Mission Grey Daily Brief - November 10, 2024
Summary of the Global Situation for Businesses and Investors
The world is bracing for another series of shocks as Donald Trump is set to assume office in January following his election victory. Trump's return to power has heartened some of America's long-time rivals, particularly Moscow, while worrying many of its friends. Instead of seeing peace on the horizon, a world already in turmoil is preparing for another series of shocks. Trump's proposed economic policies, including a 60% tariff on Chinese imports and a 10% tariff on all U.S. imports, are expected to have broad economic implications for China and Taiwan, respectively. Trump's win has also boosted the chances of Netanyahu remaining in power until Israel's 2026 elections. In Ukraine, there are fears that Trump plans to force a peace deal on Kyiv by cutting off the flow of U.S. military aid. Trump's victory has also sparked uncertainty over how long Western support for Ukraine will continue, with Hungary's leader predicting that a new U.S. administration under Trump will cease providing support to Ukraine.
Trump's Tariff Bombshell: Implications for China and Taiwan
U.S. President-elect Donald Trump's proposed economic policies include a 60% tariff on Chinese imports and a 10% tariff on all U.S. imports. These policies are expected to have broad economic implications for China and Taiwan, respectively. Taiwan's Economics Minister Kuo Jyh-huei has outlined plans to help companies shift production and minimize the impact on Taiwan's critical tech and electronics sectors. Taiwan's government is preparing policies to support companies looking to diversify their supply chains and adapt to shifting trade policies. Taiwan, whose firms have invested heavily in China over the past four decades, is closely watching how these tariffs could affect Taiwanese companies that have historically relied on China's lower production costs.
Japan's Military Buildup and Alliance with the U.S.
Japan's Prime Minister Shigeru Ishiba has renewed a pledge to build up Japan's military and deepen its alliance with the U.S. under President-elect Donald Trump. Ishiba cited escalating tensions with China, Russia, and North Korea as reasons for strengthening Japan's military power. He also pledged to pursue the ongoing military buildup plan under the 2022 security strategy, which calls for a counter-strike capability with long-range cruise missiles, a break from Japan's self-defence only principle. Ishiba's governing coalition, however, lost a recent parliamentary election, which could make it difficult to pursue his party's planned policies and budget plans in the coming months.
Western Parts Found in Russian Weapons
Ukraine has found Western-made parts inside the wreckage of a new heavy Russian combat drone that crashed last month. Ukraine's military intelligence agency said that an analysis of the S-70 Okhotnik, or "Hunter," drone that was downed over eastern Ukraine in early October, revealed components made by companies in the U.S. and Europe. Officials found microelectronics and other technological components inside the wrecked drone made by U.S.-based companies Analog Devices, Texas Instruments, and Xilinx-AMD, as well as Infineon Technologies in Germany and STMicroelectronics in Switzerland. Ukraine uploaded purported evidence of the Western-made parts to a government portal, where several other companies were listed. Business Insider reached out to the companies mentioned in the HUR's statement and received a response from four of them. Infineon, ST, Texas Instruments, and Analog said that since the start of the Ukraine war in 2022, they have taken steps to prevent their technologies from falling into Russia's hands in violation of sanctions and export control measures. The recent find marks the latest discovery of Western-made components inside Russian weapons, despite widespread international sanctions aimed at curbing Moscow's war efforts.
Syrian Refugees Returning to Syria
Hundreds of thousands of Syrian refugees have returned to their country since Israel launched a massive aerial bombardment on wide swathes of Lebanon in September. Many who fled to Lebanon after the war in Syria started in 2011 did not want to go back. But for officials in Lebanon, the influx of returnees comes as a silver lining to the war between Israel and Hezbollah that has killed more than 3,000 people and displaced some 1.2 million in Lebanon. Some in Syria hope the returning refugees could lead to more international assistance and relief from western sanctions. Lebanon's caretaker Minister of Social Affairs Hector Hajjar told Russia's Sputnik News last month that the war in Lebanon could yield “a positive benefit, an opportunity to return a large number of displaced Syrians to their country, because the situation there is now better than here." Political leaders in Lebanon, which was hosting an estimated 1.5 million Syrian refugees before the recent wave of returns, have been calling for years for the displaced to go home, and many don't want the refugees to return.
Further Reading:
Newspaper headlines: US economy 'overheating' and 'Ukraine fears' - BBC.com
US to send contactors to Ukraine to repair, maintain US weapons - VOA Asia
Themes around the World:
Russian Commodity Market Influence
Russia's dominant role in global platinum production (over 90% via Nornickel) and competitive pricing in coal exports, notably to India, significantly impact international commodity markets. Supply deficits and geopolitical tensions have driven platinum prices up by over 50% in 2025, while Russian coal exports to India hit a two-year high, affecting global supply chains and trade flows.
Defense Industry and International Partnerships
Turkey’s defense sector is expanding through joint ventures with European firms, but partnerships face scrutiny due to geopolitical controversies, such as arms trade with Israel. These tensions may affect defense exports, technology transfers, and international cooperation, influencing Turkey’s defense industrial base and related economic sectors.
Market Volatility Amid Trade Uncertainty
Trump's tariff announcements and trade rhetoric have caused significant stock market fluctuations, with sectors like consumer discretionary and energy notably affected. While some investors view these moves as political posturing, the uncertainty complicates investment strategies, inflation expectations, and Federal Reserve policy decisions, influencing overall economic confidence.
North Korean IT Employment Fraud Scheme
A DOJ crackdown revealed North Korean operatives using stolen US identities to secure remote IT jobs, funneling millions to the regime and risking exposure of sensitive US military technology. This cyber-enabled economic threat highlights vulnerabilities in US labor and cybersecurity frameworks, with implications for corporate risk management and national security.
Supply Chain Diversification and Risks
In response to tariffs and geopolitical tensions, over half of U.S. businesses plan to seek alternative suppliers outside China, Mexico, and Canada. This shift impacts nonprofits dependent on global supply chains, increasing operational complexity and costs. The U.S. government’s push to reduce reliance on China for critical minerals, especially rare earths, underscores the strategic imperative to diversify supply chains to mitigate risks from geopolitical conflicts.
US-South Africa Trade Negotiations and Tariffs
South Africa seeks an extension to negotiate a trade deal with the US to avoid a 31% tariff on key exports like autos, steel, and aluminum. The outcome affects bilateral trade, job security in export sectors, and supply chain stability, highlighting the importance of strategic diplomacy in maintaining favorable trade terms amid US protectionist policies.
BRICS Alignment and US Trade Retaliation Risks
President Ramaphosa emphasized BRICS countries' development goals amid US threats of additional tariffs targeting nations aligned with BRICS' 'anti-American policies.' This geopolitical tension risks trade retaliation, complicating South Africa's international trade relations and investment environment, especially as it balances relations between Western powers and emerging economies.
China’s Military Modernization and Geopolitical Signaling
China’s upcoming large-scale military parade showcases advanced missile systems and naval capabilities, reflecting a strategic shift from low-profile defense to assertive power projection. This demonstration amid territorial disputes and US rivalry signals Beijing’s intent to strengthen deterrence and influence regional security dynamics, with potential ramifications for international trade routes and investor risk assessments.
US-Japan Trade Tensions and Tariffs
Escalating trade tensions between Japan and the US, marked by President Trump's imposition of 25% tariffs on Japanese car exports and demands for increased defense spending, threaten bilateral economic relations. These tariffs impact Japanese automakers' pricing strategies and create uncertainty for trade negotiations, potentially disrupting supply chains and investment flows between the two countries.
Declining Domestic Refinery Capacity
South Africa's refinery capacity has diminished due to closures, increasing reliance on imported crude and refined petroleum products. Over 60% of petroleum products are now imported, raising concerns about fuel supply security. This shift affects energy costs, supply chain stability, and exposes the country to global market volatility impacting industrial and transport sectors.
Trade Strategy and Protectionism
The UK unveiled its first comprehensive trade strategy in decades, aiming to boost exports, protect domestic industries from unfair foreign competition, and counteract global protectionism, especially in response to US tariffs. The strategy includes expanding export finance, enhancing trade defense tools, and pursuing multiple trade deals to secure market access and safeguard supply chains.
Geopolitical Influence and Supply Chain Risks
China’s strategic stance supporting Russia’s war prolongation and its role as a major supplier of components for Russian weapons production complicate EU sanctions enforcement. Restrictions on rare earth exports and potential blacklisting of Chinese banks pose risks to European companies and global supply chains, highlighting the geopolitical complexity affecting trade and investment in Ukraine and the region.
Geopolitical Security and Sea Lane Vulnerability
Australia faces significant risks from China's military buildup, particularly the potential disruption of vital sea lanes critical for imports, including nearly all liquid fuels. This geopolitical tension threatens supply chain stability, energy security, and national resilience, compelling Australia to enhance deterrence policies and defense capabilities to safeguard trade routes essential for economic and military operations.
Geopolitical Tensions and Regional Security
Escalating geopolitical conflicts, particularly between Pakistan and India, and regional instability in the Middle East, significantly impact investor confidence, trade routes, and economic stability. Military confrontations and diplomatic strains raise risks of broader conflicts, affecting foreign investment flows, stock market volatility, and supply chain disruptions, while emphasizing Pakistan’s strategic role in South Asian security dynamics.
Economic Recovery and Growth Outlook
Despite conflict-related challenges, Israel's economy is projected to grow by 2% in 2025 and 4.5% in 2026. Post-war optimism has driven strong gains in the Tel Aviv Stock Exchange, with record-breaking rallies and increased foreign and domestic investment inflows, signaling resilience and opportunities for investors and businesses.
Digital Fraud and Social Media Risks
Cases of online scams, such as fraudulent Facebook accounts selling others' goods, and social media defamation impacting charitable organizations, highlight vulnerabilities in Vietnam's digital ecosystem. These risks necessitate stronger cybersecurity measures and legal frameworks to protect consumers and maintain investor confidence.
Automotive Industry Under Tariff Pressure
The Canadian automotive sector contends with U.S. tariffs on vehicles and raw materials, threatening growth and employment, particularly in Ontario. Industry leaders express concerns over sustainability of current policies and electric vehicle mandates, while government engagement seeks to mitigate recession risks and preserve competitiveness.
Industrial Policy and Customs Enforcement
The government has established a specialized committee to combat customs evasion, protect local industries, and improve market integrity. Efforts include infrastructure upgrades in industrial zones, stricter licensing controls, and promoting local content in manufacturing. These initiatives aim to strengthen domestic production, reduce import dependency, and enhance export competitiveness.
Germany's Role in Ukraine-US Defense Support
Germany closely monitors US-Ukraine defense cooperation amid partial US arms delivery suspensions. The evolving military aid dynamics underscore risks to regional security and supply chain continuity for defense-related industries. Germany's engagement in diplomatic and economic support frameworks influences investor risk assessments and strategic partnerships in Eastern Europe.
Airfare Affordability and Foreign Ownership
Canada’s Competition Bureau recommends relaxing foreign ownership restrictions in the airline industry to increase competition and lower airfares. Current caps limit market entry and pricing flexibility, affecting travel costs and connectivity. Enhanced competition could stimulate tourism, business travel, and supply chain logistics, improving overall economic efficiency and consumer choice in the aviation sector.
Energy Subsidy Reforms Affecting Industry
The revocation of industrial electricity discounts marks a policy shift toward fiscal consolidation amid rising global energy costs. This change increases operational expenses for industrial sectors, necessitating cost reassessment and potential price adjustments. The reform reflects Egypt’s strategy to transition subsidies toward more sustainable models, influencing industrial competitiveness and investment decisions.
Migration and Border Control Policies
France and the EU are actively managing migration flows, including Anglo-French migration pacts and Mediterranean state concerns. These policies impact labour markets, social stability, and bilateral relations, influencing trade and investment climates. Migration management remains a sensitive geopolitical issue with potential to affect cross-border cooperation and supply chain continuity.
Geopolitical Risks Impacting Bond Yields
Escalating geopolitical tensions, notably the Israel-Iran conflict and ongoing Russia-Ukraine war, are driving volatility in Indian bond markets. Rising crude oil prices due to supply concerns increase inflation and current account deficits, prompting cautious RBI monetary policy. This environment elevates borrowing costs and currency pressure, affecting investment strategies and financing conditions for Indian businesses.
Regional Security and Border Crime Control
Effective border patrols and inter-agency operations against cross-border crime, such as vehicle theft near Mozambique, demonstrate South Africa's commitment to regional security. Maintaining secure borders is vital for protecting trade routes, reducing illicit activities, and fostering a stable environment for business.
Labor Market and Immigration Policy Risks
U.S. immigration enforcement actions targeting undocumented workers threaten key sectors like agriculture, hospitality, and manufacturing. Potential labor shortages could disrupt supply chains and economic output, while raising wages for some workers. Businesses warn of negative impacts on GDP and community economies, highlighting the delicate balance between enforcement and economic stability.
Critical Minerals and Rare Earths
India's heavy reliance on China for rare earth minerals and magnets essential for EVs, electronics, and defense creates strategic vulnerabilities. Efforts to diversify supply chains through partnerships with countries like Namibia and calls for national strategies underscore the urgency to secure critical materials, vital for sustaining manufacturing growth and reducing geopolitical risks.
Social Media Influence and Public Perception Risks
High-profile social media controversies involving celebrities and public figures demonstrate the growing impact of digital platforms on public opinion and brand reputation. For international businesses, this underscores the importance of managing social risks and understanding Vietnam's digital communication landscape.
Financial Market Volatility and Uncertainty
Tariff threats and geopolitical tensions have increased volatility in U.S. financial markets, with major indexes experiencing sharp declines amid investor concerns over trade wars and Federal Reserve leadership uncertainty. This environment dampens investor confidence, complicates corporate earnings outlooks, and pressures monetary policy decisions, influencing capital flows and economic stability.
Government Crisis Preparedness and Policy Response
Indonesian lawmakers and government agencies are urged to develop comprehensive crisis scenarios and mitigation strategies, including fiscal-monetary coordination, energy diversification, and social safety nets. Effective policy responses are essential to manage inflation, subsidy burdens, currency stability, and maintain economic resilience amid prolonged geopolitical shocks.
Cross-Border Corruption and Money Laundering
Investigations reveal extensive corruption and money laundering involving Thai and Cambodian labor officials exploiting migrant workers through extortion and illicit fees. Estimated scams exceed ฿6 billion, undermining labor market integrity and bilateral relations. This systemic corruption threatens Thailand’s regulatory environment, labor supply stability, and international reputation.
Infrastructure and Transportation Integration
Indonesia faces challenges in integrating its national transportation system, impacting logistics efficiency and supply chain connectivity. Government efforts to finalize the National Transportation System Law aim to enhance multimodal coordination, reduce bottlenecks, and support economic activities critical for trade and investment growth.
Energy Innovation for Data Centers
Tokyo Gas Engineering Solutions promotes city gas-powered generators for data centers, enabling faster facility startups by bypassing grid delays and improving energy efficiency through waste heat utilization. This innovation addresses Japan's energy infrastructure constraints, supporting digital economy growth and attracting investment in technology and data services sectors.
Climate and Water Resource Variability
Unusually heavy rainfall in June brought drought relief but also flooding in Mexico City and other regions, highlighting climate volatility. Water reservoir levels remain below historical averages in key areas, posing risks to agriculture, manufacturing, and urban infrastructure, which can disrupt supply chains and increase operational risks.
Geopolitical Tensions in Middle East
Turkey is situated amid escalating Middle Eastern geopolitical conflicts involving sectarian divides, regional power struggles, and shifting alliances. The complex interplay of Iranian 'Shia Crescent' ambitions, Israeli security doctrines, and US strategic interests creates a volatile regional environment. This instability impacts Turkey’s trade routes, energy security, and diplomatic relations, posing risks to cross-border commerce and investment.
Agricultural Trade and GMO Policy Risks
Proposed imports of genetically modified (GM) agricultural products from the US threaten India's GMO-free export reputation, risking market access in the EU due to stringent labeling and consumer resistance. Cross-contamination risks and lack of segregation infrastructure could lead to shipment rejections, increased costs, and reputational damage, impacting key agricultural export sectors.
Currency Appreciation and Inflation Control
The Israeli shekel has appreciated significantly against major currencies, driven by reduced risk premiums and strong economic fundamentals. This appreciation helps moderate inflationary pressures, benefiting importers and consumers but potentially challenging exporters due to currency competitiveness in international markets.