Automotive Protection and Chinese Entry

Brazil is raising tariffs on imported electric vehicles to 35% by July, prompting a surge in imports and reshaping industrial strategy. Chinese automakers are rapidly gaining share, with electrified vehicles already at 16% of new-car sales, intensifying competition and localization pressure.

Property and Debt Overhang

The property downturn, weak land-sale revenues, and mounting local government liabilities continue to drag on growth. Local governments issued about 3.1 trillion yuan of bonds in Q1, including major refinancing, underscoring fiscal strain that may affect infrastructure spending, payment cycles, financial stability, and regional business conditions.

CUSMA review and tariff uncertainty

Canada faces acute uncertainty ahead of the July 1 CUSMA review, with Washington signalling major changes and unresolved disputes. Continued U.S. tariffs on steel, aluminum, autos and lumber risk deterring investment, raising compliance costs, and disrupting cross-border planning.

Energy Export Diversification Push

Rising oil output and tightening pipeline capacity are intensifying decisions on new export routes south and west. Western Canadian crude exports averaged 4.6 million barrels per day last year, with capacity expected to fill soon, shaping long-term energy investment, market diversification and infrastructure strategy.

Regulatory Scrutiny on Foreigners

Authorities are intensifying enforcement against nominee shareholding, foreign property structures and misuse of visa-free entry, backed by AI-based reviews. This improves legal transparency but raises compliance risk, due diligence costs and operational uncertainty for foreign firms using informal ownership or staffing arrangements.

Fiscal slippage and rates

Brazil’s fiscal outlook is deteriorating, with the 2026 primary deficit projection raised from R$23 billion to about R$60 billion, while automatic spending pressures persist. This sustains high borrowing costs, currency volatility, and tighter financing conditions for trade, investment, and expansion plans.

Data Center Power Constraints

AI-driven electricity demand is straining the US grid, with data centers potentially consuming up to 17% of US power by decade-end. Utilities are imposing flexibility demands, while firms turn to costly off-grid gas generation, affecting operating costs, siting decisions, and ESG exposure.

Tariff Uncertainty Reshapes Trade

The United States remains the main source of global trade-policy volatility as sweeping 2025 tariffs, subsequent court challenges, and replacement measures keep import costs elevated. Businesses face persistent pricing uncertainty, rerouted sourcing, and higher compliance burdens across cross-border trade and procurement planning.

Petrochemical Feedstock Supply Stress

Naphtha shortages are disrupting core industrial inputs for chemicals, semiconductors and manufacturing. Korea banned naphtha exports for five months, while LG Chem shut an 800,000-ton annual cracker and emergency Russian imports of 27,000 tons offered only a short-lived buffer.

Foreign Portfolio Outflows Intensify

International investors have been exiting Turkish assets rapidly, with record bond selling reported in mid-March and about $22 billion of portfolio outflows in the first three weeks of the regional conflict. This raises refinancing risk and market volatility for corporates.

Inflation and Tight Monetary Policy

Annual inflation stood at 31.5% in February, with 12-month household expectations at 49.89%. The central bank has paused easing, kept the policy rate at 37%, and lifted overnight funding near 40%, raising borrowing costs and squeezing domestic demand.

Sustainability strengthens export positioning

Costa Rica is leveraging traceability and environmental credentials to defend agricultural exports in premium markets, especially Europe. Milestones including deforestation-free coffee shipments and carbon-neutral banana farms enhance branding, but also raise the importance of certification, transparency and compliance capabilities.

Energy Security and Import Exposure

Japan remains highly vulnerable to imported fuel disruptions despite reserve releases and route diversification. LNG still supplies over 30% of power generation, while oil import dependence on the Middle East keeps manufacturers exposed to logistics shocks, electricity costs, and inflation.

New Government Policy Continuity

Prime Minister Anutin’s coalition holds about 292 of 500 lower-house seats and retained core economic ministers, supporting near-term policy continuity. For investors, reduced cabinet uncertainty helps planning, but Thailand’s fourth government in three years still signals institutional volatility and execution risk.

Disaster Resilience and Operational Continuity

A magnitude 7.3 earthquake near Santo in late March damaged buildings and disrupted power and water, reinforcing Vanuatu’s high disaster-risk profile. Cruise island developers must price stronger resilience standards, emergency logistics, insurance costs, and recovery downtime into project economics and supply contracts.

Energy Shock and Cost Inflation

Middle East disruption is lifting fuel and LNG costs in an import-dependent economy where gas supplies about 60% of power generation. Rising tariffs and logistics expenses are squeezing manufacturers, transport operators, hotels, and exporters, while threatening growth, inflation, and operating margins.

Fuel Shock Inflation Exposure

South Africa’s reliance on road freight has amplified exposure to higher global oil prices and diesel shortages, with implications for agriculture, retail and manufacturing. Rising transport and input costs could feed inflation, disrupt deliveries and complicate operating-margin planning.

Semiconductor Export Boom Intensifies

AI-driven chip demand is powering South Korea’s trade performance, with semiconductor exports up 152% to $8.6 billion in early April and March ICT exports reaching $43.51 billion. This strengthens investment appeal but heightens sector concentration and advanced supply-chain dependency.

Symbolic OPEC+ output policy

OPEC+ approved a symbolic May quota rise of 206,000 barrels per day, but actual export gains remain limited by maritime disruption. For international firms, this means continued oil price volatility, uncertain feedstock costs, and unstable planning assumptions for energy-intensive operations.

Energy Grid Disruption Risk

Repeated Russian strikes continue to damage electricity infrastructure, triggering nationwide industrial power restrictions and blackouts. Ukraine rebuilt 4 GW of 9 GW lost generation, yet outages, higher backup-power costs, and repair delays still materially disrupt manufacturing, warehousing, and investor operations.

Regional Trade Barriers Rising

Namibia, Botswana, and Mozambique have restricted some South African agricultural shipments despite SACU and AfCFTA commitments. With 17% of South Africa’s $15.1 billion agricultural exports going to SACU in 2025, regional policy uncertainty now threatens food supply chains and agribusiness investment.

EU Trade Pact Reshapes Access

Australia’s new EU trade deal removes over 99% of tariffs on EU goods, could add about A$10 billion annually, and lift EU exports by up to 33% over a decade, materially reshaping sourcing, market-entry, investment, and regulatory conditions.

FDI Surge Favors High-Tech

Vietnam continues attracting multinational capital despite external shocks. Registered FDI rose 42.9% year on year to $15.2 billion in Q1, with $5.41 billion disbursed. Manufacturing captured 70.6% of total registered and adjusted capital, while cities prioritize semiconductors, data centers, logistics, and R&D.

Black Sea Export Corridor

Ukraine’s Black Sea corridor remains vital for grain and broader trade flows, with around 200 cargo ships a month using Odesa routes despite ongoing attacks. Corridor viability shapes freight costs, food supply chains, marine insurance pricing, and export competitiveness across agriculture and commodities.

Critical Minerals Trade Repositioning

A new US-Indonesia trade arrangement and Jakarta’s push to diversify beyond China are recasting market access for nickel and other minerals. Businesses face shifting investment conditions, local-processing requirements, environmental scrutiny, and potential changes to export restrictions and bilateral supply-chain partnerships.

EU trade pact reshapes market access

Australia’s new EU free trade agreement removes over 99% of tariffs on EU goods, may add about A$10 billion annually to the economy, expands services and investment access, and changes competitive dynamics across manufacturing, agribusiness, vehicles, and professional services.

Sectoral Protectionism Expands Rapidly

The United States is increasingly using national-security tools and industrial policy to protect strategic sectors, including metals, pharmaceuticals, semiconductors and clean technology. This favors localized production and subsidy-seeking investment, but raises input costs and complicates procurement for internationally exposed manufacturers.

Vision 2030 project reassessment

Major Vision 2030 programs are being reviewed as war-related losses reportedly exceeded $10 billion. Flagship developments such as Neom and Sindalah have been scaled back or paused, potentially slowing construction demand, foreign participation, and long-term diversification opportunities.

Food Security and Input Pressures

Authorities target 5 million tonnes of local wheat procurement while maintaining roughly six months of strategic reserves. However, fertiliser, fuel, and transport costs are rising sharply, increasing agribusiness input risks and potentially feeding broader food inflation, subsidy pressure, and consumer demand weakness.

War Economy Weakens Growth

Russia’s civilian economy is losing momentum as defense spending distorts resource allocation. GDP fell 1.8% year-on-year in January-February, Q1 contraction is estimated near 1.5%, and the budget deficit reached 4.58 trillion rubles, increasing fiscal and operating risks for businesses.

Foreign investment gap persists

Saudi Arabia still needs substantially more foreign direct investment to fund diversification ambitions, yet inflows remain below expectations. Estimates cited annual needs near $100 billion, versus around $30 billion achieved in 2024, implying continued competition for capital and selective dealmaking opportunities.

Energy Shock and Stagflation

The UK is unusually exposed to imported gas and Middle East disruption, with OECD cutting 2026 growth to 0.7% and raising inflation to 4.0%. Higher energy, transport and financing costs are squeezing demand, margins, investment planning and cross-border operating budgets.

US-China Trade Escalation

Renewed tariff battles, Section 301 probes, and fragile summit diplomacy keep bilateral trade conditions volatile. Duties have previously exceeded 100%, while temporary truces remain reversible, complicating pricing, market access, sourcing decisions, and long-term capital allocation for multinational firms.

Labor Constraints Accelerate Automation

Immigration restrictions and persistent labor shortages are tightening workforce availability in agriculture, manufacturing, and logistics. Businesses are responding with automation and revised operating models, affecting production economics, investment priorities, and location choices for firms dependent on labor-intensive US operations.

Red Sea shipping disruption

Houthi threats have revived concern over Bab el-Mandeb after more than 100 merchant vessels were targeted in 2023-25. With Suez containership transits reportedly down 33% in late March, freight costs, insurance premiums, lead times, and routing uncertainty remain significant.

Monetary Tightening and Yen

The Bank of Japan’s 0.75% policy rate and hawkish guidance point to further tightening, while markets price another hike soon. A weak yen near politically sensitive levels is raising import costs, reshaping hedging, financing, and cross-border investment decisions.