Services Exports Outpace Goods

Goods exports remain weak amid softer rice shipments, flood-related agricultural losses, and moderate demand in major markets, while IT and services exports are expanding. Remittances rose 8.2% in July-March, supporting stability, but export concentration still limits broader trade resilience.

Border Connectivity With Bulgaria

Turkey and Bulgaria reaffirmed plans for a new border crossing north of Kapıkule, plus road, rail, and checkpoint expansion. With bilateral trade above €8.4 billion in 2025, upgraded crossings would reduce congestion, support Middle Corridor freight flows, and improve EU-facing supply-chain reliability.

Ceasefire diplomacy and reconstruction uncertainty

Mediated proposals on Hamas disarmament, phased Israeli withdrawal, and Gaza governance remain unresolved, delaying clarity on reconstruction, border arrangements, and aid access. For businesses, prolonged diplomatic uncertainty limits visibility on infrastructure rebuilding, donor flows, and future operating conditions near Gaza.

High rates and inflation persistence

Inflation expectations have climbed to 5.11%, above target, and the Selic at 14.5% may stay near 14% year-end. Elevated borrowing costs constrain credit, delay capex, pressure consumer demand, and increase hedging and working-capital burdens for multinationals.

US Tariff and Compliance Risks

Washington’s scrutiny of Vietnam’s US$123.5 billion 2025 trade surplus, transshipment controls, intellectual property enforcement and market access raises tariff and compliance risks for exporters, especially electronics, solar, steel and wood supply chains serving the US market.

Coalition Politics and Reform Uncertainty

Government of National Unity tensions and cabinet reshuffle pressures are complicating policy execution. Business faces slower reform delivery on infrastructure, agriculture and industry, while political fragmentation increases uncertainty around regulations, implementation timelines and public-sector accountability critical to investment decisions.

Electronics Localization Accelerates

India’s electronics manufacturing is moving from assembly toward domestic components and higher value addition. Industry output rose from Rs 2.6 trillion in FY15 to Rs 11.5 trillion in FY25, creating stronger import-substitution opportunities but also new compliance, partner-selection, and incentive-planning demands.

Winter Resilience Financing Gap

Kyiv’s €5.4 billion energy resilience plan faces a significant financing shortfall despite state allocations and earlier EU energy support of €3 billion. Delays in backup heat, water, and protection works could weaken industrial continuity and municipal service reliability this winter.

South China Sea Exposure Persists

Persistent friction in the South China Sea continues to influence shipping security, offshore energy and fisheries. Vietnam is expanding maritime capabilities and offshore ambitions, but Chinese pressure around contested waters still creates long-term uncertainty for logistics, insurance and marine investment planning.

Banking Access Still Constrained

Iran remains heavily restricted from global finance, with banks disconnected from SWIFT and tens of billions in overseas oil revenues frozen. Even with limited waivers, payment settlement, trade finance, dollar access, insurance, and repatriation channels remain unreliable for exporters, investors, and supply-chain operators.

Privatization And Market Openings

The government signalled renewed privatization of DISCOs, banks, airports and other state-linked assets, while highlighting more than 200 international companies in technology parks. This creates selective entry opportunities, but execution risk, regulatory delays and political contestation remain significant for investors.

Ports and logistics modernization delays

Port reform remains stalled after the government dropped a substitute bill, leaving labor rules unresolved and reducing chances of a vote this year. Meanwhile, selective investments continue, including a R$2 billion Suape terminal, but wider logistics efficiency gains remain uneven.

Tariff Uncertainty Still Lingers

Despite trade progress, India still faces uncertainty around evolving US tariff policy and Section 301 investigations tied to industrial capacity and labour practices. Exporters and investors should prepare for abrupt duty changes, compliance scrutiny, and margin pressure in globally integrated supply chains.

Red Sea shipping disruption

Houthi threats against Israel-linked vessels have renewed risks around the Red Sea and Bab el-Mandeb, a route previously carrying about $1 trillion in annual trade. Firms face longer rerouting, higher freight and war-risk premiums, and less predictable delivery schedules.

Thai-Cambodia Border and Maritime Tensions

Bangkok’s suspension of wider bilateral talks with Cambodia, continued border-gate closures, and UN-backed conciliation over a 26,000 sq km disputed Gulf area with energy stakes near $300 billion heighten logistics, labor mobility, security, and cross-border trade risks for regional operators.

Energy and Infrastructure Reliability

India’s growth story still depends on power, logistics, and industrial infrastructure resilience. Recent reporting links energy supply disruptions and higher fuel costs to external shocks, underlining operational risks for manufacturers, exporters, and foreign investors relying on just-in-time production networks.

USMCA review uncertainty escalates

Washington’s refusal to pre-renew USMCA before the 1 July milestone points to rolling annual reviews through 2036, extending uncertainty over roughly US$2 trillion in North American trade and delaying capital allocation, supplier commitments, and long-horizon manufacturing investments in Mexico.

Gaza ceasefire uncertainty

Negotiations over Gaza remain unresolved, with disputes over Hamas disarmament, Israeli troop withdrawal, policing, and reconstruction governance. This prolongs political uncertainty, slows normalization prospects, and sustains reputational, legal, and stakeholder pressures on foreign investors and multinational operators.

Chinese Industrial Hub Expansion

Egypt is emerging as an export-manufacturing platform, especially in the Suez Canal Economic Zone. Chinese tyre investments exceeded $3.5 billion in a year, while SCZone attracted $11.6 billion over three and a half years, reshaping supplier networks and competitive dynamics.

Rupee Flows Shape Financing

India’s external positioning and capital-flow sensitivity continue to matter for investors financing local operations or repatriating returns. Exchange-rate swings can affect import costs, hedging expenses, and asset valuations, especially for businesses with thin margins or significant foreign-currency obligations.

Black Sea and Export Logistics

Ukraine’s trade competitiveness still depends heavily on secure Black Sea shipping and alternative land corridors for grain, metals, and industrial goods. Maritime or border disruptions can quickly raise freight, delay deliveries, and alter sourcing decisions across regional food, manufacturing, and commodity markets.

War-Driven Fiscal Dependence

Ukraine’s economy remains heavily dependent on external financing as defense spending exceeds €80 billion in 2026. EU support loans and Facility disbursements sustain budget stability, but reform-linked civilian funding creates execution risk for investors and contractors.

Energy Policy Drives Market Influence

Saudi Arabia remains central to global oil pricing through OPEC+ coordination, including closer engagement with Russia as market structure shifts. This sustains the kingdom’s geopolitical weight, but businesses should watch volatility tied to sanctions, quotas, and divergent producer interests.

Regional war escalation risk

Renewed Israel-Iran strikes, Hezbollah friction and fragile ceasefire dynamics keep conflict risk elevated. Business exposure includes airspace interruptions, emergency operating restrictions, insurance cost increases, and heightened contingency planning needs for personnel, logistics, and cross-border commercial commitments.

Regulatory Retaliation Risk Increases

China is building a broader retaliation toolkit spanning export controls, procurement bans, investment restrictions and anti-coercion measures. This raises the probability that foreign firms become exposed to reciprocal action tied to geopolitical disputes, especially in strategic sectors such as technology, energy, aerospace and advanced manufacturing.

Won volatility and inflation

The won fell to its weakest level since 2009 amid Middle East tensions and U.S. rate expectations, prompting intervention plans. Currency weakness, inflation above 3 percent and import-cost pressures complicate pricing, hedging, treasury management and consumer-demand forecasting for international businesses.

Geopolitical Backing Boosts Stability

Egypt is attracting stronger strategic support from Europe and regional partners because of its location and mediation role. The EU approved another €20 million for maritime security, taking support since 2024 to €40 million, reinforcing Red Sea security and investor perceptions of state resilience.

Nearshoring Faces Infrastructure Bottlenecks

Mexico remains highly attractive for manufacturing and nearshoring, but infrastructure, energy, water, and logistics constraints are limiting expansion. Companies increasingly prefer established industrial parks over greenfield sites, indicating demand remains solid but execution risks could cap foreign direct investment and supply-chain relocation gains.

AI Power Demand Reshapes

Explosive data-center growth is straining U.S. electricity systems, especially in Texas and PJM markets, where regulators are reassessing who pays for generation and grid upgrades. Rising power costs, interconnection delays, and local opposition could affect industrial siting, cloud expansion, and operational reliability.

Rare Earths and Input Vulnerability

China-linked restrictions on rare earths and magnets are reinforcing US corporate concerns over critical mineral dependence. Many firms are scouting alternative suppliers, but substitution will take years, creating medium-term cost, procurement, and production risks across manufacturing and advanced technology sectors.

Customs Enforcement Burden Expands

A new executive order directs tighter customs enforcement against transshipment, undervaluation, forced-labor exposure, and importer-of-record abuse. Companies should expect higher bond requirements, expanded beneficial-ownership disclosures, more supply-chain documentation, and greater audit and penalty risks at the U.S. border.

IEU-CEPA Market Access Upside

Jakarta is pushing to finalize the Indonesia-EU trade agreement for entry into force on 1 January 2027. If concluded, it could improve tariff certainty, support German and wider European investment, and diversify export demand beyond China-centered commodity and manufacturing chains.

EU Market Access Recalibration

South Korea is intensifying engagement with the EU as Brussels tightens industrial policy. Seoul seeks favorable steel treatment under the bloc’s new import regime, while both sides launched a Competitiveness Partnership and signed a Digital Trade Agreement supporting investment, standards alignment, and digital commerce.

Labor Enforcement Shapes Export Risk

USMCA labor enforcement is intensifying and increasingly affects export manufacturers. Around 70% of admitted rapid-response labor cases involve auto parts and automotive facilities, with remediation plans leading to reinstatements, back pay, and compliance obligations that can affect reputation, production continuity, and buyer relationships.

Geopolitical Energy Shock Returns

Middle East disruption has revived Germany’s vulnerability to external energy shocks. Industrial orders fell 3.8% month on month in April, with eurozone orders down 11.1%, as higher oil and gas prices, inflation risks and Hormuz-related bottlenecks weakened demand and planning visibility.

State Reforms Centralize Execution

President To Lam’s restructuring drive is cutting administrative layers, reducing civil-service headcount, and pushing local authorities to engage investors more actively. The reforms may improve decision speed and project facilitation, but they also create short-term execution gaps in licensing, enforcement, and approvals.