Manufacturing competitiveness under cost pressure

CBI surveys show manufacturing output falling (balance -14) and order books weak (-28), with export orders down and price expectations elevated (+26). High energy costs and volatile trade conditions are constraining investment, reshoring decisions and supplier stability across industrial value chains.

Investment governance reset under Vision 2030

A new investment minister from the $925bn PIF signals a pivot from headline giga-project spend toward investment-driven growth in logistics, mining and AI. With 2024 FDI inflows at 119.2bn riyals ($32bn) versus a $100bn annual 2030 goal, investors should expect policy recalibration and prioritization.

Sanctioned LNG logistics innovation

Russia is sustaining Arctic LNG exports via ship‑to‑ship transfers, floating storage units and complex routing from Yamal and Arctic LNG 2. Europe still buys large volumes ahead of a 2027 EU ban, creating sudden policy-cliff risk for buyers, shippers and terminal operators.

Escalating sanctions and enforcement

UK and EU are widening measures against Russian energy logistics, including Transneft, banks and dozens of shadow-fleet tankers. Businesses face heightened secondary-sanctions exposure, tighter compliance expectations, contract frustration risk, and higher costs for screening counterparties, cargoes and beneficial ownership.

Defense Exports and Tech Partnerships

Korea is deepening defense industrial ties with partners like Poland and Saudi Arabia, including R&D MOUs and localization ambitions. Defense exports support manufacturing and services, but bring compliance obligations, technology-transfer controls, and geopolitical sensitivity tied to Russia and regional conflicts.

Fiscal Rules and Investment Execution

Debate over Germany’s debt brake and stimulus delivery creates uncertainty for contractors and investors. A €500bn off-budget infrastructure fund and sharply higher defense budgets may boost demand, but political resistance and execution shortfalls can delay projects, permitting, and procurement pipelines.

Logistics resilience and chokepoints

US supply chains remain sensitive to port capacity, rail/truck constraints and labor negotiations, amplifying lead times and demurrage risk. Companies should diversify gateways, build buffer inventory for critical SKUs, and strengthen carrier contracts and contingency routing plans.

Auto supply chains under reshoring

U.S. reshoring rhetoric and auto tariffs threaten Canada’s highly integrated vehicle supply chain where parts cross borders multiple times. With job losses already reported, firms face pressure to reconfigure North American footprints, rules-of-origin strategies, and supplier localization to preserve duty-free access.

LNG expansion and energy pivot

Canada’s LNG build-out, led by B.C. projects and fast-track federal processes, is reshaping energy logistics and export optionality to Asia. Rising gas royalties contrast with stressed forestry, affecting regional investment opportunities, infrastructure demand, and industrial power pricing.

Agua, clima y fricciones EEUU

La escasez hídrica y el Tratado de 1944 añaden riesgo operativo y comercial. México se comprometió a entregar mínimo 350,000 acre‑pies anuales a EE. UU. y a saldar adeudos; Washington se reserva medidas comerciales si hay incumplimiento, afectando agroindustria y manufactura regional.

Expanded Section 301 enforcement

USTR is launching new Section 301 investigations targeting industrial overcapacity, forced labor, pharmaceutical pricing, and discrimination against US tech and digital goods. These probes can drive targeted tariffs and compliance demands, raising partner-country risk and reshaping sourcing decisions.

Defence procurement shifts to IP

Draft Defence Acquisition Procedure 2026 reweights “L1” bidding with credits for indigenous design and IP, aiming for “Owned by India” outcomes and 30–50% faster timelines. Foreign OEMs face stricter localisation, source-code/data expectations, and selective foreign-route clearances affecting partnerships and offsets.

Tourism and visa liberalization

Expanded 60-day visa exemptions for 93 countries, new Destination Thailand Visa options, and broader e-visa/digital arrival processes aim to boost arrivals and service-sector revenues. Benefits include demand for hospitality and retail, but authorities are tightening misuse controls that may affect hiring and operations.

US tariff regime uncertainty

US tariff tools are shifting from IEEPA to Sections 122/301/232, keeping Korea exposed to sudden duty changes and non-tariff barrier probes (digital rules, platform regulation). Firms should stress-test pricing, origin routing, and compliance for US-bound sales.

State-asset sales and SOE restructuring

Government plans to restructure 60 state companies—40 to the Sovereign Fund of Egypt and 20 toward EGX listing—while the IMF presses for a smaller state footprint. This opens M&A and PPP opportunities but execution risk remains, including valuation, governance, and regulatory unpredictability.

Energy policy and gas dependence

Mexico imports record U.S. natural gas (~6.638 Bcf/d in 2025) and uses gas for over 60% of power generation, while policy favors state firms. Exposure to U.S. supply/price shocks and regulatory uncertainty affects industrial power costs and project bankability.

Regional war disrupts logistics

Escalation involving Iran and wider fronts is lifting war‑risk insurance and forcing carriers to add surcharges. Shipping and air-cargo rates to Israel have risen roughly 10–25%, tightening lead times and increasing landed costs for importers and exporters.

Russia sanctions and compliance expansion

Australia issued its largest Russia sanctions package since 2022, targeting 180 individuals/entities, shadow-fleet vessels, and—newly—crypto facilitators. Multinationals must tighten screening, shipping due diligence, and payment controls, especially in energy, maritime logistics, and fintech.

Security threats to projects and staff

Persistent militant and insurgent violence, including attacks linked to major infrastructure corridors, elevates duty-of-care and insurance costs. Heightened security can delay site work, constrain travel, and raise risk premia for logistics, mining, and energy projects.

Ports and logistics continuity

Haifa and other gateways remain strategic chokepoints during conflict, with elevated missile/drone risks and tighter security protocols. Even when operations continue, businesses should plan for congestion, rerouting, and stricter cargo screening affecting import-dependent production.

Volatile tariff regime resets

After the Supreme Court struck down IEEPA-based tariffs, the administration invoked Trade Act Section 122, imposing a 15% global import surcharge for up to 150 days (expires July 24). Exemptions and refund uncertainty amplify pricing, contracting, and inventory-planning risk.

Border disruptions, transit trade growth

Thai-Cambodian tensions and Myanmar instability are disrupting overland logistics and checkpoint operations, while transit trade hit a record 1.04 trillion baht in 2025. Supply chains should build redundancy via sea routes, Laos/Vietnam corridors, and risk-aware inventory planning near border hubs.

Defense Reindustrialization and Procurement Boom

Germany has become the world’s fourth-largest military spender (~$107bn), accelerating procurement and domestic capacity build-out (e.g., up to €2bn for loitering munitions). This boosts aerospace, electronics, and dual-use tech demand, while tightening export controls and security screening.

Nearshoring investment, capacity constraints

Manufacturing reinvestment continues, especially in northern hubs like Nuevo León (e.g., new automotive logistics/assembly capacity). But water stress, power reliability, permitting bottlenecks and security costs constrain ramp-ups, influencing site selection, capex timelines and supplier localization strategies.

IMF program and reform conditionality

IMF completion of Egypt’s fifth and sixth EFF reviews unlocks about $2.0bn plus $273m RSF, reinforcing policy discipline. However, uneven structural reforms and slow state-asset divestment create regulatory uncertainty affecting privatizations, procurement, and investor confidence.

USMCA review and North America rules

USMCA exemptions shield much trade, but the agreement is under mandatory review and political pressure. Businesses should expect potential rule-of-origin tightening, sector carve-outs, and enforcement disputes, affecting auto, energy and agriculture supply chains across North America.

Digital sovereignty and regulated cloud

France is pushing sovereign cloud and tighter control of sensitive data for regulated sectors, reinforced by EU rules (AI Act, NIS2, DORA) and French qualification schemes. Multinationals may need EU-based processing, vendor changes, and new contracting for AI and cloud workloads.

Electricity cost, grid stability risks

Load shedding has eased, but Eskom output is declining and tariffs continue rising; municipal arrears exceed R110bn, prompting potential supply interruptions. Businesses face cost volatility, embedded-generation acceleration, and contingency planning needs for facilities in high‑debt municipalities.

US tariff and investment pressure

Korea faces volatile US trade policy: tariffs shifted from 25% to 15% tied to a US$350bn Korea investment pledge, while Washington signals renewed Section 232/301 actions. Exporters must plan for abrupt duty changes, compliance, and US localization.

Gibraltar border treaty operational shift

A draft UK–EU treaty would introduce dual border checks at Gibraltar’s airport and port with Spanish “second line” Schengen-style controls and customs clearance in Spain for most goods. It reduces land-border friction but adds compliance, documentation and traveller-processing complexity.

AI chip export controls tightening

US is weighing a new framework to ration AI-chip exports, potentially requiring licenses even for small installations and linking large shipments to foreign security guarantees or US investment. This could delay overseas deployments, constrain partners’ data-center buildouts, and complicate vendor compliance.

Exchange rate and import management

Although inflation has moderated, Pakistan’s external position remains sensitive. Any shock could trigger rupee volatility and administrative import management. This impacts sourcing lead times, inventory planning, and the ability to access inputs, especially for export manufacturers.

Sanctions and enforcement escalation

US sanctions policy—especially relating to Russia, Iran and other high-risk jurisdictions—remains a core operational constraint, with strong enforcement expectations for banks, shippers and traders. Secondary exposure, beneficial-ownership checks, and payments disruptions elevate compliance costs.

China exposure and de-risking

Germany’s export model faces a sharper ‘China shock’: imports rise while market access and competition concerns grow. Business groups cite intervention and uneven competition; dependence on rare earths persists. Expect tougher screening, diversification, and higher supply-chain resilience costs.

Energy supply shocks and LNG dependence

Israel’s indefinite halt of roughly 1.1 bcf/d gas exports heightens Egypt’s power and industrial fuel risk. Egypt is lining up regas capacity and up to 75 LNG cargoes (~$3.75bn), likely increasing energy costs and outage risks for factories and logistics.

Política comercial e tarifas de importação

Medidas para reforçar arrecadação e indústria local, como aumento de Imposto de Importação sobre bens de capital e TI/telecom, podem elevar custos de projetos, automação e tecnologia, pressionando margens. Para exportadores, volatilidade tarifária externa aumenta risco de demanda.