Mission Grey Daily Brief - November 18, 2024

Summary of the Global Situation for Businesses and Investors

The G20 summit in Brazil is overshadowed by two major wars and Donald Trump's recent election victory. Heightened global tensions and uncertainty about an incoming Trump administration have tempered any expectations for a strongly worded statement addressing the conflicts in the Middle East and between Russia and Ukraine. Experts instead anticipate a final document focused on social issues like the eradication of hunger — one of Brazil's priorities — even if it aims to include at least a mention of the ongoing wars.

Typhoons in the Philippines have caused tidal surges and displaced massive numbers of people.

Geopolitical tensions simmer as Cop29 heads into its second week in Baku, Azerbaijan. Climate advocates are urging world leaders to commit to a strong finance deal.

Japan and Ukraine have signed a security info-sharing pact to boost cooperation.

Russia-Ukraine War

The Russia-Ukraine war has dragged past its thousandth day, with hundreds of missiles and drones streaking across Kyiv's skies, killing at least two people, leaving a dozen more injured, and damaging the country's already beleaguered energy grid. Russia's relentless aerial bombardment has destroyed half of Ukraine's energy production capacity, according to President Volodymyr Zelensky.

With the harsh Ukrainian winter fast approaching, the country is already suffering from major energy shortfalls, while its outmanned and outgunned forces have been steadily ceding ground to the Kremlin's troops for weeks. Kyiv has implored its Western allies for help to rebuild its energy grid — a hugely expensive undertaking — and to supply its outgunned forces with more aerial defence weapons.

Many in Ukraine fear that Western help will not be as freely given following the imminent return of Trump to the White House in January. The Republican president-elect has frequently questioned the United States' backing for Ukraine, and campaigned with the promise of cutting a quick deal to end the war.

Joe Biden has authorised Ukraine’s use of long-range missiles to strike hundreds of miles inside Russia for the first time, according to reports. The decision marks a major policy shift and comes after Russia warned that Moscow would see the move to allow the use of US-made missiles as an “escalation.” With Biden leaving office in two months, president-elect Donald Trump has indicated he will limit American support for Ukraine and pledged to end the war quickly once he takes office in January.

Ukrainian President Volodymyr Zelensky has campaigned for months to allow Ukraine’s military to use US weapons to hit Russian military targets far from its border, and retains important allies in both parties in Congress. He said Sunday evening that the strikes, if carried out, would "speak for themselves." But he did not confirm the authorization directly.

The Kremlin has said that if the United States allowed Ukraine to use US-made weapons to strike far into Russia, it would lead to a rise in tension and deepen the involvement of the United States in the conflict.

North Korea's Involvement in the Russia-Ukraine War

North Korea may end up sending Putin 100,000 troops for his war, according to people familiar with assessments made by some Group of 20 nations. The analysis is one of several on the evolving partnership between Russian President Vladimir Putin and North Korean leader Kim Jong Un, said the people, speaking on condition of anonymity to talk about private discussions. They stressed that such a move wasn’t imminent and that military support at that scale — if it occurred — would likely happen in batches with troops rotating over time rather than in a single deployment.

Ukraine’s ambassador to South Korea made a similar assessment earlier this month. Dmytro Ponomarenko said in an interview with VOA that Kyiv expected up to 15,000 North Korean troops deployed to fight in Russia’s Kursk region – and possibly in occupied areas of eastern Ukraine – to rotate every few months.

Kim’s decision to send North Korean troops to join Russia’s fight against Ukraine has alarmed Kyiv’s allies, who’ve warned that it risks exacerbating what is already Europe’s largest conflict since World War II. They believe the deepening cooperation between Putin and Kim could also impact the security balance in the Indo-Pacific region, where there’s mounting rivalry between China and the US.

The issue will be raised by several allies at the G-20 Summit in Brazil this week including by German Chancellor Olaf Scholz when he meets Chinese President Xi Jinping, Bloomberg previously reported. Scholz told Putin Friday in a rare phone call that the deployment of North Korean troops was a “grave escalation” of the war against Ukraine.

Scholz will press the Chinese leader at their meeting in Rio on Tuesday to use his influence over Russia and North Korea to avoid further escalation in the war, according to German officials.

The North Korean deployment shows the war is becoming globalized and Scholz and Xi will need to discuss this new dimension of the conflict, the officials said.

Worries were also raised by allies at the APEC gathering in Lima, Peru, this past week, another person said.

Xi has been the biggest benefactor to Putin and Kim in recent years, and sees both leaders as partners in pushing against the US-led world order. But his government has remained silent publicly on the dispatch of North Korean troops to Russia — a sign the Chinese president may be unhappy with the arrangement.

The Kim-Putin partnership risks adding economic pressure on China, just as Xi is bracing for potential disruption from tariffs threatened by US President-elect Donald Trump when he returns to the White House. It also undermines Beijing’s argument that the US shouldn’t have military alliances in the Indo-Pacific region.

China doesn’t “allow conflict and turmoil to happen on the Korean Peninsula” and it won’t “sit idly by when its strategic security and core interests are under threat,” Xi told US President Joe Biden at talks Saturday on the sidelines of the Asia-Pacific Economic Cooperation summit in Lima.

North Korea has so far sent more than 10,000 troops to fight alongside Putin’s army in Russia’s Kursk region, where Ukrainian forces have occupied part of the border territory since a surprise incursion in August. In return, Russia is providing money and helping North Korea increase its capabilities.

South Korea has said there’s a “high chance” that North Korea will seek cutting-edge technology transfers from Russia — including technology related to tactical nuclear weapons, intercontinental ballistic missiles, reconnaissance satellites and ballistic missile submarines.

As well as manpower, North Korea has also sent millions of rounds of artillery ammunition and other weapons to Russia. The Financial Times reported this week, citing Ukrainian intelligence, that Pyongyang has supplied long-range rocket and artillery systems to Russia.

US-China Relations

China’s leader Xi Jinping met for the last time with President Biden on Saturday, but was already looking ahead to President-elect Donald Trump and his "America first" policies, saying Beijing "is ready to work with a new U.S. administration."

During their talks on the sidelines of the annual Asia-Pacific Economic Cooperation summit in Peru, Xi cautioned that a stable China-U.S. relationship was critical not only to the two nations but to the "future and destiny of humanity."

Without mentioning Trump’s name, Xi appeared to signal his concern that the incoming president’s protectionist rhetoric on the campaign trail could send the U.S.-China relationship into another valley.

"China is ready to work with a new U.S. administration to maintain communication, expand cooperation and manage differences so as to strive for a steady transition of the China-U.S. relationship for the benefit of the two peoples," Xi said through an interpreter.

Xi, who is firmly entrenched atop China’s political hierarchy, spoke forcefully in his brief remarks before reporters. Biden, who is winding down more than 50 years of public service, talked in broader brushstrokes about where the relationship between the two countries has gone.

He reflected not just on the past four years but on the decades the two have known each other.

"We haven’t always agreed, but our conversations have always been candid and always been frank. We’ve never kidded one another," Biden said. "These conversations prevent miscalculations, and they ensure the competition between our two countries will not veer into conflict."

Biden urged Xi to dissuade North Korea from further deepening its support for Russia’s war on Ukraine. The leaders, with top aides surrounding them, gathered around a long rectangle of tables in an expansive conference room at a Lima hotel.

They had much to discuss, including China’s indirect support for Russia, human rights issues, technology and Taiwan, the self-ruled democracy that Beijing claims as its own. On artificial intelligence, the two agreed on the need to maintain human control over the decision to use nuclear weapons and more broadly improve safety and international cooperation of the rapidly expanding technology.

There’s much uncertainty about what lies ahead in the U.S.-China relationship under Trump, who campaigned promising to levy 60% tariffs on Chinese imports.

Already, many American companies, including Nike and eyewear retailer Warby Parker, have been diversifying their sourcing away from China. Shoe brand Steve Madden says it plans to cut imports from China by as much as 45% next year.

In a congratulatory message to Trump after his victory over Vice President Kamala Harris, Xi called for the U.S. and China to manage their differences and get along in a new era. In front of cameras Saturday, Xi spoke to Biden — but it was unmistakable that his message was directed at Trump.

"In a major flourishing sci-tech revolution, neither decoupling nor supply chain disruption is a solution," Xi said. "Only mutual, beneficial cooperation can lead to common development. ‘Small yard, high fence’ is not what a major country should pursue."

Biden administration officials have said they would advise the Trump team that managing the intense competition with Beijing will likely be the most significant foreign policy challenge they will face.

On Saturday, White House national security adviser Jake Sullivan said Biden had reinforced to Xi "that these next two months are a time of transition" and that the president would like to pass off the U.S.-China relationship "in stable terms" to the new administration.

Biden has viewed his relationship with Xi as among the most consequential on the international stage and put much effort into cultivating it.

Trump's "America First" Policy

Trump's "America First" policy could shift the Horn of Africa policy and shake up Mideast diplomacy on Iran.

Trump's recent election victory and the imminent return of an America First doctrine may also hamper the diplomatic spirit needed for broad agreement on divisive issues at the G20 summit in Brazil.<co: 11>G20 summit in Brazil.</

Themes around the World:

Technological Innovation and Digital Economy

The UK is investing heavily in digital infrastructure and innovation, fostering growth in fintech and AI sectors. This focus attracts foreign investment but requires businesses to adapt rapidly to technological advancements and cybersecurity demands.

Japan’s Economic Contraction and Inflation

Japan's economy contracted by 1.8% annualized in Q3 2025 amid sticky inflation, sluggish consumer spending, and external demand weakness. Persistent inflation above the Bank of Japan’s target complicates monetary policy, while structural challenges like labor shortages and technological competitiveness erosion weigh on sustainable growth and investment climate.

Technology and Semiconductor Investments

Significant federal funding and private sector investments target domestic semiconductor production to mitigate chip shortages. This bolsters technological sovereignty, impacts global tech supply chains, and influences competitive positioning in high-tech industries worldwide.

Energy and Major Infrastructure Projects

Canada is accelerating major energy and infrastructure projects, including LNG expansions, nuclear developments, and critical mineral mining. However, political, regulatory, and Indigenous opposition, especially in British Columbia, pose significant challenges. These projects are vital for Canada’s economic future and supply chain control but face delays and capital constraints, affecting international trade and investment timelines.

Labor Market Dynamics and Workforce Shortages

Tight labor markets with skill shortages drive wage inflation and operational challenges. Businesses must adapt through automation, training programs, and immigration policies, influencing productivity and cost structures across sectors.

Technological Innovation and Digitalization

Saudi Arabia is investing heavily in digital infrastructure and smart city technologies. This digital transformation enhances business operations, supply chain transparency, and opens opportunities for tech-driven investments and partnerships.

Robust Economic Growth Outlook

India is projected to lead emerging markets with a GDP growth of 7% in 2025, driven by strong domestic demand and resilience amid global uncertainties. This growth underpins investor confidence, supports corporate earnings, and enhances India's attractiveness for foreign direct investment, bolstering its position as a key player in global trade and investment strategies.

Cross-Strait Political Tensions

Ongoing political tensions between Taiwan and China pose significant risks to international trade and investment. Heightened military activities and diplomatic strains could disrupt supply chains, increase operational costs, and deter foreign investment, necessitating strategic risk mitigation for businesses engaged with Taiwan.

Record Foreign Direct Investment Inflows

Mexico recorded a historic 15% increase in FDI in Q3 2025, reaching nearly US$41 billion. Investments focus on energy, data, construction, and financial sectors, signaling strong international confidence. The US remains the largest investor, followed by Spain, the Netherlands, Japan, and Canada. This trend supports economic growth despite domestic challenges and geopolitical uncertainties.

Export Contraction and Trade Surplus Narrowing

Indonesia's exports fell 2.31% year-on-year in October 2025 due to weakening demand from China and falling commodity prices, notably in mining shipments. This caused the trade surplus to narrow sharply to $2.4 billion. Despite this, Indonesia has maintained a trade surplus for 66 consecutive months, supported by sustained demand for palm oil, coal, and gold.

Energy Security and Transition

Japan's energy policy is shifting towards renewable sources amid concerns over energy security and climate commitments. This transition affects industries reliant on traditional energy imports and opens opportunities for investment in green technologies and infrastructure.

Regulatory Environment and Business Reforms

Recent reforms aimed at improving the regulatory framework and ease of doing business in Israel enhance investor confidence. Streamlined procedures, tax incentives, and improved corporate governance standards positively affect foreign investment and operational efficiency.

Fiscal and Labor Challenges for 2026

Coparmex and analysts highlight fiscal pressures from increased special taxes (IEPS) and limited public health funding, which may hinder regional economic progress. Labor reforms, including potential workweek reductions and increased vacation benefits, require careful compliance monitoring. Despite slow economic growth, Mexico's favorable trade position with the US offers opportunities to strengthen domestic industry and adapt to global financial shifts.

Automotive Sector Transformation

Germany's automotive industry is undergoing a significant shift towards electric vehicles and autonomous technologies. This transformation affects supplier networks, export patterns, and investment flows, with implications for global supply chains and competitive positioning in emerging mobility markets.

Post-Brexit Trade Adjustments

The United Kingdom continues to navigate complex trade realignments following Brexit, impacting customs procedures, tariffs, and regulatory standards. These changes affect supply chains and investment flows, necessitating strategic adjustments by multinational corporations to mitigate disruptions and capitalize on new trade agreements.

Sanctions and Regulatory Environment

International sanctions targeting Russia and entities linked to the conflict affect trade flows and financial transactions involving Ukraine. Businesses must navigate complex regulatory frameworks, impacting cross-border investments and necessitating enhanced compliance measures to mitigate legal and reputational risks.

Strategic India-Russia Economic Ties

Putin's visit highlights India's strategic focus on risk management, secure supply chains, and energy cooperation with Russia. Potential expansion includes joint defense production and alternative payment systems, which could reshape regional economic linkages but may provoke Western geopolitical responses, impacting trade security and investment flows.

China-Japan Diplomatic Tensions

Prime Minister Takaichi's remarks on Taiwan have escalated diplomatic tensions with China, leading to economic retaliation such as travel advisories and import restrictions. This has caused significant volatility in Japan's financial markets, particularly impacting tourism, retail, and consumer sectors, with potential long-term damage to bilateral trade and investment flows.

Financial Market Volatility and Risk Sentiment

US and global markets experienced heightened volatility in late 2025, influenced by hawkish Federal Reserve signals, disappointing tech sector performance, and geopolitical uncertainties. Risk appetite fluctuated, with equities and cryptocurrencies under pressure while safe-haven assets like gold showed mixed behavior. These dynamics affect capital flows, investment timing, and supply chain financing globally.

Oil and Energy Sector Dynamics

Iran's vast oil and gas reserves are central to its economy, but production and export capabilities are hindered by sanctions and infrastructure challenges. Fluctuations in global energy markets and OPEC decisions directly impact Iran's revenue streams and investment attractiveness in the energy sector.

Currency Volatility Risks

In Turkey, currency exchange rate fluctuations are the foremost risk for businesses, causing significant financial strain. With a 73.3% impact on companies, this volatility affects operational costs, investment decisions, and profitability, necessitating robust risk management strategies to mitigate exposure and maintain competitiveness in international trade and investment.

IMF-Backed Economic Reforms and Funding

Egypt advances reforms to liberalize exchange rates, control inflation, and privatize state enterprises, supported by an IMF mission unlocking $2.5 billion in funding. These reforms aim to boost private sector participation and fiscal discipline, enhancing macroeconomic resilience and attracting foreign direct investment.

Labor Market and Saudization Policies

Saudi Arabia's Saudization policies aim to increase local workforce participation, impacting labor costs and availability. Businesses must adjust human resource strategies to comply with localization requirements while maintaining operational efficiency.

Infrastructure and Logistics Enhancements

Investments in transportation, ports, and digital infrastructure improve Israel's connectivity and supply chain efficiency. Enhanced logistics capabilities reduce costs and delivery times, benefiting exporters and importers alike.

Logistics and Warehousing Market Growth

Egypt's logistics and warehousing sector surpassed USD 13 billion, fueled by infrastructure investments in the Suez Canal Economic Zone, free zones expansion, and e-commerce growth. The sector's modernization supports Egypt's emergence as a strategic logistics hub connecting Asia, Europe, and Africa, enhancing supply chain efficiency and attracting foreign direct investment.

Russia's Yuan-Denominated Bond Issuance

Russia is preparing to issue its first yuan-denominated sovereign bonds, reflecting a strategic pivot towards China amid Western sanctions. This move supports China's ambition to internationalize the yuan and signals a structural shift in Russia's financing away from dollar and euro dependence, impacting global currency dynamics and investment flows.

Inflation and Livelihood Pressures

Food inflation in Iran has soared by over 66%, with staples like bread and fruits experiencing even higher increases. Rising costs strain household budgets, deepen economic anxiety, and challenge social stability, while government efforts to manage energy consumption and subsidies seek to mitigate impacts.

Monetary Policy and Yen Depreciation Risks

The Bank of Japan faces complex policy decisions amid inflation and market pressures, with debates over interest rate hikes complicated by fiscal stimulus plans. Yen depreciation to historic lows against major currencies raises concerns about currency volatility, import costs, and investor confidence, influencing foreign exchange strategies and international trade competitiveness.

Public Perception of US Influence

Australian public opinion shows increased concern over US interference, reflecting a nuanced view of alliance dynamics amid geopolitical tensions. This shift influences political and economic policy considerations, including defense spending and foreign investment controls, affecting Australia's strategic positioning and trade relationships in a complex international environment.

US-China Trade Relations

Ongoing tensions between the US and China continue to influence tariffs, supply chain decisions, and investment flows. Businesses face uncertainty due to potential policy shifts, impacting sectors like technology and manufacturing, and prompting diversification of supply chains away from China.

Financial Market Volatility and Equity Performance

Despite global emerging market rallies, Turkey’s equity markets underperformed, with the BIST 100 index experiencing volatility and negative divergence. Investor uncertainty, regulatory expectations, and geopolitical developments contribute to market fragility, influencing capital flows and investment strategies in the Turkish financial sector.

Geopolitical Tensions Impact

Rising geopolitical tensions, especially with Russia and China, affect Germany's trade relations and energy imports. Sanctions and trade restrictions create uncertainties for businesses, necessitating risk assessments and adjustments in supply chain and market access strategies.

US-Taiwan Trade and Defense Pressures

The US demands Taiwan relocate 50% of semiconductor manufacturing to the US and increase defense spending to as much as 10% of GDP, while imposing tariffs on Taiwanese imports. Taiwan resists these demands due to operational and economic constraints, creating complex diplomatic and economic tensions impacting trade and investment strategies.

Geopolitical Tensions and Security Measures

Heightened geopolitical tensions, particularly with China and Russia, lead to increased security measures and scrutiny of foreign investments. These developments affect cross-border capital flows, joint ventures, and the stability of global supply networks.

Geopolitical Relations and Trade Partnerships

The UK is actively pursuing new trade agreements beyond the EU, including with the US, Commonwealth countries, and Asia-Pacific regions. These efforts aim to diversify trade partnerships, reduce dependency risks, and open new markets, shaping long-term investment and supply chain strategies.

Severe Flooding Disrupts Supply Chains

Record floods in southern Thailand, especially in Hat Yai and Songkhla, have paralyzed key tech and automotive parts hubs, disrupting exports and logistics. Estimated damages exceed 500 billion baht, threatening Thailand’s reliability as a regional supply chain hub and risking permanent shifts of buyers to competitors like Vietnam and Indonesia.