USMCA renewal and tariff risk

USMCA six‑year review talks began March 2026 amid U.S. threats to withdraw and persistent tariffs (25% on trucks; 50% on steel/aluminum/copper; 17% on tomatoes). Outcomes will shape duty-free access, dispute resolution confidence, and long-horizon investment planning.

Textile Export Competitiveness Pressure

Textiles generate about 60% of Pakistan’s exports and employ over 15 million workers, but rising energy costs, customs delays and freight uncertainty are eroding competitiveness. Industry groups warn orders are shifting to Bangladesh, India, Vietnam and Turkey.

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.

India–US tariff and trade talks

Ongoing India–US negotiations face renewed US Section 301 probes and shifting reciprocal tariff discussions (reported 18% baseline). For exporters, this elevates pricing and contract risk; for investors, it raises the value of local manufacturing, rules-of-origin planning, and diversification.

IMF Program and Fiscal Discipline

Pakistan’s delayed IMF review keeps $1 billion EFF and roughly $200 million climate financing at stake, while tax shortfalls of Rs428 billion and pressure to cut subsidies, spending and state-firm losses shape currency stability, sovereign risk and investor confidence.

Defense-tech scale-up and exports

Ukraine’s drone-interceptor industry is now mass-producing low-cost systems (e.g., claims of 50,000/month capacity; ~$1,000 unit cost) attracting US/Gulf interest, but wartime export limits persist. Joint ventures face licensing, secrecy, and supply prioritization risks.

Middle East war disrupts logistics

Iran war effects include Strait of Hormuz disruption and heightened war-risk insurance, while Turkey–Iran border day-trip crossings were suspended. Shipping delays, higher freight premiums, and rerouting pressure supply chains; Turkey may benefit as an alternative Eurasian logistics hub.

Manufacturing Cost Pass-Through

Research indicates roughly 80% to 100% of tariff costs are passed into US prices, with tariff revenue reaching $264 billion in 2025. For exporters and investors, this signals margin pressure, selective repricing, and weaker demand in industries reliant on imported inputs.

Governance, corruption and tender risk

Anti-corruption bodies pursued cases at a major defense plant (UAH 19m loss) and judicial/prosecutorial searches linked to €70m unfrozen abroad. Separately, lithium tender controversy highlights transparency concerns, increasing due‑diligence, reputational, and contract-enforcement risk.

Currency and Financing Pressure

Portfolio outflows of roughly $5–8 billion and net March outflows near EGP 210 billion have weakened the pound toward 52–53 per dollar. Exchange-rate volatility, heavy debt service, and tighter financing conditions are increasing import costs, hedging needs, and balance-sheet risk for foreign businesses.

Backup Power Capacity Buildout

Brazil awarded 19 GW in thermal and hydropower capacity in its largest-ever reserve auction to stabilize supply during renewable shortfalls. The move improves energy security for manufacturers and data-intensive sectors, but may sustain exposure to higher system costs and fossil inputs.

Megaproject reprioritization and investor confidence

Vision 2030 flagship projects—NEOM and Red Sea developments—remain central but face execution risk from regional instability, cost inflation, and reported scaling-back. International firms should expect evolving procurement scopes, revised timelines, and heightened emphasis on delivery certainty, security planning, and talent retention.

State Ownership and Privatisation

Cairo is updating its State Ownership Policy to expand private-sector participation, reform state entities and remove preferential treatment. If implemented consistently, this could improve competition, open acquisition opportunities and reshape market entry conditions across infrastructure, industry and strategic services.

China Trade Tensions Deepen

US-China commercial relations remain unstable despite a court-driven tariff reprieve that cut the effective tariff rate on Chinese goods to roughly 22.3% from 32.4%. Businesses face continuing risks from retaliatory measures, rare-earth disruptions, and accelerated market diversification pressures.

Fiscal rule and BI independence

Proposed revisions to the State Finance Law and talk of altering the 3% deficit cap have triggered rating and market concern. Fitch turned Indonesia’s outlook negative; rupiah neared 17,000/USD. Uncertainty over central-bank autonomy affects funding costs and FX hedging.

Critical minerals de-risking push

Japan is accelerating rare-earth and critical-mineral diversification amid China controls, via G7/U.S.-EU-Japan trade talks (price floors/tariffs), long-term Lynas offtake deals, and India/Africa projects. Impacts procurement costs, compliance, and EV/defense supply resilience.

Inflation And Currency Collapse

Iran’s macroeconomic instability is acute, with reported February inflation around 68.1%, food inflation near 110%, and the rial near 1.35-1.6 million per US dollar. Pricing, wage setting, contract enforcement, and consumer demand are all highly unstable for foreign businesses.

External funding dependence and Gulf leverage

Pakistan’s external position relies on IMF signalling plus Gulf deposits and deferred oil facilities; Islamabad is seeking longer-tenor Saudi support. Rollovers can become geopolitical leverage, affecting FX stability, payment terms and sovereign credit spreads that price corporate funding.

State seizures and property insecurity

Nationalizations and forced asset transfers—illustrated by Domodedovo’s seizure and auction—signal heightened political risk. Foreign residency, “strategic” designations, and prosecutorial actions can trigger expropriation, impaired governance, and limited legal recourse, deterring greenfield and M&A investment.

US tariff probe escalation

Washington’s Section 301 investigation into Thailand’s alleged excess manufacturing capacity creates the most immediate trade risk. A US$51 billion Thai goods surplus with the US in 2025 puts autos, machinery, rubber and electronics exports at risk of punitive tariffs.

Tech Self-Reliance Regulatory Push

China’s new planning framework deepens support for technological self-reliance, advanced manufacturing and strategic minerals, with R&D spending set to rise over 7% annually. Foreign firms may find opportunities in local ecosystems, but also tighter competition, substitution risk, and regulatory sensitivity.

Disinflation Path Under Strain

Turkey’s disinflation program has slowed as drought, food prices, rents, education, natural gas, and municipal water costs keep inflation elevated. Persistent price pressures complicate forecasting, wage setting, procurement planning, and consumer demand assumptions for companies operating in local-currency cost structures.

Logistics reform amid driver shortage

Japan is legislating logistics reforms to address the trucking labor crunch, subsidizing relay cargo facilities and tightening operational practices. Firms may face higher domestic distribution costs, new contracting standards, and pressure to redesign warehousing networks and delivery lead times.

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.

Auto And Consumer Markets Opening

Australia will liberalise access for EU passenger cars and lift the luxury car tax threshold for EU electric vehicles to A$120,000, exempting roughly 75% of them. This raises competitive pressure in autos, distribution, retail, charging, and aftersales ecosystems.

Fiscal Constraints and Growth Headwinds

Thailand’s economy grew 2.5% year-on-year in the fourth quarter of 2025, but forecasts for 2026 remain subdued near 1.5% to 2.5%. High household debt, import-heavy investment, infrastructure funding debates and negative rating outlooks constrain policy flexibility and domestic demand.

Far Right Kingmaker Risk

The far-right Mi Hazánk is polling around 6-7%, above the 5% threshold, and could become pivotal in a fragmented parliament. That raises the risk of harder positions on foreign capital, labour mobility, EU relations and social regulation, complicating strategic planning.

Tax, customs, and trade facilitation

Government is rolling out FY2026/27 tax reforms and customs changes to support industry and cut clearance times, including VAT tweaks and tariff adjustments. During disruptions, it granted a three-month ACI exemption for transit cargo, improving throughput for regional supply chains.

Battery technology rivalry intensifies

Korean battery leaders are escalating patent enforcement and next-generation development, while new South Korea capacity such as silicon-anode production reduces dependence on China-dominated graphite. This strengthens allied supply chains but raises litigation, licensing, and partner-selection risks for investors and manufacturers.

US tariff pressure, Section 301

Washington’s Section 301 probes and shifting tariff tools are raising uncertainty for Korean exporters and inbound investors. Seoul’s $350bn U.S. investment framework and “excess capacity” scrutiny could trigger targeted duties, compliance costs, and supply-chain re-routing decisions.

Arctic LNG logistics and security

Sanctioned Arctic LNG exports rely on a thin shadow fleet and complex ship-to-ship transfers. The Arctic Metagaz incident and potential rerouting away from Mediterranean/Suez lengthen voyages, reduce fleet utilization, and raise security and force-majeure risks for buyers, shippers, and insurers.

Deflation and Weak Consumer Demand

Persistent deflationary pressure and subdued household spending are weighing on pricing power and revenue growth. Producer prices have remained negative, retail sales growth has been modest, and weak labor-market confidence is encouraging precautionary saving, challenging foreign brands, retailers and discretionary sectors.

UK-EU trade alignment reset

Labour’s planned ‘reset’ with the EU implies dynamic alignment on agri‑food standards from mid‑2027, with ECJ-linked oversight. Officials say up to 500,000 firms may need readiness work. Reduced border friction could lower shipment costs but increases compliance and limits regulatory divergence.

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 constraints and infrastructure stress

Export logistics face chronic constraints: rail loading declines, debt‑strained Russian Railways, and weather shocks like severe Baltic ice that delays tankers. Bottlenecks raise lead times and inventory needs, while forcing route changes, higher tariffs, and operational uncertainty for shippers.

Chokepoint Security and Insurance

Even with Yanbu rerouting, exports remain exposed to Bab el-Mandeb and Red Sea threats. War-risk premiums have reportedly risen as much as 300%, while buyers and shipowners face higher insurance, convoy constraints, and possible voyage delays affecting petroleum and industrial supply chains.