Mission Grey Daily Brief - November 22, 2024
Summary of the Global Situation for Businesses and Investors
The election of Donald Trump as President of the United States has caused uncertainty in Europe and China, with European officials expressing concern about the potential impact on the war in Ukraine and relations with China. In Ukraine, the injury of a North Korean general and the use of an intercontinental missile by Russia have raised tensions, while North Korea and Russia have strengthened their relationship with a tourism drive and missile exchange. Meanwhile, Türkiye's comms chief has called for global cooperation on energy geopolitics, and Vietnam's new digital regulations have raised concerns about the country's business environment.
Donald Trump's Election and its Impact on Europe and China
The election of Donald Trump as President of the United States has caused uncertainty in Europe and China. European officials have expressed concern about the potential impact on the war in Ukraine and relations with China. Trump has repeatedly stated that he could end the conflict in Ukraine in one day, which has prompted fears that he will push for concessions that favour Russian President Vladimir Putin. European leaders are divided on how to respond to the situation, with some criticising German Chancellor Olaf Scholz for calling Putin to negotiate and others suggesting that Europe should move closer to China. However, European officials have stated that they do not want to be dragged into the foreign policy towards China that the new American administration will be engaged in.
Ukraine
In Ukraine, the injury of a North Korean general and the use of an intercontinental missile by Russia have raised tensions in the Russia-Ukraine conflict. The North Korean general, Col Gen Kim Yong Bok, was injured in a Ukrainian strike in Russia's Kursk region, marking the first casualty of a senior North Korean military officer in the escalating conflict. The attack may have targeted a command post used by Russian and North Korean forces, and North Korean troops fighting in Ukraine have been declared fair game and targets by the Ukrainian military. The use of an intercontinental missile by Russia has raised concerns about the potential for a global war, with Poland warning that Russia may be trying to send a message to Ukraine's Western backers.
North Korea and Russia's Strengthened Relationship
North Korea and Russia have strengthened their relationship with a tourism drive and missile exchange. High-level talks in Pyongyang have resulted in an agreement to increase the number of charter flights between the two countries to promote tourism. Additionally, South Korea has stated that Russia supplied air defence missiles to North Korea in exchange for its troops, with North Korea potentially receiving between $320 million to $1.3 billion annually from Russia for sending its troops to Ukraine. This exchange of troops and missiles has raised concerns about the potential impact on the war in Ukraine and the broader geopolitical situation in the region.
Türkiye's Call for Global Cooperation on Energy Geopolitics
Türkiye's comms chief has called for global cooperation on energy geopolitics, highlighting the pivotal role of energy in global geopolitics and the need for international collaboration to tackle growing challenges. The communications director has emphasised the importance of energy in the struggle for global power and the need to address geopolitical crises, regional conflicts, climate change-induced natural disasters, and supply chain disruptions. He has stressed that energy should serve as a tool for regional and global cooperation, not conflict. This call for global cooperation has implications for businesses and investors in the energy sector, as well as those operating in regions affected by geopolitical tensions and energy-related challenges.
Vietnam's New Digital Regulations and their Impact on Business
Vietnam's new digital regulations, which require companies to verify the identities of users and share this information with authorities, have raised concerns about the country's business environment. The regulations echo a cyber identification scheme unveiled by Beijing earlier this year, which was met with international backlash over fears of government overreach, further surveillance, and the erosion of free speech. The regulations come at a precarious time for Vietnam's economy, as the country was seen as a major winner from former US president Donald Trump's trade war with China in his first term. However, success during Trump 2.0 is far from certain, as the president-elect has threatened much wider tariffs on goods from China and elsewhere. The tariffs could cut Vietnam's economic growth by up to 4 percentage points, dealing a devastating blow to the country's growth and potentially threatening business at an especially precarious time.
Further Reading:
5 things to know for Nov. 21: Gaetz report, Ukraine, Hostages, Google, Social media ban - CNN
China’s dystopian tech influence grows in Vietnam - 台北時報
North Korea and Russia expand relationship with tourism drive - The Independent
Trump's return may force Europe's hand on China and Ukraine - NBC News
Türkiye's comms chief urges global cooperation on energy geopolitics | Daily Sabah - Daily Sabah
Themes around the World:
Data Security and Cybersecurity Regulations
China’s stringent data security laws impose compliance burdens on foreign companies, affecting data transfer and storage practices. Non-compliance risks fines and operational restrictions, influencing investment decisions and IT infrastructure planning.
Labor Market Dynamics
A young and growing workforce presents opportunities for labor-intensive industries. However, skill mismatches and labor regulations pose challenges. Companies must navigate labor laws carefully to optimize operational efficiency and maintain compliance.
Infrastructure Development Initiatives
Large-scale infrastructure projects, including the Suez Canal expansion and new industrial zones, enhance Egypt's logistics capabilities and trade facilitation. Improved infrastructure attracts multinational corporations and supports Egypt's role as a regional trade hub, impacting global supply chain efficiency.
Currency Controls and Ruble Weakness
Reduced oil revenues and lower central bank FX sales are weakening the ruble. Currency controls and capital restrictions complicate cross-border transactions, profit repatriation, and risk management for foreign enterprises operating in Russia.
Energy Security and Diversification Efforts
Turkey's energy import dependency drives initiatives to diversify energy sources, including renewables and regional partnerships. Energy security concerns influence industrial costs and investment attractiveness, particularly for energy-intensive sectors and multinational firms seeking stable supply chains.
Sanctions, Compliance, and Regulatory Risk
US and EU sanctions related to defense procurement, financial transactions, and Turkey’s dealings with sanctioned states (e.g., Venezuela, Russia) create compliance challenges. Businesses must navigate evolving regulatory frameworks and potential secondary sanctions exposure.
US-EU Trade Frictions and Regulatory Clashes
The Turnberry Agreement set new tariff and investment terms, but implementation faces delays, digital regulation disputes, and Green Deal conflicts. Uncertainty over quotas, standards, and retaliatory measures complicates transatlantic business operations.
Energy Import and Infrastructure Risks
China's recent military exercises simulated blockades targeting Taiwan's ports and energy routes. With 96% of Taiwan's energy imported, any disruption could severely affect manufacturing, logistics, and business continuity, making energy security a key concern for international investors and supply chain managers.
Post-Brexit Trade Adjustments
The United Kingdom continues to navigate complex trade realignments post-Brexit, affecting customs procedures and regulatory standards. These changes introduce new barriers and opportunities in trade flows, impacting supply chain efficiency and investment decisions, particularly in sectors reliant on EU markets.
Labor Market Dynamics and Workforce Skills
Thailand faces challenges related to labor shortages and the need for upskilling amid technological advancements. These factors influence operational costs and productivity, affecting sectors like manufacturing and services that rely heavily on skilled labor.
Migration and Labor Market Effects
The Venezuelan diaspora in the US shapes labor market dynamics and consumer demographics. Migration trends influence workforce availability and create new market opportunities, affecting business strategies in sectors linked to Venezuela.
Australia-China Relations Remain Fragile
Despite recent improvements, Australia’s trade with China faces ongoing risks from sudden policy shifts, as seen with beef tariffs. Political tensions over security, Taiwan, and technology continue to threaten business predictability and investment confidence.
Regulatory and Policy Uncertainty
South Africa's evolving regulatory landscape, including changes in mining rights and land reform policies, introduces uncertainty for investors. Ambiguity around property rights and compliance requirements can delay projects and increase legal risks.
Agricultural Export Challenges
Ukraine, a major global grain exporter, faces logistical hurdles due to damaged infrastructure and blockades at Black Sea ports. These challenges threaten global food supply chains and impact revenues for agribusinesses and trading companies.
Supply Chain Vulnerabilities Persist
Despite export diversification, Korea’s heavy reliance on semiconductors and advanced tech exposes supply chains to shocks from global demand swings, trade frictions, and geopolitical tensions. Businesses must prioritize resilience and technology leadership to mitigate risks.
Geopolitical Relations and Trade Agreements
Indonesia's active participation in regional trade agreements like the RCEP enhances market access but also exposes domestic industries to increased competition. Geopolitical relations with major powers influence trade policies and investment flows, necessitating strategic geopolitical risk management.
Currency Volatility and Economic Pressures
Turkey faces persistent currency volatility and high living costs, challenging business planning and profitability. While public discontent remains muted, inflation and exchange rate fluctuations increase financial risk for international investors and complicate cross-border transactions.
Labor Market Dynamics
Taiwan's labor market, characterized by skilled workforce availability and wage trends, affects operational costs and productivity. Labor policies and demographic changes influence business strategies and investment attractiveness.
Strategic Realignment in Foreign Relations
Pakistan is balancing deepening ties with China, renewed US cooperation, and regional diplomacy. This multipolar approach is driving new trade and investment flows, but also exposes businesses to shifting geopolitical risks, sanctions exposure, and supply chain recalibration.
Regional Geopolitical Instability
Tensions in the Middle East, including conflicts involving Iran and neighboring countries, create an unpredictable security environment. This instability affects shipping routes, insurance costs, and the reliability of supply chains, posing significant risks for companies operating in or through the region.
Regulatory Complexity and Reform Pressures
Businesses face mounting regulatory and bureaucratic hurdles, with high labor and energy costs eroding competitiveness. Calls for urgent reforms—especially in tax, labor, and energy policy—are intensifying as Germany’s government struggles to deliver effective change, impacting investment decisions and operational planning.
Trade Policy Uncertainty and U.S. Tariffs
Recent U.S. tariffs have caused a 7.8% drop in German exports to the U.S., hitting automotive and industrial sectors hardest. Protectionist trends and global trade tensions undermine Germany’s export-driven growth, increasing risks for supply chains and international business strategies.
Digital Transformation and Innovation Ecosystem
Turkey is advancing in digital infrastructure and innovation, fostering startups and technology adoption. This trend offers opportunities for businesses to leverage digital tools for efficiency and market expansion but also demands adaptation to evolving cybersecurity and data regulations.
Geopolitical Security Concerns
US involvement in global security issues, including defense spending and alliances, affects geopolitical stability. These factors influence risk assessments for international investments and supply chain resilience.
Business Operations Face Regulatory Uncertainty
Vague wording in China’s export controls leaves Japanese and foreign firms exposed to unpredictable enforcement, complicating compliance, risk management, and long-term planning for international operations dependent on Japanese and Chinese inputs.
Supply Chain Adjustments and Resilience
Trade barriers, especially from China and the US, are forcing Brazilian exporters to adapt supply chains, diversify destinations, and invest in logistics. These adjustments are crucial for mitigating risks and maintaining competitiveness in global markets.
Indigenous Rights and Resource Development
Increasing recognition of Indigenous rights in Canada influences resource extraction projects and infrastructure development. Legal frameworks and consultations can delay or alter investments, affecting sectors like mining and forestry. Businesses need to engage proactively with Indigenous communities to mitigate risks and foster sustainable partnerships.
Trade Route Diversification Efforts
Ukraine is actively seeking to diversify trade routes away from Russia, including strengthening ties with the EU and developing alternative corridors. This shift impacts supply chain configurations and opens new markets for exporters and importers.
Trade Policy Shifts and Import Controls
France has suspended imports of certain South American products over banned substances, signaling stricter enforcement of EU standards. These measures reflect a broader trend toward protectionism and could impact global supply chains and trade agreements.
Geopolitical Stability and Regional Security
Tensions in the Middle East, including conflicts involving Yemen and Iran, pose risks to Saudi Arabia's security and trade routes. Geopolitical instability can disrupt supply chains and deter foreign direct investment due to heightened risk perceptions.
Labor Unrest and Strikes
Frequent labor strikes in key sectors such as mining, transportation, and manufacturing create significant operational disruptions. Labor disputes increase wage pressures and reduce productivity, impacting export volumes and investor confidence in South Africa's labor market stability.
Geopolitical Tensions with China
Vietnam's ongoing maritime disputes and border tensions with China pose significant risks to international trade routes and investment confidence. These tensions may disrupt supply chains, especially in manufacturing sectors reliant on stable regional security, potentially leading to increased costs and delays for global businesses operating in Vietnam.
Environmental and Sustainability Regulations
Increasing environmental standards and sustainability initiatives in Taiwan impact manufacturing practices and compliance costs. Businesses must adapt to these regulations, influencing operational strategies and international trade compliance.
Supply Chain Shifts and ‘China Plus One’
Vietnam benefits from supply chain diversification as firms relocate from China, boosting manufacturing and exports. However, dependence on Chinese inputs persists, and a potential US-China trade deal could reverse some gains, challenging Vietnam’s move up the value chain and long-term competitiveness.
Political Stability and Governance
Domestic political dynamics, including government policies and election cycles, impact investor confidence. Political stability is crucial for maintaining a predictable business environment; instability can lead to capital flight and reduced foreign investment.
Supply Chain Resilience and Diversification
Businesses in the UK are increasingly focusing on supply chain resilience by diversifying suppliers and nearshoring to mitigate disruptions from geopolitical risks and pandemic aftermath. This trend affects sourcing strategies, inventory management, and cost structures across industries.