Trade Diversification Accelerates Rapidly

Australia is expanding trade and economic-security agreements with Japan, India, the UAE, Indonesia, the UK and the EU to reduce single-market dependence. The strategy strengthens resilience after Chinese coercive measures and new US tariff pressures, creating fresh market-entry and supply-chain rerouting opportunities.

Chinese Capital Deepens Presence

Brazil became the largest global recipient of Chinese investment in 2025, attracting US$6.1 billion, with electricity and mining absorbing US$3.55 billion. This boosts manufacturing, EV, and resource chains, but creates concentration, geopolitical, governance, and strategic dependency considerations for foreign firms.

Legal Certainty and Judicial Risk

Judicial reform and concerns over judge independence are weighing on investor confidence and contract enforcement. U.S. officials and multinationals are openly warning about weaker legal certainty, prompting more arbitration clauses, higher risk premiums, and caution on long-term industrial projects.

Hormuz Disruption Threatens Logistics

Conflict around the Strait of Hormuz and maritime enforcement actions are disrupting Iran’s core trade artery, through which over 90% of its annual trade reportedly passes. Businesses face elevated freight costs, insurance premiums, delivery uncertainty and regional energy-market volatility.

Data Centers and AI Expansion

France is attracting large-scale digital investment thanks to relatively low-carbon power and market scale. Amazon pledged more than €15 billion over three years, while Ile-de-France added 66 MW of data-center capacity in 2025, though land and grid connections are tightening.

AI Infrastructure Power Bottlenecks

Explosive data-center expansion is straining US electricity systems, especially PJM, where shortages could emerge as soon as next year. Rising tariffs, lengthy interconnection queues, and transformer lead times of 18-36 months are influencing site selection, utility costs, and industrial investment feasibility.

Tourism and Services Expansion

Tourism is becoming a major demand engine, with 123 million visitors in 2025 and ambitions to reach 150 million by 2030. Rising pilgrim and leisure flows boost hospitality, transport, retail and aviation, creating opportunities but also capacity and service-delivery pressures.

Middle East Energy Shock

Conflict-linked disruption around Hormuz is raising oil and LNG costs for an economy importing over 80% of its energy. OECD cut Korea’s 2026 growth forecast to 1.7% from 2.1%, while refiners, petrochemicals, steel and transport face higher operating costs.

Export Manufacturing Outpaces Consumption

April data show manufacturing resilience but weak domestic demand. Official manufacturing PMI held at 50.3, while new export orders rose to 50.3, yet non-manufacturing PMI fell to 49.4, a 40-month low, signaling an increasingly unbalanced, externally dependent growth model.

Domestic Gas Reservation Shift

Canberra will require east-coast LNG exporters to reserve 20% of output for domestic users from July 2027, aiming to curb shortages and lower prices. The intervention changes contract economics for Shell, Santos and Origin-linked projects while reshaping energy-intensive manufacturing and export planning.

Chabahar Uncertainty Alters Corridors

The expiry of US sanctions relief is clouding India’s role in Chabahar, a strategic gateway to Afghanistan, Central Asia and the INSTC. Potential stake transfers and legal restructuring create uncertainty for traders, logistics planners and infrastructure investors using the corridor.

Hormuz Disruption and Shipping Risk

Strait of Hormuz disruption is the dominant trade risk: roughly 20% of global seaborne crude and LNG normally transits it, while Iran depends on the route for over 90% of trade. Shipping, insurance, routing, and compliance costs have surged.

Currency Strength, Export Competitiveness

The real has strengthened alongside high interest-rate differentials and commodity support, helping contain imported inflation and attracting financial inflows. For businesses, this lowers some import costs but can compress export margins, complicate hedging, and alter market-entry pricing strategies.

Technology Substitution Accelerates

Beijing is deepening indigenous substitution by requiring chipmakers to use at least 50% domestic equipment for new capacity and by excluding foreign AI chips and selected cybersecurity software from sensitive sectors, narrowing opportunities for overseas technology suppliers.

Skills Shortages in Strategic Industries

France’s industrial strategy is constrained by shortages in maintenance technicians, electrical engineering, and other technical roles. This talent gap threatens factory ramp-ups, energy-transition projects, and advanced manufacturing timelines, increasing labor costs and complicating location decisions for foreign investors.

Energy Reliability Becomes Strategic

Power infrastructure is becoming a decisive factor for semiconductor, AI, and hyperscale data-centre investment. Vietnam is exploring advanced energy systems, including small modular reactors, while upgrading planning and regulation, because unreliable or insufficient power could constrain high-tech manufacturing expansion and operating resilience.

China EV Competition Intensifies

Chinese manufacturers are gaining share in Germany’s fast-electrifying car market as battery electric vehicles recently outsold combustion cars in Germany for a month. This raises competitive pressure on domestic OEMs while increasing strategic dependence on Chinese batteries, software, and components.

Tourism Weakness Reduces Domestic Demand

Foreign arrivals are now projected at roughly 30–33.5 million, below earlier expectations, as higher airfares, fuel costs and geopolitical uncertainty curb travel. Weaker tourism affects retail, hospitality, transport, real estate and broader service-sector demand that many international firms rely on.

Tariff Regime Volatility Returns

Washington is rebuilding tariffs after the Supreme Court voided IEEPA measures, using Section 122 and likely Section 301 probes. With temporary 10% duties expiring July 24 and broader cases covering 70%-99% of imports, landed-cost and sourcing uncertainty remains elevated.

Revenue Drive and Tax Burden

The government is pursuing stronger revenue through tighter tax expenditures, taxes on offshore structures and exclusive funds, higher CSLL on fintechs and multinationals, and IOF recalibration. This may improve accounts but increase sector-specific tax costs and regulatory complexity.

Higher Wage and Labor Costs

Annual shunto wage settlements reportedly exceeded 5%, including solid gains among small and medium enterprises. Rising labor costs may support demand over time, but near term they raise payroll burdens for employers and accelerate automation, restructuring, and location reviews across service and manufacturing operations.

Industrial Growth Remains Fragile

Germany’s macro backdrop remains weak, with government growth expectations around 0.5% and economists warning that further trade escalation could trigger recession in 2026. Soft industrial output and low resilience make external shocks more damaging for investors and operators.

Foreign Investment Pipeline Accelerates

First-quarter 2026 investment applications exceeded 1 trillion baht, about 2.4 times year-earlier levels, led by digital, electronics, clean energy, food processing, and logistics. The surge signals stronger medium-term opportunities, but also tighter competition for land, utilities, labor, and incentives.

FDI Shift Toward High-Tech

Foreign investment remains strong, with registered FDI reaching $18.24 billion in the first four months of 2026 and disbursed FDI $7.40 billion. Capital is shifting into semiconductors, AI, data centres, and green manufacturing, reshaping site-selection and partnership strategies.

Major Investment Incentive Overhaul

Ankara has launched a broad reform package featuring a 9% corporate tax for manufacturing exporters, full tax exemptions for some service exports and transit trade, plus long-term incentives for regional headquarters, materially improving Turkey’s appeal for selected FDI and trade platforms.

Policy Volatility Clouds Planning

Rapid changes in tariffs, export controls, licensing, and sectoral restrictions are reducing business visibility. Even where top-level diplomacy improves temporarily, the broader trend points to structural economic rivalry, making scenario planning, inventory buffers, and localization strategies more important for resilience.

Nuclear Talks and Sanctions Uncertainty

US-Iran negotiations remain fragile, with major disputes over uranium enrichment, stockpiles, inspections, and sanctions relief. The unresolved framework keeps investors exposed to abrupt policy shifts, secondary sanctions, licensing changes, and renewed conflict that could rapidly alter market access and compliance obligations.

AI Sovereignty and Regulation

The UK is backing sovereign AI capacity with a £500 million Sovereign AI Unit and forthcoming AI hardware initiatives, while avoiding alignment with the EU AI Act. This creates opportunities in digital investment, but firms face evolving governance, security and compliance expectations.

New Nickel Pricing Rules Bite

A new mineral benchmark pricing formula raises nickel cost assumptions and adds iron, cobalt, and chromium valuation, while shifting to wet-metric-ton pricing. This increases domestic ore costs, reduces arbitrage, and may pressure smelter margins, contract structures, and export pricing.

Foreign Investment Screening Stays Tight

Despite closer US economic coordination, Taiwan is maintaining legal restrictions on foreign investment in sensitive sectors including power, telecoms, minerals, and infrastructure. This preserves national security controls, but may slow deal execution, require deeper regulatory diligence, and limit access in strategic industries.

Metals Tariffs Hit Manufacturing

U.S. tariff changes now apply 25% duties to the full value of many metal-containing goods, sharply raising costs for exporters. Ontario and Quebec are particularly exposed, with passenger vehicle exports down over 46% and rolled steel products down more than 60%.

Defense Spending Crowds Out

Rising war costs and a proposed decade-long defense buildup are straining public finances, with analysis warning debt-to-GDP could reach 83% by 2035. Higher fiscal pressure may mean tighter budgets, heavier borrowing, slower reforms and weaker medium-term business conditions.

Energy Transition and Green Power Constraints

Decarbonization requirements are colliding with limited renewable availability and rising industrial demand. Taiwan is expanding offshore wind, storage, and grid resilience, yet green electricity shortages and future carbon pricing could materially affect manufacturers seeking RE100 compliance and low-carbon procurement.

Rupiah Weakness Raises Financing Risk

The rupiah has weakened past 17,500 per US dollar, prompting Bank Indonesia intervention and possible rate hikes to 5%. Currency volatility raises imported input costs, external debt servicing burdens, hedging expenses, and uncertainty for foreign investors evaluating Indonesian assets.

Energy Infrastructure Vulnerability Persists

Repeated attacks on power assets continue to damage generation and networks, raising operating costs, outage risks, and import dependence. Energy accounted for more than a quarter of applications to the US-Ukraine Reconstruction Investment Fund, underscoring both urgent need and investment opportunity.

Energy Export Boom Reshapes Trade

The Hormuz crisis has boosted US crude and LNG exports to record levels, with crude and products reaching 12.9 million barrels per day and March LNG shipments hitting 11.7 million metric tons. This strengthens US trade leverage but increases exposure to infrastructure bottlenecks and price volatility.