UK-EU Reset and Alignment

London is pursuing a summer reset with Brussels covering food standards, electricity, emissions trading, and wider regulatory alignment. A deal could lower border frictions and support exports, but disputes over youth mobility and tuition fees still create uncertainty for cross-border planning.

Industrial Policy Rewires Sectors

Tariff exemptions and policy support continue to favor strategic industries such as semiconductors, pharmaceuticals, machinery, and AI-linked infrastructure. Import patterns show strong growth in exempt categories, encouraging investors to prioritize subsidy-aligned manufacturing, data-center ecosystems, and protected segments over tariff-exposed consumer goods.

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.

AI Chip Controls Tighten

US enforcement against advanced chip diversion to China is intensifying, highlighted by a US$2.5 billion server-smuggling case and scrutiny of Chinese end-users. Businesses face higher compliance, licensing and transshipment risks across semiconductors, cloud infrastructure, electronics and Southeast Asia distribution networks.

Air Connectivity Severely Constrained

Security restrictions at Ben Gurion cut departures to one flight per hour and about 50 outbound passengers per flight, prompting airlines to slash routes. The resulting bottlenecks hinder executive travel, cargo movement, project deployment, and emergency evacuation planning for multinational firms.

War-Driven Operational Security Risks

Long-range Ukrainian drone attacks now reach major Russian industrial and logistics hubs, including ports, refineries and inland facilities. The expanding strike envelope increases physical risk to assets, warehousing, transport nodes and employees, raising business continuity, contingency planning and infrastructure resilience requirements.

Local Government Debt Constraints

Rising local government debt and weaker land-sale revenue are narrowing fiscal headroom. Ratings agencies expect targeted support rather than broad stimulus, implying slower project pipelines, tighter subnational budgets, and elevated counterparty risk for infrastructure, public procurement, and regionally exposed investors.

Fuel Subsidies Distort Energy Economics

Jakarta will keep subsidized fuel prices unchanged even with oil above US$100 per barrel, absorbing costs through the budget. This cushions short-term consumer demand and logistics costs, but increases fiscal strain and policy risk for energy-intensive businesses.

Payments and Sanctions Exposure

India’s tentative return to Iranian oil under temporary US waivers highlights persistent sanctions, banking, and settlement risks. Iran’s exclusion from SWIFT and uncertainty over insurance and payment channels show how geopolitical finance constraints can quickly disrupt procurement and trading strategies.

Fiscal Stress And State Extraction

Despite episodic oil-price windfalls, Russia faces widening fiscal strain, weak reserve buffers, and pressure to finance war spending. The state is increasing taxes, budget controls, and informal demands on large businesses, raising regulatory unpredictability and cash-flow pressure for firms still operating locally.

Energy export expansion to Asia

Ramped LNG Canada exports and Trans Mountain capacity-optimization plans are increasing Canada’s ability to supply Asian buyers as global energy flows tighten. This supports investment in upstream, terminals and services, but exposes projects to permitting, Indigenous consultation, and operational reliability risks.

Trade Policy Drives Market Volatility

US trade actions are increasingly tied to domestic fiscal, industrial, and geopolitical goals rather than narrow sector protection. That broadens exposure for international firms, as tariffs, forced-labor rules, and export restrictions can change quickly and reshape investment returns, supplier geography, and negotiation leverage.

US Tariff And Probe Exposure

Washington’s tariff stance remains the top external risk: Trump threatened tariffs of 25% from 15%, while USTR Section 301 probes on overcapacity and forced labor could hit autos, semiconductors and other exports, complicating pricing, contracts and market access planning.

US trade pressure on digital regulation

Washington’s renewed Section 301 posture signals scrutiny of Korea’s digital-platform rules, network fees, and data governance as potential non-tariff barriers. Companies face higher risk of retaliatory tariffs or negotiated regulatory changes, affecting cloud, e-commerce, ad-tech, mapping, and data localization strategies.

Mining Policy Uncertainty Persists

Mining, which contributes 6.2% of GDP and R816 billion in exports, still faces regulatory delays, cadastre problems, crime, corruption and infrastructure failures. Proposed mining-law changes, chrome export restrictions and rising electricity costs continue to raise capital costs and deter new investment.

Foreign Investment Resilience Continues

France recorded 1,900 foreign investment decisions in 2025, up 2%, with 47,000 jobs expected. Continued investor interest supports industrial and digital expansion, but future inflows will depend on permitting speed, fiscal credibility, energy access and political stability ahead of 2027.

Rail market liberalisation reforms logistics

Competition is expanding in passenger rail, with Trenitalia on Paris–Marseille and Transdev operating Marseille–Nice after tendering. Service frequency and investment are rising, but labour tensions and fragmented ticketing illustrate transition risk, affecting mobility planning for firms and staff.

Targeted Aid Over Broad Subsidies

Paris is rejecting economy-wide fuel or energy subsidies, favoring narrow support for exposed sectors such as transport, farming, fishing, and potentially chemicals. Companies should expect selective relief only, with most input-cost shocks remaining on private balance sheets.

War economy and dual-use controls

Russia’s wartime industrial priorities expand export controls, import substitution and scrutiny of dual‑use items. Suppliers and logistics providers risk enforcement exposure via re‑exports, while domestic buyers prioritize defense needs, crowding out civilian demand and disrupting industrial supply chains.

Logistics Bottlenecks Raise Trade Costs

Persistent weakness at ports and rail is the most immediate business constraint. Durban, Cape Town and Ngqura rank 391st, 398th and 404th of 405 ports globally, while Transnet failures raise lead times, freight costs, inventory risk and export unreliability.

PIF Partnership Model Shift

The Public Investment Fund is moving from predominantly self-funded deployment toward crowding in international and domestic partners. A new five-year strategy targets infrastructure, renewables, pharmaceuticals, real estate and data centers, creating opportunities but also reshaping deal structures and capital access.

Climate Resilience and Infrastructure Exposure

Floods and extreme weather are increasingly disrupting roads, rail and ports, exposing South Africa’s trade infrastructure to physical climate risk. Businesses should expect higher insurance, maintenance and contingency costs as resilient transport assets become more central to investment screening and supply-chain planning.

Trade Barriers and Compliance Frictions

India’s high tariffs, frequent duty changes, import licensing, and expanding Quality Control Orders continue to complicate market access. USTR says duties still reach 45% on vegetable oils and 150% on alcohol, raising compliance costs and supply-chain uncertainty for foreign firms.

Credit Outlook and Sovereign Risk

Fitch affirmed Israel at A but kept a negative outlook, warning debt could rise toward 72.5% of GDP by 2027 and the 2026 deficit reach 5.7%. Elevated sovereign risk can lift borrowing costs, constrain investment appetite and pressure long-term project financing.

Managed Trade With China

Washington and Beijing are discussing a possible US-China Board of Trade to steer bilateral flows, potentially covering agriculture, energy, aircraft and non-sensitive goods. Any managed-trade arrangement could alter market access conditions and create politically driven allocation risks.

Sanctions Volatility Reshapes Energy Trade

Temporary U.S. waivers on Russian oil in transit, while core sanctions remain, have sharply altered trade conditions. Analysts estimate Russia could gain $5-10 billion monthly from higher prices and easier placements, raising compliance, contract, and counterparty risks for importers and shippers.

Antitrust Scrutiny Reshapes Deals

U.S. regulators are signaling tougher review of mergers and ‘acquihires,’ especially in technology and concentrated sectors. Even where federal settlements emerge, state-level actions continue, creating longer approval timelines, greater deal uncertainty, and more complex market-entry or expansion strategies.

Automotive and EV manufacturing shift

Thailand’s vehicle output rose 3.43% in February to 117,952 units, with pure-electric passenger vehicle production surging 53.7%. The transition strengthens Thailand’s regional manufacturing role, but changing incentives and weak domestic sales complicate supplier investment and capacity decisions.

Foreign Talent Rules Tighten

Japan is hardening residency and naturalisation rules even as industry needs more overseas workers. From April 1, the naturalisation residency requirement doubles from five to 10 years, potentially complicating long-term talent retention, plant staffing and cross-border operational planning.

Manufacturing Economics Remain Pressured

Despite protectionist policy, U.S. manufacturing competitiveness remains under pressure from higher input costs, policy uncertainty, and uneven reshoring results. Recent reporting cites a record 2025 goods trade deficit of $1.23 trillion and 108,000 manufacturing jobs lost, challenging assumptions behind long-term localization and capital allocation strategies.

High interest and inflation

The Selic was cut only marginally to 14.75%, while 2026 inflation expectations rose to 4.31% amid oil-price shocks. Elevated real rates support the currency but restrain credit, dampen domestic demand, and increase capital costs for expansion, procurement, and working capital.

Logistics bottlenecks: ports and rail

Congested ports and weak rail performance keep freight on roads (about 69%), raising costs and delays. Government estimates logistics inefficiencies cost nearly R1 billion per day, while Transnet is opening rail access and upgrading Durban capacity to 2.8m TEUs.

Tax administration and revenue crackdown

Revenue shortfalls push intensified FBR enforcement, target revisions and policy tightening. Multinationals face higher audit probability, withholding tax complexity, and cash-flow hits from upfront taxes and delayed refunds, raising working-capital needs and compliance costs across supply chains.

CPEC Industrial Expansion

CPEC Phase 2.0 is shifting from core infrastructure toward manufacturing, mining, agriculture, electric vehicles and Special Economic Zones. New agreements worth about $10 billion could improve industrial capacity and regional connectivity, but execution, security and trade-imbalance issues remain material business risks.

Supply-chain resilience and corridors

India is positioning as a ‘China+1’ production base via manufacturing incentives and trade agreements, but infrastructure and corridor execution remain uneven. Businesses should expect ongoing capex in ports/industrial corridors and localized supplier development, alongside episodic logistics bottlenecks.

Critical minerals export leverage

China’s rare-earth and specialty-metal export licensing remains a strategic chokepoint, with US-bound magnet shipments down 22.5% YoY to 994 tonnes (Jan–Feb 2026). Expect supply uncertainty, compliance burdens, and accelerated allied reshoring, stockpiling, and price-floor schemes.