Nuclear Program Uncertainty and Geopolitical Tension

Iran’s nuclear program remains a flashpoint, with recent US and Israeli strikes on nuclear sites and Iran’s threats to weaponize. The unresolved nuclear issue heightens geopolitical risk, complicating long-term investment and trade planning for international businesses.

Complex Regulatory and Compliance Risks

A wave of new regulations and cross-border investigations is straining UK businesses, especially in trade, tax, ESG, and employment. Nearly 40% of organizations lack adequate dispute budgets, raising the risk of delayed responses and increased vulnerability to global policy uncertainty.

IMF Dependency and Reform Conditionality

Pakistan’s reliance on IMF support persists, with recent disbursements stabilizing reserves but imposing strict fiscal and structural reforms. While these measures bring macroeconomic discipline, they also constrain growth and complicate policy autonomy, impacting investment strategies and business planning.

Structural Trade Deficit Worsens

Pakistan’s trade deficit surged 35% to $19.2 billion in the first half of FY26, driven by a 20% export decline and rising imports. Persistent external imbalances threaten currency stability, increase sovereign risk, and undermine investor confidence in the country’s trade outlook.

US-Taiwan Strategic Technology Partnership

A historic US-Taiwan agreement will see at least $250 billion in Taiwanese investment in US chip manufacturing, with reciprocal tariff reductions. The deal aims to enhance supply chain resilience, secure advanced manufacturing, and deepen bilateral technology cooperation amid geopolitical tensions.

Geopolitical Tensions and Trade Fragility

Global conflicts, notably US–Venezuela tensions, increase volatility in energy prices, logistics costs, and exchange rates. These risks disrupt supply chains and trade flows, requiring Thai businesses and foreign investors to adopt robust risk management and diversification strategies.

Infrastructure and Resource Constraints

Taiwan faces challenges in scaling advanced manufacturing due to land, water, and power limitations. These constraints affect expansion plans for high-tech industries and may drive further overseas investment, influencing long-term industrial competitiveness.

Escalating US-Mexico Security Tensions

US threats of military action against Mexican drug cartels, coupled with recent interventions in Venezuela, have raised geopolitical risk. Mexico firmly rejects intervention, but persistent US pressure and rhetoric could impact investor confidence, cross-border operations, and regional stability.

Foreign Investment Climate Deteriorates

Sanctions, currency instability, and political unrest have sharply reduced foreign direct investment. The environment is marked by opaque regulations, high corruption, and unpredictable policy shifts, deterring new entrants and expansion.

Rising Role in Global Supply Chains

Indonesia is capturing a growing share of global supply chains as U.S.-China trade declines, with Indonesian imports to the U.S. rising 34% in 2025. This shift enhances Indonesia’s position as a sourcing hub, attracting investment and diversifying global manufacturing.

State Intervention and Subsidy Expansion

The German government, with EU approval, is expanding subsidies for new gas-fired power plants and industrial electricity costs. While aimed at supporting industry, these interventions raise concerns about long-term competitiveness, fiscal sustainability, and potential market distortions within the EU.

Regulatory and Compliance Pressures

A wave of new regulations—including the Chair Law, digital labor rights, and whistleblower portals—has increased compliance demands. Enhanced inspections and evolving labor, environmental, and investment rules require businesses to strengthen risk management and adapt to a more stringent regulatory environment.

Foreign Direct Investment Surge

FDI in Vietnam rose 8.9% to $23.6 billion in 2025, with manufacturing accounting for 82.8%. High-tech, green industries, and logistics attract multinational corporations, reinforcing Vietnam’s role as a strategic hub in global supply chains and boosting long-term investment prospects.

Stricter Migration and Student Visa Policies

Australia has moved India, Nepal, Bangladesh, and Bhutan to the highest-risk category for student visas, increasing scrutiny and documentation requirements. This policy shift affects international education revenues, skilled migration pipelines, and labor market flexibility, especially in sectors reliant on foreign talent.

Trade Policy Uncertainty and EU-Mercosur Tensions

Strong domestic opposition to the EU-Mercosur trade deal, especially from French farmers and parliament, has led to protests and political crises. This uncertainty affects market access, supply chains, and investment strategies for global agribusiness and exporters.

Infrastructure Investment and Industrial Policy

Continued emphasis on infrastructure upgrades and industrial policy supports domestic growth and supply chain localization. However, protectionist measures and vertical integration strategies may raise costs, limit market access, and require strategic adaptation for foreign investors and partners.

Industrial Output Faces Prolonged Decline

German industrial production declined 1.2% in the first 11 months of 2025, marking a fourth consecutive annual drop. Key sectors like automotive and machinery remain below pre-pandemic levels, reflecting deep structural challenges and ongoing risks for exporters and global supply chains.

EU-Mercosur Trade Deal Signed

The EU and Mercosur, including Brazil, have signed a landmark free trade agreement eliminating over 90% of tariffs and creating the world’s largest free trade area. This will boost Brazilian exports, attract investment, and reshape supply chains, though ratification hurdles and sectoral quotas remain.

Foreign Direct Investment Reboot

Thailand is prioritizing high-value FDI in sectors like high-tech, green infrastructure, and wellness tourism. Streamlined investment processes and improved incentives aim to reverse declining FDI, but success depends on legal reforms, transparency, and stable governance.

Regulatory Liberalisation in Insurance Sector

The Insurance Laws (Amendment) Bill, 2025, allows 100% FDI in insurance and eases entry for global reinsurers. This reform enhances capital access, competition, and innovation, making India’s insurance sector more attractive to international investors and supporting broader financial sector growth.

Supply Chain Resilience and Diversification

The US-Taiwan deal includes mechanisms for ongoing consultation on tariff and supply chain issues, supporting resilience against shocks. Taiwan’s strategy emphasizes global diversification, advanced packaging, and maintaining technological leadership amid rising global competition.

Persistent Inflation and Currency Volatility

Turkey’s inflation remains elevated, with forecasts for 2026 at 16–23%. The Turkish lira continues to depreciate, trading around 43–44 per US dollar, impacting import costs, investment planning, and supply chain pricing for international businesses.

Geopolitical Fragmentation and Sanctions Complexity

Divergent approaches among Western allies on sanctions enforcement, asset seizures, and military aid create a fragmented regulatory landscape. Businesses face heightened compliance risks and must navigate evolving sanctions regimes, cross-border asset restrictions, and shifting political alliances.

Infrastructure and Supply Chain Modernization

Record export volumes highlight Brazil’s need for continued investment in logistics, ports, and supply chain resilience. Upgrades are crucial to sustain growth, reduce bottlenecks, and meet rising international standards, especially as trade volumes approach US$700 billion in 2026.

Geopolitical Tensions and Regional Security Risks

Persistent tensions with the UAE over Yemen, as well as broader regional instability, continue to pose risks to supply chains and investment. Saudi Arabia’s leadership in OPEC+ and its strategic location mean that geopolitical developments can rapidly impact energy markets and cross-border trade flows.

Major Infrastructure and Logistics Expansion

Record infrastructure investment, especially in transport and logistics, is transforming states like Uttar Pradesh and Madhya Pradesh into key hubs. Platforms like PRAGATI enable efficient project execution, reducing bottlenecks and enhancing India’s competitiveness as a manufacturing and export base.

Resource Nationalism and Mineral Sovereignty

The Anglo American–Teck merger and declining tax contributions highlight South Africa’s struggle to retain control over its mineral wealth. Weak regulatory oversight and lack of strategic policy risk further capital flight, undermining national interests and deterring long-term resource investment.

Semiconductor and Technology Investment Surge

A landmark US-Taiwan deal commits at least $250 billion in Taiwanese semiconductor investments in the US, with reciprocal tariff reductions to 15%. This aims to boost US tech self-sufficiency, secure supply chains, and reshape the global semiconductor landscape.

Infrastructure Investment and Northern Growth

The UK government’s commitment to £1.1bn in Northern Powerhouse Rail and broader regional development aims to boost productivity, connectivity, and economic growth. However, delivery timelines and funding gaps remain, with business impact contingent on execution and regional coordination.

Infrastructure Investment and Bottlenecks

Vietnam plans to secure $5.5 billion in foreign loans for 2026 and up to $38 billion by 2030 to fund major infrastructure projects. Persistent disbursement delays due to land clearance, project approval, and administrative hurdles could impact project timelines and investor confidence.

Inflationary Pressures and Currency Volatility

Food inflation and rupiah depreciation are ongoing concerns, with inflation peaking at 2.92% in 2025 and the rupiah hitting record lows. These trends impact consumer purchasing power, operational costs, and financial planning for international businesses operating in Indonesia.

USMCA Uncertainty and Tariff Risks

Ongoing US-Canada trade tensions, including Supreme Court decisions and USMCA renegotiations, create volatility for Canadian exporters. Tariff threats on key sectors like furniture and lumber impact supply chains, investment planning, and cross-border business operations.

Geopolitical Role in Black Sea Security

Turkey is assuming a leadership role in Black Sea naval security missions amid the Russia-Ukraine conflict, enhancing regional maritime safety. This strategic position strengthens Turkey’s influence in NATO and impacts trade routes, logistics, and risk assessments for international operators.

Trade Policy And FTA Leverage

Vietnam actively expands and upgrades FTAs, targeting 8% export growth and a $23 billion trade surplus in 2026. FTAs with the US, EU, CPTPP, and RCEP drive market access, regulatory reforms, and higher standards, fostering export diversification and resilience against global trade tensions.

US Sanctions and Escalating Tariffs

The US has intensified sanctions, imposing a 25% tariff on countries trading with Iran, directly impacting global supply chains and trade flows. These measures raise costs, deter investment, and complicate international partnerships, especially for India, China, and the UAE.

High Energy and Tax Costs Undermine Competitiveness

Pakistan’s elevated energy tariffs and tax burdens are driving some multinational companies to exit, while others adapt through local sourcing. These costs, among the highest in the region, erode export competitiveness and deter new foreign investment, complicating business operations.