Industry Policy Turns Strategic

Paris is increasing intervention in strategic industries as closures mount in chemicals, steel and autos, while backing batteries and trade-defense tools. Exporters and investors should expect more selective incentives, tougher anti-dumping action, and supply-chain localization efforts.

Steel Protectionism Reshapes Supply Chains

London will cut tariff-free steel quotas by 60% from July and impose 50% duties above quota, backed by a £2.5 billion strategy. The shift protects domestic capacity but raises input costs for construction, automotive, infrastructure, and imported intermediate supply chains.

Ukraine Strikes Disrupt Export Infrastructure

Ukrainian drone attacks on hubs including Tikhoretsk, Novorossiysk and Primorsk are disrupting Russia’s oil logistics. February oil exports fell 850,000 bpd to 6.6 million bpd and revenues dropped to $9.5 billion, increasing supply uncertainty for traders, refiners, and regional transport operators.

China trade exposure and diversification

Australia’s trade remains highly exposed to China while geopolitics intensifies across energy, minerals, and security. Reports note China’s outbound critical-minerals push and an 85% fall in China FDI into Australia since 2018, accelerating diversification to G7/Indo-Pacific partners and reshaping market access.

Labour Market and Investment Freeze

Canada lost more than 100,000 full-time jobs in the first two months of 2026, while unemployment rose to 6.7%. Trade uncertainty is freezing activity in wholesale, retail and manufacturing, increasing operational caution for multinationals evaluating expansions, hiring and capital commitments.

Critical Supply Chains Under Audit

The government is auditing vulnerabilities across pharmaceuticals, fertilizers, textiles, and medical devices, seeking item-level data on import reliance, logistics, and technology gaps. Pharma inputs already account for 63% of imports worth $4.35 billion, underscoring potential disruption risks for exporters and industrial buyers.

Cross-Strait Security Risk Premium

Renewed Chinese military flights, maritime gray-zone pressure, and blockade-style signaling keep Taiwan under a persistent security premium. Businesses face elevated shipping, insurance, inventory, and contingency-planning costs, especially for time-sensitive semiconductor, energy, and industrial supply chains linked to Taiwan’s ports.

Escalating Regional Security Risk

Conflict involving Iran, US, Israel, and potentially the Houthis is raising threat levels for ports, tankers, energy assets, and airspace. Businesses face higher geopolitical risk premiums, contingency costs, and possible disruption across Gulf-facing operations.

Foreign Investment Security Screening

US market access remains attractive, but security-led scrutiny of foreign capital is intensifying. CFIUS-style logic is spreading globally and US debate over Chinese investment is hardening, raising transaction risk, longer approval timelines, and governance requirements for cross-border mergers, technology deals, and greenfield projects.

Critical Minerals Supply Chain Push

The EU deal eliminates tariffs on Australian critical minerals and hydrogen, strengthening Australia’s position in lithium, rare earths, cobalt, nickel and uranium supply chains. It should attract downstream processing capital, long-term offtake agreements, and strategic diversification away from concentrated suppliers.

Judicial and Regulatory Certainty Concerns

International investors continue to prioritize legal certainty as Mexico enters high-stakes trade talks. Unclear dispute resolution, changing regulatory conditions and demands for stronger investment screening mechanisms increase risk premiums, especially for long-horizon projects in manufacturing, technology, logistics and strategic infrastructure.

Auto Transition and EV Competition

Thailand’s automotive base is shifting toward EVs as production of pure-electric passenger vehicles jumped 53.7% in February. Yet lower consumer incentives, a strong baht, and US scrutiny of Chinese-linked assembly create uncertainty for exporters, suppliers and long-term auto investment decisions.

Regional security spending and dual-use

Heightened Indo-Pacific tensions and tighter dual-use controls are expanding Japan’s defense-industrial activity and allied coordination. This supports shipbuilding, aerospace, cyber, and semiconductors, but increases compliance needs, export licensing complexity, and supplier screening for foreign partners.

Fiscal strain and ratings pressure

War costs are reshaping fiscal priorities and sovereign risk. Israel’s 2026 budget includes NIS 699 billion spending and NIS 142 billion for defense, while Fitch kept the country at A with negative outlook, warning debt could reach 72.5% of GDP.

Semiconductor AI Demand Concentration

AI-led chip demand continues to power Taiwan’s economy, with export orders up 23.8% year on year in February and TSMC holding about 69.9% of global foundry revenue. This strengthens Taiwan’s strategic importance but deepens concentration and supply continuity risks.

Port capacity and hinterland connectivity

Cai Mep–Thi Vai handled 711,429 TEU in Jan 2026 (+9% y/y) with 48 weekly international services and capability for 24,000-TEU ships. New expressways and bridges aim to cut inland transit times, lowering logistics costs and improving resilience for exporters and manufacturers.

Inflation and Rate Risks Rising

Higher oil prices and a weaker Taiwan dollar are increasing inflation and financing risks. The central bank raised its CPI forecast to 1.8%, while markets price possible rate hikes, potentially affecting borrowing costs, consumer demand, and currency-sensitive import and export margins.

Red Sea Logistics Hub

Saudi Arabia is rapidly strengthening its role as a regional logistics fallback. New shipping services, a Khorfakkan-Dammam corridor, and a 1,700-km rail link to Jordan are cutting transit times, supporting cargo continuity and improving resilience for multinational supply chains.

India–EU FTA compliance squeeze

The India–EU FTA promises duty-free access for ~93% of Indian exports and tariff cuts on 96.6% of EU goods, but CBAM/EUDR sustainability rules and IP provisions could raise compliance costs, reshape sourcing, and favor larger, well-certified exporters and EU investors.

AI Infrastructure Cost Inflation

Rapid growth in AI infrastructure is driving broader cost inflation beyond technology hardware. Electricity prices have risen 42% since 2019, data centers may intensify cross-subsidy disputes, and utilities are reconsidering rate designs, affecting industrial competitiveness, real estate strategy, and regional operating expenses.

ESG scrutiny of nickel boom

Rapid nickel downstreaming expansion—often coal-powered—has increased environmental and social pressures in mining hubs, raising due-diligence expectations for automakers and financiers. Heightened scrutiny can trigger permitting delays, community disputes and higher compliance costs for supply chains.

Enerji fiyatları, cari açık riski

Türkiye’nin enerji ithalat bağımlılığı, Brent’in ~96 $/varil seviyelerine çıkmasıyla maliyet ve enflasyon kanalı üzerinden büyümeyi baskılıyor. Sürmekte olan şokta akaryakıt vergi “kayar ölçek” mekanizması tampon sağlasa da uzun sürerse cari açık ve fiyatlama riski yükselir.

Middle East war logistics shock

Conflict around Iran and the Strait of Hormuz is halting sea shipments to Middle East markets (~4% of Thai exports) and driving war-risk insurance and fuel costs sharply higher. Exporters face delays, container shortages, and forced rerouting, straining delivery reliability.

Privatization and state-ownership reform

Government is updating the State Ownership Policy to integrate state entities into the budget, remove preferential treatment, and clarify commercial activities, alongside tax, customs and digital reforms. This can open acquisition/PPP opportunities, but timing, governance and execution risk remain material.

Energy price shock and shortages

Middle East conflict-driven oil volatility and LNG interruptions raise fuel, power and gas costs; price caps strain budgets under IMF rules. Higher tariffs and potential rationing hit manufacturing margins, logistics costs, and contract pricing, with heightened inflation and demand risk.

Rupiah defense and FX controls

War-driven risk-off flows pushed the rupiah near record lows, prompting Bank Indonesia to keep rates at 4.75% and tighten FX rules: cash FX purchase cap reduced to US$50,000/month and documentation required for transfers ≥US$50,000, impacting treasury operations and liquidity planning.

Sovereign resilience and fiscal flexibility

S&P affirmed Saudi at A+/stable, citing ability to reroute oil exports via the East‑West pipeline, use storage, and calibrate Vision 2030 spending. For investors, stronger credit metrics can lower financing costs, but regional conflict scenarios still drive contingency planning.

Energy Cost Shock Intensifies

UK businesses remain exposed to severe energy-price volatility, worsened by Middle East disruption. Forecasts suggest electricity costs could rise 10%-30% and gas 25%-80%, squeezing margins, disrupting contract planning, weakening manufacturing competitiveness and complicating site-selection decisions for energy-intensive investors.

Non-Oil Growth Momentum

The kingdom’s non-oil economy remains a major investment driver, with 2025 GDP growth estimated at 4.5% and Q4 at 5%. Expansion in tourism, logistics, technology, pharmaceuticals, and advanced manufacturing supports demand for services, industrial inputs, partnerships, and regional headquarters.

EU Trade Policy Recalibration

France is exposed to tightening EU industrial policy, including stricter screening of foreign investment, local-content preferences, and low-carbon procurement rules in batteries, hydrogen, wind, solar, and nuclear. Multinationals may face more compliance, restructuring, and partner-selection pressures.

Wage Growth Reshapes Cost Base

Spring wage talks delivered an initial 5.26% average increase, the third straight year above 5%. Stronger labor costs support domestic demand, but they also raise operating expenses, compress margins, and accelerate pressure for automation and productivity-enhancing investment.

Energy import shock and logistics

Middle East conflict and Hormuz disruptions are lifting fuel, freight and insurance costs. Pakistan raised petrol/diesel by Rs55 per litre and officials warn the oil bill may rise $600m monthly; LNG supply risks add outage and transport-cost uncertainty.

Currency volatility and capital outflows

Regional war-driven risk aversion is triggering foreign portfolio outflows and renewed pound weakness, with spot levels moving above EGP 52 per USD and multi‑billion dollar outflows reported. FX swings lift import costs, complicate pricing and contracts, and increase repatriation and hedging needs.

US Tariff Exposure Intensifies

Japan’s trade outlook is being reshaped by US tariff risk despite a new bilateral deal lowering a proposed blanket rate from 25% to 15%. Uncertainty over separate 25% auto tariffs and fresh Section 301 probes threatens exporters, investment planning, and cross-border pricing strategies.

Rare earths and China controls

China’s shift toward targeted export controls against Japanese firms, including dual-use items and rare earths, raises input and compliance risk for electronics, defense, and automotive supply chains. Japan is pursuing US cooperation and alternative sourcing to reduce coercion exposure.

Industrial Policy Reshoring Frictions

Reshoring remains strategically favored, yet tariffs on machinery, steel, and components are raising capital costs for US manufacturers. Industry groups warn domestic capacity is insufficient in key equipment categories, so aggressive protection may delay investment, weaken competitiveness, and disrupt localization timelines.