Shifting Energy Trade Flows to Asia

India and Turkey have reduced Russian fossil fuel imports due to sanctions, while China has increased purchases, benefiting from steep discounts. These shifts are altering global supply chains, with China now accounting for nearly half of Russia’s fossil fuel export revenues, impacting trade patterns and pricing.

Shifting Global Trade Alliances

US unpredictability has accelerated trade realignments, with the EU and India finalizing deals and Germany increasing investment in China. Major economies are hedging against US volatility by building alternative trade frameworks, reducing reliance on American markets and supply chains.

Critical Minerals and Mining Expansion

Saudi Arabia is investing $2.5 trillion in mineral reserves, including rare earths, gold, copper, and lithium, aiming to become a global mining and processing hub. Strategic partnerships with the US, Canada, Brazil, and others are reshaping global supply chains and reducing reliance on China for critical minerals.

Infrastructure Expansion and Logistics Modernization

India’s 2026-27 budget prioritizes accelerated investment in highways, ports, and digital infrastructure. Initiatives like Gati Shakti have reduced logistics costs below 10% of GDP, improving supply chain efficiency and global competitiveness, and supporting the goal of becoming a $5 trillion economy.

Canada-China Strategic Trade Pivot

Canada’s new agreement with China lowers tariffs on Chinese EVs and secures reduced Chinese tariffs on Canadian agriculture. This shift diversifies trade but risks US retaliation, reshapes supply chains, and could attract Chinese investment in Canadian manufacturing and energy sectors.

ESG and Sustainability Standards Tighten

Germany’s modular building sector is increasingly shaped by strict ESG and sustainability requirements, including CSRD implementation. Compliance with green building standards and lifecycle emissions reporting is now essential for market access, financing, and supply chain integration.

Nickel quota tightening and audits

Jakarta plans to cut 2026 nickel ore mining permits to 250–260m wet tons from 379m in 2025, alongside MOMS verification delays and tighter audits. Expect supply volatility, higher nickel prices, and permitting risk for battery, steel, and EV supply chains.

Strategic ports and infrastructure sovereignty

Moves to return the Port of Darwin to Australian control highlight rising “sovereignty screening” over logistics assets. Investors in ports, airports, energy and telecoms should expect tougher national-interest tests, deal delays, and possible renegotiation or compensation disputes impacting valuations.

Labor Market Reform and Demographic Challenges

Japan is revising pension rules in 2026 to encourage seniors to remain in the workforce, addressing acute labor shortages and an aging population. While male parental leave uptake is rising, progress on gender diversity in management remains slow, affecting long-term productivity and talent strategies.

Technological Innovation in Battery Reuse

French firms and startups are advancing second-life battery technologies, including hydrometallurgical recycling and smart energy management. These innovations improve recovery rates, reduce environmental impact, and enhance competitiveness in international trade and investment.

Critical Minerals and Geopolitical Competition

Indonesia’s dominance in nickel and tin places it at the center of U.S.-China competition for critical minerals. While new trade frameworks with the U.S. offer market access, there are risks of resource dependency and the need for robust industrial policy to ensure domestic value addition and supply chain security.

Offshore Wind Investment Surge

The UK has secured $30 billion for 8.4 GW of offshore wind capacity, powering 12 million homes and advancing decarbonization goals. This initiative attracts private investment, supports job creation, and strengthens energy security, though grid integration and supply chain challenges persist.

Gaza ceasefire uncertainty persists

Ceasefire implementation remains fragile, with intermittent strikes, aid-flow constraints and contentious governance/disarmament sequencing for post-war Gaza. Businesses face elevated security, force‑majeure and personnel-duty-of-care risks, plus potential reputational exposure and operational volatility tied to border closures.

EU-India Free Trade Agreement Signed

The EU and India have concluded a landmark free trade agreement, covering 25% of global GDP. The deal will reduce tariffs—especially on German autos and machinery—boosting exports and diversifying supply chains amid US trade unpredictability and China competition.

Trade Policy Uncertainty and Diversification

US tariffs (currently 19%) and global trade tensions are prompting Thailand to diversify export markets beyond the US and China. Efforts to expand FTAs, streamline certification, and access India and the Middle East are central to trade resilience and supply chain adaptation.

Port attacks disrupt Black Sea

Repeated strikes on Odesa-area ports and logistics assets are cutting export earnings by about US$1bn in early 2026 and reducing grain shipment capacity by 20–30%. Higher freight, insurance, and rerouting to rail constrain metals and agrifood supply chains.

Green Transition and E-Mobility Expansion

Mexico’s electric vehicle market is set to triple by 2032, supported by government incentives, urban pollution concerns, and major automaker investments. However, limited charging infrastructure and high upfront costs remain barriers, while sustainability goals reshape automotive and energy sectors.

Kritische Infrastruktur und Sicherheitspflichten

Das Kritis-Dachgesetz verschärft Vorgaben für Betreiber kritischer Infrastruktur (Energie, Wasser u.a.): Risikoanalysen, Meldepflichten für Sicherheitsvorfälle, höhere Schutzmaßnahmen und Bußgelder. Das erhöht Capex/Opex, IT- und Physical-Security-Anforderungen sowie Anforderungen an Zulieferer und Dienstleister.

Energy Exports Under Sanctions Pressure

Despite sanctions and Ukrainian drone attacks, Russia’s oil production fell only 0.8% in 2025. However, revenues declined sharply due to price caps, discounts up to $35 per barrel, and shifting demand, impacting the federal budget and raising risks for energy sector investors.

Privatisation and SOE restructuring

Government plans broader privatisation after PIA and targets loss-making SOEs to reduce fiscal drain. Transaction structure, governance and regulatory clarity will shape opportunities in aviation, energy distribution and logistics, while policy reversals could elevate political and contract risk.

Security Risks and Regional Instability

Persistent terrorism, border tensions with Afghanistan, and internal unrest continue to disrupt supply chains, deter foreign investment, and raise operational costs. Recent US and international travel advisories highlight sustained security risks, especially in Khyber Pakhtunkhwa and Balochistan, impacting business confidence and insurance premiums.

China Trade Tensions Hit Auto Sector

German car exports to China fell by nearly 40% in 2025, while Chinese imports to Germany rose. Ongoing trade frictions, China’s state support for its industries, and Germany’s cautious stance on EU tariffs are reshaping supply chains and market strategies for German manufacturers.

Afreximbank and Regional Integration

South Africa’s accession to Afreximbank unlocks up to $11 billion in funding for infrastructure, energy, and industrialization. This supports value-added manufacturing, Black business participation, and deeper integration into the African Continental Free Trade Area, enhancing regional trade prospects.

China trade détente, geopolitical scrutiny

Canada’s partial tariff reset with China (notably EV quotas and agri tariff relief) improves market access for canola/seafood but heightens U.S. concerns about transshipment and “non-market economy” links. Expect tighter investment screening, procurement scrutiny, and reputational due diligence.

Dollar and rates drive financing costs

Federal Reserve policy expectations and questions around inflation trajectory are driving dollar swings, hedging costs, and trade finance pricing. Importers may see margin pressure from a strong dollar reversal, while exporters face demand sensitivity as global credit conditions tighten or ease.

Energy Sector Reform and Pemex Strategy

Mexico is investing $323 billion in energy and infrastructure through 2030, with Pemex targeting 1.8 million barrels daily and expanding natural gas. Reforms focus on debt reduction, domestic refining, and attracting private capital, but Pemex’s financial health remains a concern.

Secondary Sanctions via Tariffs

Washington is expanding coercive tools beyond classic sanctions, including threats of blanket tariffs on countries trading with Iran. For multinationals, this elevates third-country exposure, drives deeper counterparty screening, and can force rapid rerouting of trade, logistics, and energy procurement.

Electricity market and hydro reform

Le Parlement avance une réforme des barrages: passage des concessions à un régime d’autorisation, fin de contentieux UE et relance d’investissements. Mais mise aux enchères d’au moins 40% des capacités, plafonnement EDF, créent risques de prix et de contrats long terme.

Energy Security and Infrastructure Deals

A new 15-year gas agreement with Azerbaijan and major investments in natural gas and renewables are central to Turkey’s drive for energy security and reduced import dependency. These moves enhance industrial competitiveness and supply chain resilience.

Technology Export Controls and Decoupling

The US maintains and expands technology export controls, particularly targeting China and sensitive sectors like semiconductors and AI. These measures drive supply chain decoupling, compliance complexity, and strategic realignment for technology firms and global investors.

Nearshoring Momentum and Supply Chain Shifts

Mexico’s role as a nearshoring hub is accelerating, driven by US-China tensions and global supply chain recalibration. Firms are relocating manufacturing to Mexico for resilience, but face challenges including labor shortages, infrastructure gaps, and regulatory complexity.

Technology Sector Resilience and Global Ties

Despite regional instability, Israel’s technology and cybersecurity sectors attract substantial investment and foster international partnerships. Recent major funding rounds and cross-border collaborations, especially in cybersecurity, underscore the sector’s resilience and its centrality to Israel’s economic strategy.

Inflation, Cost Pressures, and Consumer Demand

US inflation remains above the Fed’s 2% target, driven by tariffs, wage pressures, and supply chain adjustments. Persistent cost increases are prompting companies to cut jobs and automate, while consumer confidence has dropped to its lowest since 2014. These dynamics are reshaping pricing strategies, profit margins, and investment decisions, with downstream effects on global supply chains and export competitiveness.

Green Economy and Environmental Standards

Vietnam is accelerating its green economy transition, prioritizing renewable energy, sustainable agriculture, and circular economy models. Compliance with stricter EU and US environmental standards is now mandatory, affecting market access and requiring significant investment in traceability and emissions reduction.

Internal Unrest and Political Crackdown

Mass protests over economic hardship and government repression have resulted in thousands of deaths and ongoing internet blackouts. Political instability and human rights concerns heighten unpredictability for foreign investors and may trigger further international punitive measures.

Russia-China Trade Faces Headwinds

Bilateral trade between Russia and China fell 6.5% in 2025, ending five years of growth. Declines in energy and automotive trade, new tariffs, and falling commodity prices have contributed, challenging long-term investment strategies and exposing vulnerabilities in Russia’s pivot to Asian markets.