Green Energy Transition and Overcapacity

China leads in renewable energy, installing over half the world’s new wind and solar capacity. Policy shifts, including cuts to export tax rebates for batteries and solar, aim to curb overcapacity and align with global climate goals, but also reshape trade dynamics and supply chains.

Strategic Supply Chain Realignment

US efforts to reduce reliance on China for critical minerals and advanced manufacturing have accelerated. Initiatives with allies aim to diversify sourcing, but supply chain resilience remains challenged by geopolitical tensions and resource nationalism.

Currency Volatility and Capital Outflows

The South Korean won has weakened to levels not seen since the global financial crisis, partly due to the looming $350 billion investment outflow. This volatility raises financial risks for international investors and complicates funding for large-scale projects and trade settlements.

Infrastructure Safety and Regulatory Scrutiny

Recent fatal construction accidents have led to the suspension of major infrastructure projects and stricter government oversight. Enhanced safety standards and contractor accountability are now central, potentially causing project delays and raising operational risks for investors.

Defense Sector Expansion and Privatization

Israel’s defense industry is expanding internationally, with IPOs of key firms like IAI and increased exports to Europe amid heightened demand. Privatization and global partnerships enhance competitiveness, but regulatory and labor hurdles, as well as security considerations, shape the sector’s trajectory.

US-France Trade War Escalation

Tensions between France and the US have escalated, with threats of 200% tariffs on French wine and champagne over political disputes, notably Greenland and Gaza. Such measures threaten billions in exports, disrupt transatlantic supply chains, and increase uncertainty for investors and multinationals.

Strategic Shift Toward India and Indo-Pacific

Germany is deepening economic, technological, and defense ties with India, positioning the Indo-Pacific as a core region for diversification. The India-EU Free Trade Agreement, expanded mobility, and joint ventures in green energy and semiconductors are set to reshape supply chains and investment flows.

Labor Shortages Drive Immigration Policy Shifts

Persistent skilled labor shortages are prompting Germany to expand ethical pathways for foreign workers, notably from India. This trend is vital for modular sector growth, affecting project delivery, wage structures, and operational scalability for international investors.

Sustainability and Environmental Policy Challenges

Indonesia faces mounting criticism over deforestation, land conversion, and large concessions, which increase disaster risks and threaten long-term sustainability. Environmental management and regulatory enforcement are under scrutiny, affecting international partnerships and compliance with global ESG standards.

EU Customs Union Modernization Urgency

Turkey faces mounting pressure to modernize its Customs Union with the EU as new EU trade deals with India and MERCOSUR threaten to erode Turkey's competitive position. Outdated agreements expose Turkish exporters to increased competition and regulatory barriers, impacting trade flows and investment decisions.

Accelerating Supply Chain Diversification

Vietnam is rapidly emerging as a preferred hub for high-value electronics manufacturing, with global firms like Google and Apple relocating advanced production and engineering processes from China. This shift is driven by geopolitical tensions, U.S. tariffs, and the need for resilient, independent supply chains, positioning Vietnam at the center of global value chains.

Compliance Costs and ESG Barriers in EU Trade

While the EU FTA offers tariff-free access, Indian exporters face high compliance costs from the EU’s carbon border tax and ESG standards. These non-tariff barriers could offset gains, especially for steel, aluminum, and emission-intensive sectors, requiring strategic adaptation by businesses.

Export Controls and Technology Sanctions

US-led export controls on advanced chips and technology, especially targeting China, place Taiwan at the heart of global supply chain tensions. Compliance risks, supply bottlenecks, and retaliatory measures from China complicate operations for multinationals relying on Taiwanese tech.

Energy Security and Nuclear Revival

Japan has restarted the Kashiwazaki-Kariwa nuclear plant, boosting energy self-sufficiency and emissions targets. This move, amid regional security tensions, signals a shift toward stable domestic energy sources and reduced reliance on fossil fuel imports, affecting industrial competitiveness.

Resilient Political and Regulatory Environment

Vietnam’s political stability, reinforced by recent leadership consolidation, underpins its appeal as a business destination. Ongoing regulatory reforms focus on transparency, anti-corruption, and legal discipline, fostering greater predictability and confidence for international investors.

Electric Vehicle Market Disruption

Reduced tariffs allow up to 49,000 Chinese EVs annually into Canada at 6.1%, boosting affordable options and competition. This move could reshape the auto sector, attract Chinese investment, and challenge domestic manufacturers, while provoking US concerns over supply chain security and market share.

Nearshoring Drives Manufacturing Boom

Nearshoring continues to transform Mexico’s industrial landscape, with high-tech exports from states like Jalisco growing 89% annually. Companies leverage Mexico’s proximity to the US, skilled labor, and USMCA benefits, making it a global hub for electronics, automotive, and AI hardware supply chains.

Critical Minerals Supply Chain Security

France is intensifying international cooperation to diversify and secure critical minerals supply chains for EV batteries, reducing reliance on China. This strategic shift is crucial for trade, investment, and the resilience of EV battery second-life operations.

Shifting Global Trade Power Dynamics

China’s record $1.19 trillion trade surplus in 2025, driven by exports to Africa, Southeast Asia, and Latin America, signals a shift in global trade power. The US faces challenges to its traditional dominance, impacting investment strategies and market access for multinationals.

Deteriorating Investment Climate and Human Rights Concerns

Widespread repression, mass casualties, and international condemnation have further eroded Iran’s investment climate. Heightened scrutiny over human rights abuses and governance failures increases reputational and regulatory risks for foreign investors and partners.

Diversification of Trade Partnerships

With strained US and EU relations, South Africa is strengthening ties with the UAE, China, and other Asian markets. This diversification supports investment in renewable energy, AI, and manufacturing, but also exposes the country to new geopolitical and compliance risks.

Strengthened Strategic Partnerships and Trade Alliances

Japan is deepening economic and security ties with partners such as the EU, India, and Italy, focusing on critical minerals, technology, and defense. These alliances support resilient supply chains, market access, and shared innovation, reinforcing Japan’s role as a stable anchor in the Indo-Pacific and global economy.

Energy Revenue Decline Strains Budget

Russia’s oil and gas revenues fell 24% in 2025, hitting a five-year low and driving a record budget deficit of 2.6% of GDP. Lower prices, sanctions, and Ukrainian attacks undermine fiscal stability, pressuring government spending and increasing economic uncertainty for investors.

Gaza Conflict Drives Regional Instability

The ongoing conflict in Gaza and Israel’s military operations have resulted in persistent regional instability, affecting supply chains, humanitarian access, and investor sentiment. Ceasefire agreements remain fragile, and reconstruction is tied to complex security and governance conditions, impacting trade and operations.

Foreign Investment Decline and Decoupling

Foreign direct investment in China fell 9.5% in 2025, with many investors shifting to emerging markets due to geopolitical tensions, economic slowdown, and concerns over regulatory unpredictability. This trend challenges China’s long-term growth and integration with global capital markets.

US-China Economic Competition Intensifies

US-China relations remain a dominant force in global economics, with ongoing tensions over technology, trade, and security. These dynamics influence market access, regulatory risk, and supply chain resilience for international businesses operating in or sourcing from both countries.

Privatization and Infrastructure Modernization

The government is advancing privatization of key assets, including airports and state enterprises, through transparent, open bidding. These efforts aim to improve operational efficiency, attract foreign investment, and modernize infrastructure, with significant interest from Gulf and Turkish investors.

Tariff Reductions and Trade Diversification

Taiwan secured a reduction of US tariffs to 15%, matching Japan and South Korea, in exchange for massive investments. This levels the playing field for Taiwanese exports, enhances competitiveness, and encourages diversification of trade partners amid shifting global alliances.

Energy Import Dependency and LNG Shift

Domestic gas production declines and regional supply disruptions forced Egypt to import a record 9 million metric tons of LNG in 2025. The country is transitioning from a gas exporter to a major importer, raising costs and energy security concerns.

Tariffs, Trade Tensions, and Supply Chain Realignment

The US continues to escalate tariffs, notably on South Korea, Taiwan, and Canada, as part of an 'America First' industrial policy. Recent deals require massive foreign investment in US manufacturing in exchange for tariff relief, with Taiwan and South Korea pledging over $600 billion. These policies are pressuring global supply chains to relocate to the US, but also driving allies and rivals to diversify away from American markets, increasing long-term uncertainty for international business operations.

Geopolitical Fragmentation and Business Uncertainty

US interventions abroad and retreat from multilateralism have contributed to a fragmented geoeconomic landscape. National security concerns, sanctions, and unpredictable policy shifts increase operational risks for international businesses, requiring adaptive strategies and robust risk management frameworks.

Australia–China Trade Tensions Escalate

Rising trade friction with China, including potential tariffs on steel and ongoing disputes over agricultural exports, threatens key sectors. Policy responses risk retaliation, supply chain disruptions, and market volatility, underscoring the need for diversification and robust risk management for international businesses.

Industrial Policy and Innovation Incentives

The Nova Indústria Brasil policy allocates R$300 billion in financing to boost industry, innovation, and exports, with a focus on green technologies and automotive efficiency. The government is also responding to industrial competitiveness challenges, especially in chemicals and fertilizers, with new fiscal incentives and regulatory reforms.

Critical Minerals and Geoeconomic Competition

Pakistan’s rare earth and mineral sector is attracting US and Chinese interest, but faces governance, certification, and processing challenges. Despite high-value deals, lack of infrastructure and provincial disputes limit immediate supply chain impact, making the sector more a geopolitical lever than a business engine.

America First and Investment Nationalism

The US is pursuing an 'America First' agenda, leveraging tariffs and investment controls to promote domestic industries and national security. This approach complicates relations with allies, influences defense procurement, and increases compliance burdens for multinational firms.

Labor Market Reforms and Corporate Impact

South Korea is enacting sweeping labor reforms to extend protections to up to 8.6 million freelancers and platform workers. While aiming to reduce inequality, these measures could increase compliance costs, heighten labor market rigidity, and accelerate automation in business operations.