Downstreaming and Industrial Policy Challenges

Indonesia’s downstreaming success in nickel, driven by Chinese investment and favorable market conditions, is difficult to replicate for other minerals like copper. High capital costs and thin margins threaten resource depletion and discourage new exploration, raising concerns about the sustainability of the industrialization model.

Tech Sector Growth and Foreign Investment

Israel’s high-tech sector, including AI, cybersecurity, and fintech, continues to attract major foreign investment. Projects like Nvidia’s new campus and robust M&A activity underscore Israel’s role as a global innovation leader, though infrastructure and regulatory adaptation are ongoing challenges.

EU Considers Anti-Coercion Measures

In response to US tariffs, the EU is preparing to activate its anti-coercion instrument, potentially restricting US market access and imposing retaliatory tariffs. This unprecedented move could escalate into a full-scale trade war, amplifying risks for Finnish companies.

Nile Water Crisis and GERD Dispute

The Grand Ethiopian Renaissance Dam (GERD) has intensified Egypt’s existential concerns over Nile water security. Ongoing disputes with Ethiopia threaten agricultural output, food prices, and political stability, while U.S. and Israeli mediation efforts aim to secure binding water-release guarantees critical for Egypt’s future.

Disrupted Trade and Supply Chains

Widespread unrest, sanctions, and payment uncertainties have nearly halted key imports and exports, such as Indian basmati rice. Delayed remittances, shipment risks, and suspended subsidized foreign exchange have led to significant supply chain disruptions and heightened counterparty risk.

Escalating Western Sanctions Enforcement

Western powers have intensified enforcement of sanctions on Russian oil exports, including direct maritime interdictions and seizures of shadow fleet tankers. This escalation increases legal, operational, and reputational risks for businesses involved in Russian energy logistics or trade, and heightens global supply chain volatility.

Technology Sector and Digital Transformation

India’s electronics exports reached Rs 4 lakh crore in 2025, with mobile phone and semiconductor manufacturing surging. Major global tech firms are increasing hiring and offshoring to India, driven by US visa restrictions and cost advantages, signaling a structural shift in global supply chains.

Trade Diversification and Supply Chain Security

Saudi Arabia is intensifying efforts to diversify trade and secure supply chains, especially for critical minerals. New bilateral agreements, regional logistics infrastructure, and upstream partnerships in Africa and Asia are positioning the Kingdom as a strategic connector in fragmented global trade, reducing reliance on single-country suppliers.

Currency Collapse and Hyperinflation

Iran's rial has plunged to record lows, now trading at 1.4–1.5 million per US dollar, with inflation nearing 50%. This currency crisis, driven by sanctions, mismanagement, and corruption, has triggered mass protests, eroded purchasing power, and created severe import and operational challenges for businesses.

Energy Transition and Green Ammonia Expansion

Japan is leading Asia in green ammonia co-firing projects and renewable energy investments, targeting decarbonization of power generation. Major projects and international supply agreements position Japan as a regional leader in clean energy, with significant implications for energy-intensive industries and supply chains.

Trade Policy Uncertainty and EU-Mercosur Tensions

Strong domestic opposition to the EU-Mercosur trade deal, especially from French farmers and parliament, has led to protests and political crises. This uncertainty affects market access, supply chains, and investment strategies for global agribusiness and exporters.

Geopolitical Risk: U.S.-China Rivalry and Canadian Autonomy

Canada’s efforts to balance relations with both the U.S. and China expose businesses to geopolitical risks, including retaliatory tariffs, regulatory shifts, and political pressure. The evolving stance on ‘strategic autonomy’ will shape future trade, investment, and supply chain resilience.

Digital Sovereignty and Cybersecurity

France has launched a national cybersecurity strategy and a Digital Resilience Index, aiming to reduce technological dependencies and safeguard economic sovereignty. New regulations and investment in digital infrastructure will affect compliance, risk management, and competitive positioning for international firms.

Domestic Reforms and Infrastructure Investment

Canada is fast-tracking $1 trillion in investments across energy, AI, critical minerals, and trade corridors, alongside tax reforms and interprovincial trade liberalization. These initiatives aim to boost competitiveness and supply chain resilience, presenting significant opportunities for global investors.

US-China Trade Tensions Escalate

Renewed US tariffs, including a 25% levy on countries trading with Iran, have reignited trade frictions. Despite a 19.5% drop in US-bound exports, China posted a record $1.2 trillion trade surplus in 2025, highlighting resilience but also raising risks of further escalation and global supply chain disruptions.

Sanctions, Export Controls, and Security Concerns

The UK’s alignment with Western sanctions on Russia and scrutiny of Chinese investments heighten compliance risks. Export controls, especially in technology and dual-use goods, require robust due diligence and may affect cross-border operations and partnerships.

Legal Uncertainty Deters Investment

Despite wartime resilience, investors cite unpredictable legal and regulatory frameworks as a greater deterrent than conflict itself. Prolonged legal proceedings and lack of transparency undermine trust, limiting foreign direct investment and complicating contract enforcement.

Digital Transformation and Data Center Expansion

Thailand is investing nearly 100 billion baht in new data centers to support digital transformation and emerging industries. This positions the country as a regional technology hub, but also raises energy demand and infrastructure challenges.

Energy Security and Nuclear Revival

Japan has restarted the Kashiwazaki-Kariwa nuclear plant, boosting energy self-sufficiency and emissions targets. This move, amid regional security tensions, signals a shift toward stable domestic energy sources and reduced reliance on fossil fuel imports, affecting industrial competitiveness.

Collapse of the Iranian Rial and Hyperinflation

Iran’s currency has plummeted to over 1.4 million rials per USD, with annual inflation around 40%. This has eroded purchasing power, raised import costs, and destabilized local operations, making pricing and payment settlements highly unpredictable for international businesses.

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.

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.

Gulf Investments Drive Economic Recovery

Egypt has attracted over $12 billion in foreign investment in 2025, with Gulf states—especially Qatar—committing billions to real estate, tourism, and infrastructure. These inflows are critical for stabilizing the economy, supporting foreign reserves, and funding large-scale development projects.

Escalating US-South Korea Trade Tensions

The abrupt US tariff hike from 15% to 25% on South Korean autos, pharmaceuticals, and other goods marks a sharp escalation in bilateral trade tensions. This move disrupts supply chains, threatens export competitiveness, and injects volatility into investment strategies, especially in the automotive sector.

Export-Led Growth Under Global Pressures

Vietnam’s export-driven economy faces mounting US tariffs (up to 20%) and EU trade measures, threatening key market access. The government is actively diversifying export destinations to mitigate risks, but global trade tensions remain a significant operational challenge.

Geopolitical Tensions with US and China

President Macron’s criticism of US sanctions and China’s aggressive trade practices underscores France’s drive for strategic autonomy and regulatory sovereignty. These tensions heighten risks for multinationals in tech, energy, and advanced manufacturing, with potential for retaliatory measures and regulatory divergence.

Innovation, AI, and Digital Transformation

India is accelerating its digital economy through AI, tech innovation, and digital asset regulation. The government is fostering R&D, digital infrastructure, and responsible AI, positioning India as a global leader in digital services and technology-driven growth.

Semiconductor Supply Chain Resilience

Japan is accelerating investment in domestic and allied semiconductor capacity, with TSMC's Kumamoto expansion and TOPPAN's new lines. The sector is driven by AI demand, strategic 'de-China' moves, and advanced process upgrades, reshaping global supply chains and investment flows.

Labor Market Weakness Amid Economic Growth

While US GDP growth remains strong, job creation has slowed, with unemployment rising to 4.4%. AI-driven productivity gains and reduced immigration contribute to a decoupling of growth from employment, raising social and political risks for businesses dependent on domestic demand.

Global Supply Chain Realignment

US tariff policies and geopolitical frictions have accelerated the diversification of supply chains away from China. Southeast Asian countries, notably Indonesia and Thailand, gained significant US sourcing share in 2025, reshaping manufacturing and logistics strategies for international businesses.

US-China Trade and Tariff Policy

The US maintains high tariffs on Chinese goods, with ongoing trade tensions and periodic truce agreements. Recent deals have reduced some tariffs, but policy uncertainty remains high, impacting global supply chains and prompting businesses to diversify sourcing and production.

Regulatory Reform Accelerates Modular Growth

Recent changes in state building codes, especially in NRW and Baden-Württemberg, are streamlining approvals and reducing compliance costs for modular projects. This regulatory shift is expected to boost investment, speed up project timelines, and enhance market attractiveness for international players.

Energy Security and Eskom Reform

South Africa’s improved energy stability, following Eskom’s R254 billion bailout and operational reforms, has reduced load shedding and restored investor confidence. However, high electricity costs and municipal debt remain risks for energy-intensive industries and future investment.

Drone Strikes Disrupt Supply Chains

Ukrainian drone and missile attacks on Russian refineries and infrastructure in 2025 caused a 25% drop in energy income and the lowest refinery deliveries since 2010. These disruptions threaten supply reliability and raise operational risks for businesses dependent on Russian energy.

Supply Chain Resilience and Diversification

Japan’s government and industry are accelerating efforts to diversify supply chains for critical minerals, semiconductors, and pharmaceuticals. Recent G7-led initiatives and domestic innovation aim to reduce strategic vulnerabilities exposed by geopolitical shocks and export controls.

China Partnership and Market Risks

China remains Brazil’s largest trading partner, with 2025 exports reaching US$100 billion. However, recent Chinese quotas on beef and potential regulatory shifts highlight both the opportunities and the vulnerabilities of Brazil’s reliance on the Chinese market for key commodities.