Regional Alliances and Diplomatic Realignment

China’s trade actions test US and South Korean support for Japan, reshaping East Asian alliances. International businesses must factor evolving diplomatic ties and security arrangements into their risk assessments, as regional cooperation and competition directly affect trade and investment flows.

Energy Sector Reform and Investment

Mexico is negotiating with global oil majors to revive hydrocarbon production and attract private capital, while expanding renewable energy and gas infrastructure. Regulatory reforms aim to balance state control with investment incentives, but contract risks and policy shifts remain a concern.

Rising Global Trade Barriers

U.S. tariffs and the EU’s Carbon Border Adjustment Mechanism are increasing costs for Korean exports, particularly autos, steel, and electronics. These barriers challenge competitiveness and require strategic adjustments in pricing, compliance, and market targeting for international businesses.

AI and Technology as Market Drivers Amid Fragmentation

Artificial intelligence and advanced technology investment remain central to US economic growth and global market leadership. However, trade fragmentation, export controls, and valuation risks are prompting more selective investment approaches, with a focus on supply chain security, domestic capacity, and regulatory compliance.

Regional Geopolitical Tensions and Iran’s Role

Iran’s support for Hamas and other non-state actors continues to threaten Israel’s security and regional normalization efforts. The risk of escalation with Iran or its proxies remains high, impacting energy infrastructure, cross-border trade, and investor sentiment.

Regulatory Tightening and Compliance Risks

China is strengthening oversight of outbound investment, foreign acquisitions, and sensitive technologies. New export control laws and anti-dumping investigations increase compliance complexity for multinationals, requiring robust risk management and adaptability to evolving legal frameworks.

Territorial Disputes Complicate Peace Talks

Negotiations remain fraught over territorial control, especially in Donetsk and Zaporizhzhia. Russia demands concessions, while Ukraine resists, affecting the framework for postwar business operations, property rights, and investment security in disputed areas.

Investment Stagnation and Infrastructure Cuts

Sanctions and war have led to a 20% cut in Russian rail investment and stagnating GDP, with industrial output declining. Foreign direct investment is constrained, and infrastructure projects face delays, raising long-term risks for investors and operators.

Supply Chain Realignment To Vietnam

Vietnam’s strategic location and integration into FTAs have made it a preferred destination for supply chain shifts, especially from China and other Asian economies. This trend enhances Vietnam’s industrial capacity and global competitiveness, but also increases exposure to external shocks.

Supply Chain Vulnerabilities and Resilience

Germany’s supply chains remain exposed to geopolitical shocks, resource access issues, and energy constraints. The government is seeking joint international action to secure critical materials and modernize logistics, but disruptions persist, affecting manufacturing, exports, and cross-border operations.

Labor Market Transformation and Demographic Advantage

Vietnam’s young population and rising labor productivity underpin its competitiveness. The government is prioritizing workforce upskilling, digital transformation, and social equity, aiming to sustain productivity growth above 8.5% annually (2026-2030) and maintain its position as a leading manufacturing hub.

Regulatory Shifts for Environmental Compliance

New rules require burn-free certification and stricter origin documentation for feed corn and wheat imports, aligning with global sustainability standards. These regulations impact agri-business supply chains and signal Thailand’s commitment to environmental compliance, but increase operational complexity for importers and exporters.

Geopolitical Tensions Over Taiwan

Escalating China-US and China-Japan frictions over Taiwan have led to sanctions, military drills, and trade restrictions. These developments heighten regional instability, increase compliance risks, and threaten supply chain continuity for international businesses operating in or trading with China.

Escalating Regional And Geopolitical Tensions

Recent Israeli and US airstrikes on Iranian infrastructure, coupled with threats of further military action, have heightened geopolitical risks. These tensions threaten supply chains, cross-border trade, and the stability of foreign investments in Iran and the wider region.

Internationalization Amid Domestic Uncertainty

Facing political and economic uncertainties, 56% of French business leaders plan to expand internationally by 2026, up from 36% last year. Europe and Southeast Asia are favored destinations, reflecting a strategic shift to diversify risks and sustain growth.

Centralized Leadership and Policy Continuity

Vietnam’s Communist Party, under To Lam’s likely continued leadership, is consolidating power and driving ambitious reforms. This centralization ensures policy stability for investors but raises concerns about checks and balances, impacting governance and business predictability.

Domestic Refining Versus Export Pipelines

Canada’s energy debate is shifting toward building domestic refining capacity to capture more value and reduce reliance on US processing. This strategic choice will shape future investment, competitiveness, and resilience against global oil market shocks and trade policy shifts.

Technology Export Controls and Geopolitical Rivalry

US technology export controls, especially targeting China, continue to escalate. This restricts access to advanced semiconductors and dual-use technologies, prompting retaliatory measures and complicating cross-border R&D, investment, and supply chain strategies for global tech firms.

Automotive Sector: Market Access and Security Risks

The Canada–China EV deal allows up to 49,000 Chinese electric vehicles annually at reduced tariffs, supporting Canadian net-zero goals but provoking U.S. concerns over North American content rules and cybersecurity. This move may attract Chinese investment in Canadian auto manufacturing, but risks U.S. countermeasures.

Transformation of Labor Market Dynamics

Israel's labor market has shifted from Palestinian to foreign workers, with over 61,000 new permits issued in 2025. This structural change impacts construction, agriculture, and services, raising concerns about labor standards, costs, and long-term workforce stability.

Infrastructure Expansion and Urban Development

Major infrastructure projects, including transport and power grid upgrades, are driving economic growth and urban transformation. Hanoi’s record budget revenue and full disbursement of public investment funds highlight the government’s commitment to sustainable development and improved business environment.

Regulatory Reforms to Attract Investment

The Korean government is streamlining regulations and enhancing incentives to attract foreign investment, particularly in advanced industries. These reforms aim to improve the business environment, foster innovation, and maintain Korea’s status as a preferred destination for international capital and technology partnerships.

Transatlantic Trade War Escalation

President Trump's threat of 10–25% tariffs on UK and European goods over Greenland has triggered the most serious US-EU trade crisis in decades. The risk of retaliatory measures and suspended trade agreements could severely disrupt UK exports, supply chains, and investment flows.

Energy Sector Reform and Pemex Struggles

Mexico’s energy sector faces challenges from declining Pemex production, revenue shortfalls, and policy shifts. Recent moves to allow private operators in key fields signal reform, but fiscal pressures and regulatory uncertainty may affect energy investment and supply reliability.

Mercosur Agreement Sparks Turmoil

France’s opposition to the EU-Mercosur trade agreement has triggered nationwide farmer protests and political threats, reflecting deep fears of unfair competition and lower standards. The deal’s ratification could reshape European agriculture, supply chains, and trade flows.

Defense Sector Expansion and Joint Production

Ukraine’s defense industry is set for expansion, with joint production agreements and technology transfers from European partners. This creates new investment and partnership opportunities, but also requires careful risk assessment due to ongoing conflict and regulatory changes.

Strained UK-EU-US Trade Agreements

The tariff dispute endangers the recently negotiated US-EU and UK-US trade agreements. The EU may suspend ratification, and uncertainty over future market access is causing businesses to delay investment and hiring, undermining long-term strategic planning for UK-based multinationals.

Critical China-Iran Energy Nexus

China purchases over 80% of Iran’s oil, often via independent refiners and shadow fleets to evade sanctions. Any escalation in US pressure or Iranian instability could disrupt this flow, affecting global energy security and bilateral trade dynamics.

Political Uncertainty and Election Risks

Upcoming elections and coalition uncertainties create significant risks for policy continuity, fiscal reforms, and investor confidence. Political fragmentation may delay critical reforms and budget processes, affecting business planning and international investment flows.

Political Uncertainty and Border Tensions

Thailand faces heightened political uncertainty ahead of the February 2026 elections, compounded by border tensions with Cambodia. These factors increase operational risks, impact investor confidence, and may disrupt cross-border trade and supply chains.

US-China Trade Tensions Escalate

Ongoing tariff increases and retaliatory measures have sharply reduced US-China trade, with US imports from China down 28% and exports down 38% in 2025. This realignment is driving supply chain diversification and impacting global trade flows.

China-Pakistan Economic Corridor 2.0 Expansion

Pakistan and China are launching CPEC 2.0, prioritizing industry, agriculture, mining, and infrastructure. The initiative aims to boost connectivity and investment, but security threats and regional instability remain significant obstacles to realizing its full economic potential.

Sanctions Intensify Trade Restrictions

Renewed UN and US sanctions have frozen Iranian assets, restricted arms and technology trade, and targeted the ballistic missile program. These measures disrupt supply chains, limit market access, and complicate international payments, directly impacting foreign investment and trade flows.

Sanctions, Export Controls, and Geopolitical Tensions

The UK’s involvement in enforcing sanctions, particularly against Russia and in coordination with the US, affects global supply chains and trade flows. Ongoing tensions and policy shifts in sanctions regimes require businesses to maintain robust compliance and risk management frameworks.

Infrastructure-Led Investment Boom

India is experiencing a capital expenditure-driven investment surge, with nearly 80% of FY26 investments focused on infrastructure, power, metals, chemicals, and transport. This policy-driven growth is transforming the business landscape, though consumer demand remains subdued, impacting employment and sectoral balance.

Energy Sector Expansion Drives Investment

Brazil’s oil production is projected to reach 5.5 million barrels per day in 2026, positioning the country as a key global energy supplier. This expansion attracts foreign investment, enhances export revenues, and increases Brazil’s geopolitical influence in energy markets.