danantara. The government is rationalizing state-owned enterprises and courting foreign investors, enhancing Indonesia’s appeal as a stable investment destination.

US Energy Transition and Climate Policy

Federal investment in clean energy and infrastructure modernization is accelerating, but regulatory uncertainty and political resistance persist. Businesses face shifting incentives, compliance requirements, and supply chain adjustments as the US seeks to balance energy security with climate commitments.

US-EU Trade Tensions Escalate

The US has imposed new tariffs of up to 25% on German and European goods, citing geopolitical disputes. This has led to a sharp decline in German exports to the US, especially in automotive and steel, and threatens supply chain stability and investment planning.

Regulatory and Legal Enforcement on Foreign Ownership

Australian courts and regulators have imposed fines and forced divestments on foreign investors defying national interest rules, particularly in critical minerals. This robust enforcement environment increases compliance costs, legal risks, and operational uncertainty for international businesses.

Aggressive US Industrial and Tariff Policy

Sweeping tariffs, export controls, and industrial subsidies under the Trump administration aim to boost domestic manufacturing and reduce trade deficits. These measures raise input costs, provoke foreign retaliation, and complicate cross-border investment and supply chain management for global firms.

Fed Independence Faces Political Threats

The US Federal Reserve is under unprecedented political pressure, with DOJ subpoenas against Chair Powell amid Trump administration efforts to influence rate policy. Erosion of central bank independence risks market volatility, higher inflation, and diminished investor confidence in US assets.

Outbound Investment and Global Capital Flows

China’s record trade surplus is fueling outbound private investment, with over $1 trillion flowing into global markets. This trend increases China’s influence in international finance but raises risks of sudden capital reversals and global market volatility.

Workforce Development and Talent Mobility

Industrial growth and nearshoring are driving demand for skilled labor, prompting national upskilling initiatives. TN visas facilitate Mexican talent mobility to the US, while labor shortages and wage pressures in both countries are reshaping hiring strategies and operational models.

Investment Uncertainty and Supply Chain Realignment

Rising trade tensions and unpredictable US policy have slowed German investment flows into the US and prompted companies to reconsider supply chain locations. Prolonged uncertainty could accelerate regionalization, delay capital projects, and weaken Germany’s manufacturing base, with long-term implications for competitiveness and global market access.

EU-India FTA Reshapes Trade Landscape

The EU-India Free Trade Agreement, praised as historic, eliminates tariffs on nearly all goods and is expected to double Finland–India trade to €6 billion by 2032. This deal will significantly boost Finnish exports, diversify supply chains, and deepen political ties, providing new opportunities in technology, manufacturing, and services.

ESG Standards and Regulatory Pressure

Environmental and social governance (ESG) standards are increasingly shaping investment and operational decisions, especially in mining. While Indonesia is adopting international frameworks, enforcement remains uneven, and companies face rising pressure from global buyers and lenders to improve compliance and transparency.

Strategic Diversification Away from U.S. Dependence

Canada is actively seeking to double non-U.S. exports by 2035, driven by repeated U.S. tariffs and trade unpredictability. This diversification strategy is reshaping investment priorities, market access, and supply chain decisions for Canadian and international firms operating in the country.

Semiconductor Tariffs and Industrial Pressure

The US is leveraging tariffs to coerce Korean chipmakers into expanding US-based manufacturing. Taiwan secured exemptions with $250 billion investment, while Korea faces pressure for similar commitments. These developments threaten Korea’s semiconductor sector, a cornerstone of its export economy.

Energy Transition and Nuclear Expansion

South Korea’s commitment to build two new nuclear reactors by 2038 reflects a strategic pivot toward clean energy and carbon neutrality. This policy shift impacts energy-intensive industries, investment in renewables, and long-term infrastructure planning.

Supply Chain Disruptions from Geopolitical Crises

Ongoing instability in the Red Sea and Mediterranean, including French shipping giant CMA CGM’s route reversals, creates unpredictability in global supply chains. These disruptions affect transit times, freight rates, and inventory management for businesses dependent on Asia-Europe trade.

German Investment Pivot to China

German direct investment in China surged 55% in 2025, reaching over €7 billion. Firms are localizing supply chains in China to hedge against US trade volatility, deepening economic ties with Beijing and complicating EU efforts to reduce China dependence.

EU Carbon Border Measures Challenge Exports

The European Union’s implementation of the Carbon Border Adjustment Mechanism raises costs for Korean steel and machinery exports, eroding competitiveness in key EU markets. Compliance and decarbonization are now strategic imperatives for Korean industrial exporters.

US Trade Deficit and Competitiveness Concerns

The US trade deficit widened to $973.5 billion in 2024, reflecting structural challenges such as a strong dollar, underinvestment in manufacturing, and declining export competitiveness. Persistent deficits threaten economic growth and complicate efforts to reshore production.

Suez Canal Disruptions and Recovery

The Gaza conflict and Red Sea security threats caused Egypt to lose $9 billion in Suez Canal revenue over two years, severely impacting global supply chains and Egypt’s foreign exchange. Gradual resumption of shipping is underway, but risks remain.

US Tariff Escalation and Trade Wars

Recent US tariff threats against China, the EU, and South Korea have intensified global trade tensions, disrupting supply chains and raising costs. Tariffs averaging 18%—the highest since 1934—are largely borne by US consumers and businesses, impacting inflation and investment strategies.

Inflation and Monetary Policy Uncertainty

US inflation held steady at 2.7% in December 2025, above the Federal Reserve’s 2% target. The Fed is expected to hold rates steady, but persistent cost-of-living concerns and political pressures create uncertainty for global investors and business planning.

Regulatory and Policy Shifts for Business

Japan is implementing regulatory reforms to attract foreign investment and enhance business resilience. Policy changes in economic security, industrial strategy, and trade are designed to support supply chain diversification, technological innovation, and long-term competitiveness for international firms.

Persistent Logistics and Port Inefficiencies

Chronic inefficiencies at South African ports, especially Cape Town and Durban, continue to undermine export competitiveness. Recent failures cost the fruit sector hundreds of millions of rand, with global port rankings placing South African ports among the worst, hampering supply chains and growth.

Fiscal Stabilization and Policy Reform

South Africa is nearing a fiscal turning point, with debt-to-GDP stabilizing and primary surpluses returning. Improved fiscal credibility has strengthened the rand and bonds, but sustaining reforms and managing coalition politics remain critical for long-term investor confidence.

Macroeconomic Reform and Investment Climate

Egypt’s government is accelerating macroeconomic reforms, including privatization, infrastructure upgrades, and digitalization. These measures, highlighted at Davos 2026, aim to attract long-term foreign investment, but sustained policy execution and regulatory clarity remain critical for investor confidence.

Declining Indian Demand for Russian Oil

Indian refiners are reducing Russian oil imports due to sanctions, compliance complexities, and a shift toward Middle Eastern suppliers. This trend impacts Russia’s export revenues and alters global crude trade patterns, while increasing supply chain and regulatory risks for energy sector stakeholders.

Rules-Based Order Fragments Globally

Canadian leadership now openly acknowledges the collapse of the traditional rules-based international order. This fragmentation increases uncertainty for multinational firms, as trade, finance, and supply chains become tools of geopolitical leverage rather than predictable frameworks.