Mission Grey Daily Brief - November 12, 2024
Summary of the Global Situation for Businesses and Investors
The global order is shifting as Donald Trump wins a landslide victory in the US and Germany's coalition government collapses. This marks a shift from neoliberalism to economic realism, with national security considerations taking precedence over market interests. Trump's protectionist policies and China's state-directed capitalism are intensifying geopolitical competition, pressuring businesses to make investment decisions through a geopolitical lens. The era of peak globalisation is behind us, and companies face a choice between rival IT infrastructures, markets, and currency systems. Trump's proposed tariffs and trade war threats are causing concern and uncertainty for many countries, especially those with close trade ties to the US and China.
Trump's Return to the White House and the End of the Neoliberal Era
Donald Trump's return to the White House coincides with the collapse of Germany's coalition government, signalling a shift in the global order. The German government coalition fell apart over disagreements regarding the debt brake, with former Finance Minister Christian Lindner advocating for neoliberal staples such as tax relief, deregulation, and fiscal discipline, while Chancellor Scholz pursues "economic realism", acknowledging that market-driven solutions may no longer work in a world disrupted by geo-economic competition.
Following Russia's invasion of Ukraine, Europe and Russia have economically decoupled, and while a complete decoupling of Western economies from China remains impossible due to extensive interdependence, the Biden administration has turned to export controls, investment restrictions, and a subsidy-driven industrial policy. China's state-directed capitalism is surging to the technological frontier through heavily subsidised industrial policies, threatening industries worldwide.
Trump's protectionist policies and China's state-directed capitalism are intensifying geopolitical competition, pressuring businesses to make investment decisions through a geopolitical lens. The era of peak globalisation is behind us, and companies face a choice between rival IT infrastructures, markets, and currency systems. Diversification, especially in high-tech sectors, is accelerating, potentially leading to competing economic blocs.
Trump's Tariff Plans and the Potential Impact on Global Trade
Trump's proposed tariffs and trade war threats are causing concern and uncertainty for many countries, especially those with close trade ties to the US and China. Trump has threatened to impose tariffs of between 10-20 per cent on all goods coming into the US, and up to 60 per cent on those coming from China, which could trigger global trade wars on a scale we've never seen before.
Indonesia's businesses are concerned that restrictive trade policies from the US will incentivize Chinese producers to divert large quantities of goods to Southeast Asian markets and create barriers for Indonesian exports to the US. Indonesia is China's largest trading partner and the US is the second-largest export market for Indonesian goods, so these policies could significantly impact Indonesia's economy.
Indonesia's government is taking steps to minimize the negative impact of the change of US administration, including pushing for trade deals, diversifying export markets, and improving competitiveness. More regional trade agreements are necessary to navigate the expected wave of protectionism, as such deals would cement a strong foundation for Indonesian businesses to brace for the shift of US policies.
Taiwan's Position in the US-China Trade War
Taiwanese companies with bases in mainland China are in a hurry to relocate back to Taiwan or elsewhere if Donald Trump imposes high tariffs on China. This highlights the delicate position Taiwan finds itself in as it navigates the US-China trade war.
Mexico's Response to Trump's Threats
Mexico is bracing for the challenges ahead as Donald Trump eyes a return to office, with Trump's constant threats on tariffs, massive deportations, and cross-border trade putting the country in a difficult position. Mexico has a new leader, Claudia Sheinbaum, who is more ideological and less pragmatic than the former Mexican president, Andrés Manuel Lopez Obrador.
Sheinbaum's administration could face particular pressure to address US concerns regarding immigration and drug trafficking, and her recent moves to centralize government power by diminishing independent regulatory bodies could violate US-Mexico-Canada Agreement (USMCA) terms, giving Trump grounds to push for trade renegotiations, especially regarding the auto industry and supply chain regulations.
Mexico hopes for peaceful trade dynamics, but experts argue that optimism should be tempered by a realistic understanding of Trump's national security-focused policies, which often prioritize economic protectionism.
Further Reading:
Eoin Burke-Kennedy: Ireland’s €54bn exposure to Trump’s tariff plan - The Irish Times
How A Second Trump Term Could Strain U.S.-Mexico Relations To The Breaking Point - Reform Austin
Indonesia’s businesses fear deluge of Chinese goods after Trump takes office - asianews.network
Trump Wins Big, Germany’s Coalition Falls—A New Global Order? - Social Europe
Themes around the World:
Manufacturing Reshoring Through Tariffs
Officials explicitly frame tariffs as tools to reshore manufacturing and shrink trade deficits. Sector-specific pressure on autos, steel, aluminum and lumber signals a more interventionist industrial posture, affecting plant-location decisions, supplier footprints and cost structures across North American manufacturing networks.
IMF Review Shapes Reform
Pakistan is preparing for IMF reviews that could unlock about $1.2 billion, with scrutiny centered on tax collection, privatization, governance, anti-corruption and energy-sector reform. For investors, continued disbursements support external liquidity, while reform slippage would raise macro and policy risk.
Frozen assets fund Ukraine
The EU transferred $1.62 billion in interest from immobilized Russian central bank assets to Ukraine, bringing total such proceeds to $9.23 billion. This reinforces long-duration financial confrontation and raises sovereign asset, litigation and retaliatory-policy risks for foreign investors.
Industrial Operations Under Strike Risk
Russian missile and drone attacks are hitting industrial and logistics sites beyond ports, including the Zaporizhstal steel plant, which suspended operations after a strike killed seven employees. Businesses face direct asset damage, workforce risk, production interruptions and higher continuity-planning costs.
Russia tensions complicate LNG
Putin’s visit to the disputed Kuril Islands is sharpening pressure for tougher Japanese sanctions, yet Japan still relies on Sakhalin LNG. That leaves businesses facing elevated geopolitical risk around energy sourcing, bilateral trade policy, and possible further disruption in Northeast Asian commercial ties.
Nickel downstreaming policy entrenched
Senior officials reaffirmed Indonesia’s raw nickel export ban and domestic processing strategy despite earlier WTO challenges and external pressure. The stance reinforces long-term localization of mineral value chains, affecting sourcing strategies, smelter investment decisions, and metals trade flows.
Allied unity may fracture
Simulation reporting suggests a Taiwan crisis may split partner responses as economic interests diverge. Scenarios showed Australia maintaining commercial engagement with China while Japan aligned more closely with Washington, raising uncertainty for sanctions exposure, logistics continuity, and contingency coordination.
Regional Conflict Damages Infrastructure
Ongoing US-Iran military escalation and strikes are damaging energy, transport, and industrial infrastructure, while negotiations remain unstable. This is intensifying shortages, rationing, and business continuity risks, especially for logistics, utilities, and any firms dependent on local production networks.
China-plus-one model under scrutiny
Articles note Vietnam benefited from supply-chain diversification out of China, including investment by Chinese-owned factories. However, tighter US enforcement is blurring the line between legitimate manufacturing relocation and tariff evasion, complicating future sourcing, ownership and investment structures.
Uncertain 2027 budget trajectory
The government plans to submit the 2027 budget by September 30, targeting a 4.9% deficit versus about 5.0% in 2026. Repeated political delays and minority-government fragility increase uncertainty around taxes, spending programs, procurement, and business-facing fiscal measures.
Red Sea Shipping Disruption
Houthi attacks on Saudi tankers, ports and energy assets have sharply raised disruption risk across the Red Sea and Bab al-Mandeb, threatening trade continuity, shipping reliability and insurance costs as Saudi-linked cargoes face growing operational uncertainty and route diversion pressure.
Turkey becomes upstream investor
TPAO’s 15% stake in Kirkuk fields and new offshore participation in Bulgaria’s Khan Tervel block mark a shift from transit role toward direct upstream ownership. This expands Turkey’s external energy footprint and creates fresh partnership openings with majors including bp, Shell and OMV.
US-Canada Tariff Escalation
Washington imposed 50% tariffs on about $20 billion of Canadian goods using Section 338, triggering Canadian retaliation. The dispute threatens integrated autos, metals and consumer goods flows, raising North American costs and undermining planning certainty for cross-border investors and suppliers.
Critical Minerals Access Prioritized
US negotiators are seeking preferential access to Canadian lithium, nickel, cobalt and copper to reduce dependence on Chinese supply chains. This reinforces policy support for regional sourcing, reshapes mining and battery investment strategies, and may redirect procurement toward politically preferred suppliers.
Institutional and regional instability worries
Recent reporting tied weak growth, judicial reform uncertainty, and political-security instability in Sinaloa to broader investor concerns. For international firms, these domestic risks matter because boardrooms assess trade access, contract enforceability, logistics security, and state capacity as a single risk package.
PIC Governance Crisis Threatens Pension Assets
South Africa's Public Investment Corporation, managing R3.6 trillion in public-sector assets, faces leadership instability following board resignations and incomplete Mpati Commission reforms. Governance failures risk undermining civil servants' pension security and may lead to further value-destroying investments, threatening broader financial market confidence.
Asia becomes emergency fuel supplier
Russia is importing nearly 270,000 tonnes of refined fuel in August, including gasoline and jet fuel from India, South Korea and Malaysia. This reverses normal trade patterns and increases dependence on Asian counterparties, longer routes and politically exposed procurement channels.
Iran economy deteriorates sharply
Iran’s domestic operating environment is worsening under war and sanctions, with reported annual inflation at 88.6%, central-bank inflation running 53.9% in one recent period, IMF contraction forecasts of 5.4%–6%, and currency weakness undermining imports, payments, and commercial predictability.
FTA-led export market expansion
Recent official messaging repeatedly ties India’s export strategy to newly concluded trade agreements and broader market access. For firms in agriculture, food processing, manufacturing and services, this increases opportunities to diversify customers and reduce dependence on any single market.
US tariff enforcement pressure
Washington’s Section 301 actions and AI-based anti-transshipment crackdown are intensifying scrutiny of Vietnam-bound and Vietnam-origin exports, with reports citing Vietnam as a key routing hub and referencing 12.5% additional tariffs and potential 40% penalties on suspected transshipped goods.
Weak consumption clouds demand outlook
Japan’s household spending fell 3.3% year on year in June, the seventh straight decline, despite real wages rising 1.6%. Softer domestic demand, precautionary saving and higher food and energy costs may weaken sales expectations for consumer-facing and service-sector businesses.
Fragile Summit-Driven Trade Truce
Both sides are preserving dialogue ahead of Xi Jinping’s expected September US visit, but disputes over tariffs, human rights listings, robotics, and technology controls continue to simmer. Businesses should plan for temporary stabilization rather than durable resolution in bilateral commercial relations.
Tech Regulation Bilateral Irritant
U.S. concerns over South Korean regulation of American technology platforms, including scrutiny linked to Coupang and misinformation rules, have become a bilateral issue. Heightened regulatory friction may affect digital trade, platform compliance costs, foreign investor sentiment, and broader market-access negotiations.
India Minerals Corridor Expands
Australia’s critical-minerals role is broadening beyond the US, with Australia-India cooperation advancing due diligence on lithium and cobalt projects. This creates opportunities for diversified export corridors, downstream processing investment, and reduced concentration risk in Asian clean-tech supply chains.
Germany export markets rebalancing
Weakening sales to Germany’s two largest external markets are being partly offset by stronger Central and Eastern European demand. First-half exports fell 12.4% to China and 6.5% to the US, while shipments to Poland rose 9.2% and Czechia 14%.
Refining expansion cuts imports
Authorities are advancing six refinery projects worth more than $4 billion to raise domestic petroleum output and reduce fuel import costs. For international firms, this could reshape downstream opportunities, procurement patterns, and Egypt’s medium-term demand for imported refined products.
Investor confidence in energy
Officials say Egypt has cleared arrears owed to oil and gas partners, improving confidence in the sector’s payment environment. Combined with new exploration and infrastructure linkages, this may support upstream investment decisions, though security and geopolitical exposure remain elevated.
Regional integration still anchors operations
Despite tensions, recent analysis suggests a full USMCA rupture remains unlikely because North American production networks are deeply integrated. Mexico and Canada account for 51% of US vehicle imports and 58% of imported auto components, preserving incentives for pragmatic compromise and continuity planning.
Reglas de origen más estrictas
Estados Unidos impulsa elevar el contenido regional automotriz a 82% y exigir que 50% del valor sea específicamente estadounidense. Esto obligaría a rediseñar abastecimiento, desplazar proveedores mexicanos, elevar costos de producción y reorientar nuevas inversiones industriales hacia territorio estadounidense.
Strategic Commodity Exchange Emerges
The government plans to launch a Strategic Mineral and Commodity Exchange on 1 January 2027 under OJK oversight, covering exports such as nickel, coal and palm oil. This could reshape benchmark pricing, contract structures, trading transparency and hedging practices for global buyers.
Refinery damage reshapes fuel trade
Repeated Ukrainian attacks on Russian refineries have cut crude-processing rates and forced Russia to import nearly 270,000 metric tonnes of refined fuel from Asia in August, reversing normal trade patterns and tightening domestic export controls on gasoline, jet fuel and diesel.
Bureaucratic frictions still matter
Despite investment momentum, foreign businesses continue reporting bureaucratic hurdles and uncertainty in dealings with tax authorities. These operational frictions can delay projects, complicate compliance and raise execution risk, especially for manufacturers scaling quickly in response to global supply-chain diversification trends.
Trade Diplomacy and Ceasefire Uncertainty
Turkey has proposed a moratorium on attacks against cargo ships, while Ukraine has floated a truce on civilian Black Sea targets and accepted limits around CPC-linked infrastructure. Businesses should expect continued volatility until maritime de-escalation mechanisms become credible and enforceable.
Transshipment Crackdown Reshapes Trade
The White House says Chinese exporters use more than 40 countries to reroute goods, with estimated annual transshipment values of $40-303 billion. New AI-based border enforcement could disrupt China+1 strategies, tighten origin checks, and expose multinationals to retroactive duties and penalties.
War spending crowds investment
Israel approved an additional 1 billion shekels for urgent arms purchases, lifting the defense budget to about 184 billion shekels, or $61 billion. Finance officials warned this could require higher taxes and cuts to civilian spending, constraining investment conditions.
China-Japan dialogue remains fragile
Japanese lawmakers’ planned Beijing visit and China’s approval of a new Chongqing envoy suggest crisis-management efforts, not normalization. Commercial channels may reopen selectively, but persistent tensions over Taiwan, export controls and detentions mean investors should expect unstable regulatory and diplomatic conditions.