USMCA Uncertainty and Trade Tensions

The upcoming review of the USMCA and threats of renegotiation or expiration by the US create uncertainty for Mexico’s trade stability, supply chains, and investment planning, with potential tariff hikes and regulatory changes impacting cross-border business operations.

Deepening Turkey–UK and EU Trade Relations

Turkey’s trade with the UK hit $24 billion, with ambitions for $40 billion. EU trade reached $233 billion. Ongoing negotiations to expand free trade agreements into services and investment are set to further integrate Turkey into European supply chains.

Intensified Technology Export Controls

China is strengthening legal frameworks and oversight on technology exports, particularly in AI, semiconductors, and rare metals. Tighter reviews and restrictions on foreign acquisitions and technology transfers reflect Beijing’s focus on national security and self-reliance, impacting cross-border investment and innovation flows.

Supply Chain Realignment and Resilience

US tariffs and sanctions, combined with China’s export controls on critical minerals, are driving a global supply chain realignment. Southeast Asia, Africa, and Latin America are gaining sourcing share, while US firms face higher compliance costs, increased supply chain complexity, and the need for diversification.

Geopolitical Risks and Strategic Autonomy

Heightened US-China tensions and US assertiveness in Latin America create uncertainty for Brazil’s trade and investment environment. Brazil’s strategy of balancing relations with both powers, while leveraging its energy and mineral resources, is critical for business resilience.

Migration Pressures and Social Stability

Ongoing conflicts in Syria and the broader region drive significant migration into Turkey, straining public services and increasing social tensions. These pressures can affect labor markets, consumer demand, and operational risks for international businesses operating in Turkey.

Executive Recruitment and Skills Shortages

Intense competition for executive and specialized talent is driving up demand for recruitment consulting. Skill gaps, especially in AI and technology, are reshaping hiring strategies and affecting international business expansion and supply chain resilience.

Critical Minerals Access and Infrastructure Gaps

Greenland’s mineral wealth offers major supply chain opportunities, but extraction is hindered by lack of infrastructure and skilled labor. International investors face high entry barriers, regulatory uncertainty, and potential political disruption, impacting resource strategies and industrial planning.

Energy Infrastructure Under Persistent Attack

Russian missile strikes continue to target Ukraine’s energy grid, causing widespread power outages and threatening industrial operations. The instability in energy supply poses significant risks for manufacturing, logistics, and foreign investment in affected regions.

Dynamic Trade Policy and Export Incentives

Indonesia is leveraging trade agreements, such as the zero-tariff policy for tuna exports to Japan under IJEPA, to boost export competitiveness. Such policies open new market opportunities, particularly in key sectors like fisheries, and support diversification of export destinations.

CPTPP Accession and Trade Policy Shifts

South Korea is actively pursuing membership in the CPTPP to diversify trade and reduce reliance on China. Progress is hindered by Japan’s conditions, such as easing seafood import bans, reflecting the complex interplay of trade, public sentiment, and regional politics.

Shifting Geopolitical Alliances

Israel’s aggressive regional posture has led to increased isolation and shifting alliances, with Gulf states and Turkey recalibrating relations. This dynamic affects trade corridors, investment flows, and the predictability of Israel’s external business environment.

Sectoral Impact: Whisky, Manufacturing, and Finance

Key UK sectors such as Scotch whisky, manufacturing, and financial services face direct exposure to US tariffs. The whisky industry alone risks losses exceeding £600 million, while broader manufacturing and financial services could see reduced US market access and investment.

Escalating Taiwan Strait Tensions

China’s sanctions on U.S. defense firms and increased military drills near Taiwan, in response to the largest-ever U.S. arms sale to the island, have intensified geopolitical risks. This escalation threatens regional stability and global supply chain continuity, impacting cross-border investments.

Infrastructure Modernization and Urban Growth

Major cities like Hanoi and Ho Chi Minh City are investing in infrastructure, digital transformation, and sustainable urban development. Record FDI inflows and public investment disbursement support mega-projects, but land disputes, regulatory bottlenecks, and the need for fiscal discipline affect project execution and business environment stability.

Regional Geopolitical Instability Escalates

Saudi Arabia faces heightened geopolitical risks from escalating conflicts in Yemen and broader Middle East rivalries, notably with the UAE and Iran. These tensions threaten vital trade routes, energy infrastructure, and investor confidence, impacting cross-border operations and supply chains.

Critical Minerals Strategy Reshapes Trade

Australia’s $1.2 billion critical minerals reserve, focused on antimony, gallium, and rare earths, aims to reduce reliance on China and stabilize supply chains. This initiative underpins new trade agreements, attracts investment, and enhances Australia’s role in global technology and defense supply networks.

Structural Labor and Property Market Challenges

High household debt (86.8% of GDP), labor shortages, and a fragile property market with unsold stock and tight credit constrain domestic demand and business expansion. Government stimulus and reforms are needed to address these structural weaknesses and support sustainable growth.

Infrastructure and Logistics Bottlenecks

Despite reforms, South Africa’s infrastructure—particularly in electricity, rail, and ports—remains a constraint. Delays in logistics and persistent service failures disrupt supply chains, increase costs, and erode competitiveness, challenging companies reliant on efficient movement of goods.

AI Investment Boom and Tech Bubble Risks

Surging US investment in artificial intelligence has fueled stock market gains and productivity hopes. However, 57% of institutional investors now rank a potential tech bubble burst as the top risk for 2026, threatening asset prices and business strategies.

Polarization in Export Competitiveness

While semiconductors and automobiles drive export growth, sectors like steel and machinery face declining global competitiveness due to Chinese competition and EU carbon border measures. This polarization requires targeted innovation and adaptation strategies for affected industries.

Infrastructure Expansion Boosts Connectivity

Ongoing and planned infrastructure projects, including road and bridge construction, aim to reduce regional isolation and improve logistics. Enhanced connectivity is expected to facilitate efficient distribution, support rural economies, and attract investment in transport and supply chains.

Escalating Western Sanctions Pressure

Western sanctions on Russia, especially targeting energy, finance, and technology, have intensified in 2025-2026. These measures have led to a 24% drop in oil and gas revenues and a 35% weekly loss in oil export income, severely constraining Russia’s budget and global trade integration.

Chronic Economic Instability and Reform Imperative

Pakistan faces persistent economic instability, marked by declining foreign investment, high debt, and inflation. Structural reforms, improved governance, and policy consistency are urgently needed to restore investor confidence and enable sustainable growth, directly impacting international business strategies.

Belt and Road Initiative’s Strategic Pivot

In 2025, China signed a record $213.5 billion in new Belt and Road deals, focusing on energy, mining, and infrastructure, especially in Africa and Central Asia. The initiative now emphasizes both renewables and fossil fuels, raising both opportunity and ESG risk for global investors.

Accelerating Food Self-Sufficiency Policies

Indonesia has achieved rice self-sufficiency and halted rice and sugar imports for 2026, with surplus production and plans to export. This shift strengthens food security, impacts global commodity prices, and signals major changes for agribusiness supply chains.

US-Saudi Relations and Security Realignment

Saudi Arabia is recalibrating its security partnerships, balancing US ties with new regional alliances and arms deals with Pakistan. Diverging interests with Washington and assertive regional diplomacy reflect a more independent Saudi foreign policy, affecting the risk calculus for Western businesses.

Communications Blackouts and Information Risks

Iran has imposed nationwide internet and phone shutdowns, severely restricting information flow. These blackouts hinder business continuity, disrupt logistics, and complicate due diligence, heightening operational uncertainty for all international stakeholders.

Stagnant Growth and Deindustrialization Risks

Germany faces its third year of economic stagnation, with GDP declining by 0.2% in 2024. High taxes, energy costs, and regulatory burdens have triggered capital outflows and job losses, particularly in manufacturing, threatening Germany’s status as Europe’s industrial engine.

CPEC 2.0 and Strategic Connectivity

Pakistan and China agreed to upgrade the China-Pakistan Economic Corridor, focusing on industry, agriculture, mining, and infrastructure. While CPEC offers regional integration and supply chain opportunities, security concerns and policy continuity are critical for third-party participation and investment scalability.

Regional Energy Partnerships and Gas Hub Role

Egypt is leveraging its infrastructure to become a regional energy hub, signing supply and cooperation agreements with Israel, Cyprus, Qatar, and Syria. These partnerships support energy security, regional integration, and cross-border investment, but depend on stable infrastructure and geopolitical conditions.

US Tariffs and Trade Uncertainty

Ongoing US tariffs of up to 50% on Indian goods, linked to Russian oil imports and stalled trade negotiations, are disrupting exports—especially textiles, gems, and leather. This uncertainty pressures supply chains, currency stability, and investment planning, compelling Indian exporters to diversify markets and production bases.

Industrial Investment and Regional Modernization

Major investments in sectors like aerospace, steel, chemicals, and logistics—such as Airbus Helicopters’ €600 million modernization and Marcegaglia’s €750 million low-carbon steel plant—demonstrate France’s focus on industrial competitiveness, job creation, and sustainable development, shaping the long-term business environment.

Regulatory Instability and Economic Reforms

Iran’s government has responded to unrest by replacing the central bank governor and promising reforms. However, regulatory unpredictability, inflation, and currency collapse undermine investor confidence and complicate compliance for foreign businesses.

Infrastructure And Energy Sector Strains

Despite vast oil and gas reserves, Iran faces energy mismanagement, rolling blackouts, and water shortages. Infrastructure decay and unreliable utilities disrupt industrial operations, logistics, and supply chain reliability for domestic and foreign businesses.

Fiscal Policy, Debt, and Bond Market Concerns

Germany’s fiscal expansion—over €850 billion in new debt planned this decade—has raised the debt-to-GDP ratio toward 90%. Bond markets are signaling concern, with risk premiums on German Bunds rising and capital shifting to other EU countries, reflecting doubts about long-term fiscal sustainability.