Semiconductor Supercycle Drives Growth

South Korea’s record $709.7 billion exports in 2025 were powered by a 22% surge in semiconductor shipments, especially for AI and data centers. This cycle is fueling profits, investment, and supply chain expansion, but exposes Korea to cyclical risks if demand weakens.

Energy Transition and LNG Import Surge

Egypt’s domestic gas production decline has led to record LNG imports—over 9 million metric tons in 2025—mainly from the US and Qatar. New energy deals and infrastructure are reshaping Egypt’s energy mix, with a strategic pivot toward renewables and regional energy hub ambitions.

US-Indonesia Trade Agreement Finalization

Indonesia is set to finalize a major trade agreement with the United States, reducing tariffs from 32% to 19%. This deal will boost exports, enhance market access, and strengthen bilateral economic ties, directly impacting trade flows and investment strategies.

Green Transformation and Regulatory Burden

Germany’s ambitious green policies have increased regulatory complexity and compliance costs for businesses. While supporting climate goals, these measures contribute to capital flight, slower investment, and concerns about overregulation, particularly for small and medium-sized enterprises.

Canada-China Trade Normalization and Tariff Reset

Canada and China have reached a landmark agreement to reduce tariffs on electric vehicles and canola, unlocking nearly $3 billion in Canadian exports. This deal signals a thaw in bilateral relations, but risks U.S. retaliation and supply chain realignment, especially in autos and agriculture.

Coal-to-Energy Diversification Strategy

State-owned enterprises are accelerating coal processing into alternative energy products like SNG, DME, and methanol. This strategy aims to reduce energy imports, diversify supply, and strengthen national energy resilience, impacting long-term industrial and energy sector development.

Accelerated OECD Accession and Reforms

Indonesia is fast-tracking its accession to the OECD, aligning policies with international standards to improve governance, regulatory quality, and competitiveness. This process is expected to boost investor confidence, enhance the investment climate, and facilitate greater integration with global markets.

Aggressive US Industrial Policy Shift

The 2025 US National Security Strategy prioritizes economic, technological, and energy dominance through reindustrialization, energy independence, and strategic subsidies. This shift challenges multilateral norms, risks marginalizing allies, and increases regulatory complexity for international investors and supply chain planners.

Supply Chain Diversification Gains

Southeast Asia, including Thailand, is capturing sourcing share as global supply chains shift away from China due to tariffs and trade tensions. Thailand’s imports to the U.S. rose 28% in 2025, positioning the country as a key alternative for international supply chain strategies.

Volatile US Trade Policy and Tariffs

The US has imposed sweeping tariffs on China, the EU, and other partners, raising average tariffs to 19%—the highest since 1930. Unpredictable policy shifts, rapid reversals, and WTO rule disregard have heightened uncertainty, complicated trade planning, and increased costs for global businesses.

Government Crackdown and Human Rights Risks

Iran’s leadership has signaled a tougher crackdown on dissent, deploying security forces and restricting media. This increases reputational and compliance risks for foreign firms, especially regarding human rights and ethical standards.

Nearshoring and AI Supply Chain Integration

Mexico is rapidly becoming a strategic hub for North American nearshoring, especially in AI hardware assembly, data centers, and advanced manufacturing. Major investments by US tech firms and alignment with USMCA digital rules are deepening regional supply chain integration and resilience.

US Tariffs and Trade Tensions

The imposition of US tariffs, particularly on automotive and manufactured goods, is straining South Africa’s export sectors. These measures threaten jobs, especially in manufacturing, and create uncertainty for investors reliant on US market access, complicating trade and investment strategies.

Rising Role in Global Supply Chains

Indonesia is capturing a growing share of global supply chains as U.S.-China trade declines, with Indonesian imports to the U.S. rising 34% in 2025. This shift enhances Indonesia’s position as a sourcing hub, attracting investment and diversifying global manufacturing.

Inflation and Monetary Policy Uncertainty

US inflation remains above the Federal Reserve’s 2% target, with annual CPI at 2.7%. Political interference and delayed data due to government shutdowns complicate monetary policy, increasing uncertainty for investment, borrowing costs, and currency stability.

Geopolitical Tensions and Security Risks

China’s persistent claims over Taiwan and frequent military exercises in the Taiwan Strait heighten regional instability. Any escalation could disrupt global electronics, automotive, and defense supply chains, making Taiwan a critical flashpoint for international business risk.

Cautious Federal Reserve Policy Outlook

The Federal Reserve, after cutting rates by 75 basis points in 2025, is expected to pause further easing in early 2026 due to persistent inflation and labor market weakness. This cautious stance affects global capital flows, borrowing costs, and currency markets, influencing international investment strategies.

Dollar Decline Reshapes Global Finance

The US dollar fell 12% in 2025, its steepest drop in eight years, driven by Fed rate cuts and global growth shifts. This depreciation impacts export competitiveness, import costs, and multinational earnings, prompting currency hedging and portfolio adjustments.

Supply Chain Resilience and Restructuring

Global supply chain uncertainties, especially in semiconductors and advanced manufacturing, are prompting Korean firms to invest in local capacity and diversify sourcing. This trend enhances resilience but requires ongoing adaptation to geopolitical shocks, regulatory changes, and technology competition.

Energy Independence and Transition Initiatives

Indonesia is accelerating its energy transition with new solar projects, waste-to-energy initiatives, and refinery upgrades. The government targets energy independence within five years, which will reduce import reliance and create opportunities for renewable energy and infrastructure investment.

Energy Infrastructure Expansion

Israel has approved major energy projects, including a 900-megawatt power plant near Jerusalem, to meet rising demand and support future data centers. These developments offer opportunities for foreign investment but are subject to long regulatory timelines and regional risks.

Energy Transition and Cost Pressures

The UK’s energy transition is raising operating costs, particularly in manufacturing and agri-food sectors. Businesses face higher energy bills and delayed investments, underscoring the need for clear policy direction to balance decarbonization goals with affordability and supply security.

Currency Depreciation and Financial Stability

The Korean won’s sharp depreciation—over 2% in early 2026—raises concerns for outbound investments and financial stability. Authorities are balancing market liberalization with intervention, as large capital outflows could exacerbate volatility, impacting international investors and trade partners.

Domestic Infrastructure and Talent Pressures

Relocation of manufacturing and increased overseas investment may strain Taiwan’s domestic infrastructure and talent pool, potentially impacting innovation capacity and competitiveness at home, while intensifying the need for workforce development and policy adaptation.

Labour Market and Automation Shifts

The semiconductor boom is driving job growth in high-skill areas but also accelerating automation and reducing employment in legacy manufacturing. Businesses must adapt workforce strategies to balance advanced skills demand with potential job displacement in traditional sectors.

USMCA Uncertainty and Tariff Risks

Ongoing US-Canada trade tensions, including Supreme Court decisions and USMCA renegotiations, create volatility for Canadian exporters. Tariff threats on key sectors like furniture and lumber impact supply chains, investment planning, and cross-border business operations.

Rising Chinese Trade Influence

South Africa’s trade deficit with China is widening, driven by surging imports of Chinese vehicles and manufactured goods. This trend threatens local industries and complicates trade balances, requiring strategic adaptation by businesses to remain competitive in key sectors.

Ambitious Double-Digit Growth Targets

Vietnam is targeting sustained GDP growth of over 10% annually through 2030. This aggressive goal is tied to deep economic reforms, industrial upgrading, and infrastructure investment, but its feasibility is challenged by global trade headwinds, tariff risks, and the need for innovation-driven growth.

Green Energy Transition and Overcapacity

China leads in renewable energy, installing over half the world’s new wind and solar capacity. Policy shifts, including cuts to export tax rebates for batteries and solar, aim to curb overcapacity and align with global climate goals, but also reshape trade dynamics and supply chains.

Supply Chain Diversification Imperatives

Japanese firms are intensifying efforts to diversify suppliers, particularly for critical minerals and advanced components. Moves to secure alternative sources in Australia and North America aim to mitigate the impact of Chinese restrictions and enhance long-term business continuity.

Resilient Domestic Productivity and AI Adoption

Despite policy headwinds, US productivity is surging, driven by AI and digital transformation. This boosts corporate earnings and offsets some labor constraints, but the benefits are uneven and depend on continued innovation and investment.

Energy and Critical Minerals Cooperation with Asia

Recent agreements with China are expanding Canadian oil, LNG, uranium, and clean energy exports to Asia. This diversification of energy partnerships supports Canada’s energy transition but raises questions about foreign investment screening and national security in strategic sectors.

State-Level Investment Realignment

States like Andhra Pradesh, Odisha, and Maharashtra now attract over 50% of new investments, driven by reforms, infrastructure, and policy clarity. This geographic shift is creating new industrial hubs and altering supply chain and investment strategies for international businesses.

Regional Security Tensions Over Taiwan

Japan’s assertive stance on Taiwan has triggered Chinese economic retaliation and military signaling, heightening regional risk. This tension impacts foreign investment sentiment, supply chain stability, and the strategic calculus for multinationals operating in Northeast Asia.

Japan’s Strategic US Alignment Deepens

Amid regional uncertainty, Japan is accelerating defense cooperation and supply chain realignment with the US, including a ¥80 trillion ($550 billion) investment plan. This shift is intended to reduce dependence on China and bolster economic and security resilience.

Infrastructure and E-Mobility Expansion

Mexico is accelerating infrastructure investments in logistics, energy, and electric vehicle markets, supported by government incentives and foreign capital. Expansion of charging networks and data centers is transforming urban mobility and digital supply chains, but gaps remain in nationwide coverage.