Mission Grey Daily Brief - November 28, 2024
Summary of the Global Situation for Businesses and Investors
The global situation is marked by geopolitical tensions and economic challenges that could have significant implications for businesses and investors. Donald Trump's return to the White House is set to reshape global trade dynamics, with tariffs on China, Mexico, and Canada potentially disrupting supply chains and increasing costs for businesses and consumers. Meanwhile, the UAE's growing global influence poses challenges for Western countries, as it undermines sanctions against Russia and engages in a policy of adventurism in Africa and the Middle East. In East Asia, Taiwan's revised air raid alert system raises concerns about civilian safety amid escalating tensions with China. Lastly, Israel's recent military victory over Iran has shifted the geopolitical landscape in the Middle East.
Trump's Tariffs and Global Trade
Donald Trump's return to the White House is set to have a significant impact on global trade. Trump has threatened to impose tariffs on China, Mexico, and Canada, citing drug smuggling and illegal immigration as reasons. These tariffs could disrupt supply chains and increase costs for businesses and consumers. For instance, a 25% tariff on Canadian oil could significantly impact gas prices in the Great Lakes, Midwest, and Rockies regions. Similarly, a 25% tariff on Mexican goods, including agricultural products and vehicles, could lead to higher prices for American consumers.
Trump's threat of additional tariffs on Chinese goods over fentanyl flows has raised concerns about a potential trade war between the world's top two economies. Chinese state media has warned against using tariffs as a political tool, emphasizing the potential for mutual destruction. Economists have begun downgrading growth targets for China's economy in anticipation of further tariffs, and are warning Americans to prepare for higher living costs.
UAE's Growing Global Influence
The United Arab Emirates (UAE) is increasing its global influence, posing challenges for Western countries. On the one hand, the UAE is a vital Western ally, partnering with Israel and countering Chinese influence in Africa. It is also a major investor, with sovereign wealth funds directing over $110 billion to US and UK ventures, and a global force in renewable energy.
However, the UAE has undermined Western sanctions against Russia, indirectly supporting its war effort in Ukraine and providing diplomatic cover to Vladimir Putin. Additionally, the UAE has engaged in a policy of adventurism, arming warlords, supporting militias, and fuelling conflict in parts of Africa and the Middle East. This has led to accusations of violating arms embargoes, spreading instability, and contributing to humanitarian disasters.
Taiwan's Revised Air Raid Alert System
Taiwan has lowered the threshold to trigger air raid alarms in case of a Chinese incursion, raising concerns about civilian safety. The Taiwanese defence minister stated that the change was necessary due to repeated and escalating hostilities by China across the Taiwan Strait. However, there are fears that the revised system might leave citizens with less time to seek shelter during a conflict.
Taiwan has been issuing air raid alerts when Chinese military vessels or aircraft breach the 70 nautical miles limit of the Taiwanese coast. The threshold has been revised to 24 nautical miles, potentially reducing the time civilians have to react to a real threat. This adjustment is meant to better align Taiwan's defences with China's strategies, but it also highlights the escalating tensions in the region.
Israel's Military Victory Over Iran
In the Middle East, Israel's military has inflicted a significant defeat on Iran, approaching the magnitude of its 1967 Six Day War victory over Egypt, Syria, and Jordan. This shifts the geopolitical landscape in the region, as Iran's threat network, which included arming the Hezbollah militia in Lebanon with precision rockets, has been significantly weakened.
The defeat of Iran's threat network could have far-reaching implications for the Middle East and global security. It demonstrates Israel's military capabilities and shifts the balance of power in the region. However, it also raises questions about Iran's future actions and the potential for retaliation.
Further Reading:
Donovan’s Deep Dives: Taiwan’s fragile reliance on global supply chains - 台北時報
Kuwait Seeks to Offer Flexible Incentives to Attract Foreign Investments - Asharq Al-awsat - English
Opinion | Three Global Challenges That Will Shape Trump’s Legacy - The New York Times
Poland Arrests German Man Over Alleged Export of Dual-Use Technology to Russia - The Moscow Times
UAE’s growing global influence sets up challenges for the west - Tortoise Media
What could get more expensive if Trump launches a new trade war with Mexico and Canada - CNN
Themes around the World:
Financial Market Upgrades and Capital Flows
FTSE Russell’s upgrade of Vietnam to Secondary Emerging Market status in 2026 is expected to attract $3–8 billion in foreign investment. Stock market reforms, IPO surges, and improved legal frameworks are enhancing capital market depth, supporting business expansion and investor confidence.
Energy Transition and Pipeline Politics
Political and regulatory disputes over pipelines, LNG, and oil exports—especially to Asia-Pacific—are intensifying. Indigenous opposition, environmental concerns, and shifting U.S. energy policies complicate project approvals, affecting energy supply chains and long-term investment planning.
Digital Economy and Technology Adoption
Rapid digitalization and technology adoption across industries enhance operational capabilities and market reach. E-commerce growth and digital payment systems open new avenues for trade and investment, while also requiring cybersecurity vigilance.
Critical Minerals Supply Chain Security
Australia is rapidly developing a $1.2 billion strategic reserve for critical minerals such as rare earths, antimony, and gallium. This initiative aims to reduce reliance on China, attract investment, stabilize supply chains, and position Australia as a global leader in critical minerals for technology, defense, and clean energy.
Suez Canal Disruptions and Security
Geopolitical tensions and attacks in the Red Sea have led to a sharp decline in Suez Canal traffic, with tonnage operating at 70% below 2023 averages. This has increased shipping costs, rerouted global supply chains, and significantly reduced Egypt’s canal revenues.
Political Stability and Governance
Indonesia maintains relative political stability, but regional autonomy and local elections can introduce policy uncertainties. Political dynamics influence regulatory consistency and can impact long-term investment planning and risk assessments for international businesses.
Declining Export Competitiveness
Thailand’s export growth is increasingly reliant on imported inputs, particularly from China, while export quality and value-added remain stagnant. The strong baht and intensifying regional competition, notably in agri-food and manufacturing, erode Thailand’s trade advantages.
Supply Chain Resilience Efforts
US companies are increasingly focusing on supply chain resilience by reshoring manufacturing and diversifying suppliers. This shift aims to reduce dependency on vulnerable foreign sources, particularly in critical sectors like semiconductors and pharmaceuticals, impacting global production networks.
Labour Market Strains and Skills Shortages
Unemployment in the UK has risen to 5.1%, the highest in nearly a decade, with youth joblessness and skills gaps posing challenges for business operations. Companies must adapt workforce strategies to mitigate risks from AI adoption and demographic shifts.
Nuclear Program Developments
Iran's nuclear activities remain a focal point of geopolitical tension, influencing global diplomatic relations and economic sanctions. Escalations or negotiations around the nuclear program directly affect investor confidence and the stability of trade agreements involving Iran.
Defense Technology as Economic Anchor
Israel’s defense-tech sector has become a key diplomatic and economic asset, attracting major foreign investment and strategic partnerships, especially from Europe. This shift bolsters Israel’s global influence but also ties its economic resilience to the volatile defense sector.
Japan’s Military Buildup Spurs Controls
Japan’s increased defense spending and security policy reforms have prompted China’s export restrictions, raising business risks in sectors linked to defense and advanced manufacturing, and signaling a more volatile regulatory environment for foreign investors.
Supply Chain Disruptions
Sanctions and countermeasures have caused disruptions in supply chains, especially in technology and manufacturing sectors reliant on imported components. Companies face challenges in sourcing materials, leading to production delays and increased costs.
Escalating US-Mexico Security Tensions
Intensified US rhetoric and threats of military intervention against Mexican cartels have raised geopolitical risks, with Mexico firmly rejecting foreign involvement. These tensions could affect investor confidence, border operations, and bilateral cooperation on security and trade.
Trade Agreements and Regional Integration
Egypt's participation in trade agreements such as the African Continental Free Trade Area (AfCFTA) and bilateral deals expands market access and influences supply chain configurations. These agreements shape tariff structures and cross-border investment flows, impacting international trade strategies.
Supply Chain Resilience Efforts
In response to recent global disruptions, South Korean companies and government initiatives focus on enhancing supply chain resilience through diversification, localization, and digitalization. These efforts aim to reduce vulnerabilities, ensuring continuity in manufacturing and trade, thereby attracting foreign investors seeking stable operational environments.
Digital Economy and Innovation Ecosystem
South Korea's advanced digital infrastructure and innovation ecosystem foster growth in ICT, fintech, and e-commerce sectors. Government support for startups and technology adoption enhances competitiveness, attracting international partnerships and investment in high-tech industries.
Trade Policy and Tariff Changes
India's evolving trade policies, including tariff adjustments and import-export regulations, impact cost structures and market access. Businesses must monitor these changes to optimize sourcing, pricing, and compliance strategies.
Energy Security and Transition
Post-Fukushima energy policies emphasize diversification and renewable energy adoption, affecting industrial energy costs and infrastructure investments. Energy security concerns drive Japan to seek stable imports and develop sustainable energy technologies, impacting sectors reliant on energy-intensive processes.
Reshoring and Supply Chain Realignment
Driven by national security and tariff policy, the US is incentivizing reshoring and ‘friend-shoring’ of manufacturing. This has triggered global supply chain restructuring, with Southeast Asia and Mexico gaining, but also increased operational complexity and costs for multinational firms.
Energy Supply Constraints
Chronic energy shortages and infrastructure deficits hinder industrial productivity and increase operational costs. Energy insecurity affects manufacturing output and deters investment in energy-intensive sectors critical to Pakistan's export capabilities.
Regional Geopolitics Reshape Alliances
China’s trade actions test US support for Japan and seek to drive wedges between regional partners, notably South Korea. These dynamics influence trade policy, investment confidence, and the stability of multinational supply chains in East Asia.
Escalating US-China Trade Rivalry
The US-China economic relationship remains the most consequential global business risk, with ongoing tariffs, selective decoupling, and technology export controls. These measures disrupt supply chains, accelerate China’s tech self-sufficiency, and force multinationals to reassess market and sourcing strategies.
Semiconductor Industry Dynamics
South Korea's semiconductor sector remains critical globally, with investments in advanced chip manufacturing and R&D. However, supply chain disruptions and export controls from major economies affect production timelines and international partnerships, impacting global tech supply chains and investment decisions.
Fossil Fuel Expansion And Energy Policy
The Trump administration’s aggressive push for fossil fuels, including efforts to control Venezuela’s oil reserves and rollback of environmental regulations, signals a durable tilt against clean energy. This shift may hinder the US energy transition and cede global clean-tech leadership to China.
Technological Decoupling
Restrictions on technology transfer and access to Western technology have led Russia to pursue self-reliance. This decoupling affects sectors reliant on advanced technology, influencing investment strategies and collaboration opportunities for multinational corporations.
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.
Rising Non-Oil Private Sector Growth
Non-oil private sector activity continues to expand, supported by Vision 2030 reforms and strong domestic demand. The Riyad Bank PMI remains well above 50, with real GDP growth forecast at 4–4.6% in 2026, signaling robust opportunities for international investors in diversified sectors.
Currency Volatility
The South African Rand experiences significant volatility driven by domestic political developments and global market shifts. Currency fluctuations impact import costs, export competitiveness, and repatriation of profits, necessitating robust hedging strategies for international businesses.
Shifting Alliances and Defense Pacts
Turkey’s potential entry into a Saudi Arabia-Pakistan mutual defense pact and its balancing act between NATO, Russia, and regional actors reflect a fluid security environment. These shifts may affect foreign investment, technology partnerships, and supply chain security, especially in sensitive sectors.
Remote Work and Regulatory Evolution
Remote work is now a permanent fixture in South Korea, prompting new legal frameworks and compliance needs. Consulting demand is rising for digital transformation, cybersecurity, and cross-border HR solutions, directly affecting multinational operations and talent mobility.
Privatization and SOE Reform Acceleration
The government is fast-tracking privatization of loss-making state-owned enterprises, starting with a 75% stake in PIA and transferring PNSC to military-run NLC. These moves, driven by IMF requirements, aim to reduce fiscal burdens but raise questions about transparency and sectoral efficiency.
Sanctions Severely Disrupt Energy Revenues
Western and Ukrainian sanctions have driven Russian oil and gas revenues down by 35%, forcing deep discounts and rerouting through opaque channels. This undermines Russia’s fiscal stability and creates volatility for global energy markets and supply chains.
US-China Technology Rivalry
Ongoing U.S. export controls on advanced AI chips and China’s push for domestic alternatives have deepened the tech decoupling. This rivalry forces multinationals to reassess supply chains, R&D investments, and compliance strategies amid shifting rules and heightened IP protection risks.
Currency Volatility and Inflation
Iran faces high inflation and significant currency devaluation, undermining economic stability. This volatility complicates pricing, contract enforcement, and financial planning for foreign investors and multinational corporations, increasing the cost and risk of doing business in Iran.
Environmental Regulations and Sustainability
Increasing emphasis on environmental compliance and sustainable practices impacts manufacturing processes and supply chain management. Businesses must adapt to stricter regulations and growing consumer demand for sustainability, influencing investment decisions and operational strategies.