
Mission Grey Daily Brief - January 30, 2025
Summary of the Global Situation for Businesses and Investors
The world is witnessing a new era of Trump, with the second administration of President Donald Trump beginning in the United States on January 20, 2025. Trump's campaign slogan, "Make America Great Again (MAGA)," signifies a focus on revitalizing the domestic economy and maximizing American economic interests by ceasing to act as "the world's policeman" and reconstructing "American hegemony." This has led to a shift in global circumstances, with China and Russia viewed as critical issues and potential threats. Trump's unpredictable negotiation-focused approach has raised questions about international society's reaction and China's engagement with it.
Trump's Second Term and its Global Implications
The Trump administration has designated China as the greatest threat, citing Beijing's long-term and strategic pursuit of global hegemony by 2049. Xi Jinping's "100-year plan" aims for "The Great Rejuvenation of the Chinese Nation", surpassing other countries economically and militarily. China's Belt and Road Initiative is expanding in Asia, Africa, and South America, constructing an independent economic system for military superiority. China's domestic economy shows signs of slowing down, but its focus on innovation suggests continued near-term expansion.
Trump's negotiation-focused approach is highly unpredictable, making it difficult to forecast international society's reaction and China's engagement with it. Some countries may strengthen ties with the U.S. based on economic interests, while others may experience cooling relationships. Withdrawal from multilateralism and divergence from internationally agreed "rule-based governance" are anticipated, particularly on issues like Palestine and climate change.
Rising Tensions in the Middle East and Asia
The West's victory in the Israel-Iran conflict, centred on Gaza, has demonstrated the U.S. and its allies' ability to prevail while managing multiple conflicts, including the Russia-Ukraine War and the Israel-Hamas War. This capability to mobilise and deploy vast political, economic, military, and intelligence assets has prompted a major attitudinal shift among key Middle Eastern powers, such as Saudi Arabia and the U.A.E. New agreements for Western firms in Iraq indicate a potential shift in regional dynamics.
Trump's Aggressive Stance on Immigration and its Impact on Latin America
Trump's standoff with Colombia over migrant deportations has sent ripples through Latin America, with Colombia ultimately conceding to U.S. demands. This aggressive posture and willingness to weaponize immigration and tariffs threaten regional economic balance and erode trust in U.S.-Latin American relations. Left-leaning governments advocating for policies misaligned with Washington's priorities may face heightened scrutiny and pressure. Smaller economies reliant on U.S. trade and investment are at high risk, and some countries may be pushed to strengthen ties with U.S. competitors like China and Russia.
Red Sea Shipping Route Disruptions
An explosion on a Hong Kong-flagged container ship in the Red Sea has forced the crew to abandon the vessel, sparking a major fire. The Red Sea is a crucial route for energy shipments and cargo between Asia and Europe, with $1 trillion worth of trade passing through annually. Houthi attacks have halved the number of ships using the route, and shippers are avoiding it due to risks, despite Houthi pledges to limit assaults. This disruption has significant implications for global trade and supply chains.
Further Reading:
Does A Rush Of New Agreements Mean The West Is Regaining Its Influence In Iraq - OilPrice.com
Explosion forces crew to abandon Hong Kong-flagged container ship in the Red Sea - The Independent
How a trade war and U.S. tariffs could hit Canada’s housing market - Global News Toronto
The U.S.-China Struggle and Japan's Strategic Direction - 笹川平和財団
What Hegseth thinks of Russia and China as he takes the Pentagon reins - Axios
Themes around the World:
Domestic Political Fragmentation and Policy Paralysis
Iran’s leadership exhibits internal divisions and risk aversion post-conflict, with competing factions debating responses to sanctions and war damage. This paralysis hampers coherent foreign and economic policy, increasing uncertainty for investors and complicating international negotiations. The fractured political landscape limits Iran’s ability to adapt swiftly to evolving geopolitical pressures.
Flooding and Humanitarian Crises
Severe flooding affecting over a million people compounds existing challenges from conflict and disease outbreaks. The humanitarian crisis disrupts local economies, labor markets, and infrastructure, further complicating business operations and supply chain logistics in affected regions.
Political Instability and Economic Impact
Thailand's frequent political upheavals, including military coups and leadership changes, hinder long-term policy implementation, dampening investor confidence and economic growth. Political uncertainty disrupts structural reforms and fiscal discipline, leading to policy inconsistency and populist measures that strain public finances and stall economic momentum, affecting trade, investment, and supply chain stability.
Australian Dollar Strength Drivers
The Australian Dollar (AUD) is benefiting from robust commodity prices, strong Chinese economic performance, and reduced expectations of RBA rate cuts. These factors enhance AUD's appeal as a cyclical currency, affecting trade competitiveness, foreign investment flows, and multinational business operations in Australia.
Turkish Port Ban Disrupting Trade Logistics
Turkey's reported ban on Israeli-linked vessels threatens to disrupt short-sea container shipping between the two countries, affecting at least 76 container ships and causing delays at key Israeli ports. This logistical disruption could increase costs, complicate supply chains, and impact Israel’s trade flows with Europe and the Mediterranean region.
UK M&A Market Trends Amid Volatility
UK merger and acquisition activity declined in volume and value amid market volatility, with investors prioritizing high-value, strategic deals in resilient sectors like industrials and financial services. Despite uncertainty, easing interest rates and strong equity markets may support a rebound, rewarding prepared investors positioned for long-term growth opportunities.
Market Volatility and Seasonal Risks
September historically marks a volatile and challenging month for U.S. equities, with increased institutional repositioning, reduced retail activity, and heightened market uncertainty. Combined with macroeconomic events like Fed decisions and inflation data, this seasonal pattern could lead to significant market corrections, affecting investor sentiment and capital flows.
Exchange Rate Management and Currency Stability
The Egyptian pound's recovery from historic lows is attributed to flexible exchange rate policies, strong foreign currency inflows, and high interest rates attracting portfolio investments. Balancing currency appreciation with export competitiveness remains a key challenge for sustaining macroeconomic stability and growth.
Foreign Direct Investment Surge
Saudi Arabia's foreign direct investment (FDI) inflows surged to SAR 119 billion ($31.7 billion) in 2024, marking a 24% increase and nearly doubling cumulative FDI stock to SAR 977 billion since 2017. This growth reflects successful reforms under Vision 2030 and the National Investment Strategy, positioning the Kingdom as a global investment hub and diversifying its economy beyond oil.
US-China Trade War and Tariff Impacts
Despite a 90-day trade truce, US tariffs continue to suppress Chinese exports, with shipments to the US falling 33% year-on-year. Rising tariffs and trade restrictions strain China's economy, elevate youth unemployment to 17.8%, and pressure Beijing to implement stimulus measures. These developments complicate global supply chains and challenge multinational firms' market access and profitability in China.
Declining Industrial and Manufacturing Orders
German industrial orders have fallen for three consecutive months, with a 2.9% drop in July 2025. Large-scale orders, especially in transport equipment like aircraft and ships, declined sharply. Domestic and foreign demand both weakened, reflecting global trade uncertainties and tariff impacts. This trend threatens supply chains and manufacturing output, affecting Germany's export-driven economy and global industrial partnerships.
US Tariffs Impact Traditional Industries
New US tariffs, set at 20% for Taiwan compared to lower rates for rivals, are intensifying pressures on Taiwan's traditional manufacturing sectors such as machinery and petrochemicals. Combined with fierce Chinese competition, these tariffs threaten the viability of these industries, leading to factory closures and challenging Taiwan's economic diversification efforts.
Potential IMF Intervention and Eurozone Contagion Risk
Finance Minister Eric Lombard acknowledged the risk of an IMF bailout if France's fiscal situation deteriorates further. Given France's central role in the Eurozone, its crisis could destabilize the Franco-German axis, triggering contagion effects across Europe. This scenario raises concerns about the sustainability of the euro and the broader EU economic integration, potentially prompting a domino effect of political and financial instability in other member states.
US Tariffs Impact on Exports
The imposition of 50% tariffs by the US on Brazilian products since August 2025 has triggered Brazil's first export decline in nearly two years, cutting $5 billion from forecasts. Key sectors affected include meat, coffee, and biofuels, disrupting trade flows, investment decisions, and employment prospects in Brazil's industrial sector.
Strategic Mineral Resources and Geopolitical Risks
Vietnam's Nui Phao tungsten mine, the world's second-largest producer, is central to global critical mineral supply chains. Western concerns over potential Chinese acquisition reflect geopolitical tensions, as tungsten is vital for defense and semiconductor sectors. Regulatory uncertainties and Masan's financial challenges add complexity, impacting supply security and investment in strategic materials.
Infrastructure and Construction Sector Strength
Turkey's construction industry is globally competitive, with 45 firms ranked among ENR's Top 250 International Contractors. The sector's extensive international projects support export revenues and economic diversification, presenting opportunities for foreign partnerships and investment in infrastructure development.
Government Fiscal Position and Debt Issuance
Contrary to its reputation for fiscal prudence, Canada is issuing government debt at rates comparable to the US, with significant borrowing at federal and provincial levels. This increased debt issuance raises concerns about fiscal sustainability, potential impacts on interest rates, and investor perceptions of Canadian sovereign risk.
Corporate Financial Performance and Restructuring
Major corporations like Sasol report mixed financial results amid volatile global conditions. Despite a 9% turnover decline and reduced EBITDA, Sasol improved free cash flow and strengthened its balance sheet through cost management and capital optimization. These corporate adjustments reflect broader challenges in maintaining profitability and investment amid economic headwinds.
Currency and Bond Market Dynamics
Indonesia's sovereign debt is outperforming regional peers like India, supported by expectations of further rate cuts and fiscal discipline. Despite political unrest, Indonesian bonds attract significant capital inflows, reflecting investor confidence in monetary easing and economic management, which contrasts with India's challenges from US tariffs and fiscal pressures.
Dependence on China and Supply Chain Vulnerabilities
Chancellor Merz highlights Germany's strategic vulnerability due to heavy reliance on China for critical raw materials like nickel and rare earths. This dependence exposes German industries to geopolitical risks and potential supply disruptions. The government aims to diversify supply chains through new trade partnerships with countries like India, Indonesia, and Latin American nations to enhance strategic sovereignty and reduce exposure.
Structural Economic Reforms Needed
Pakistan's economic recovery is fragile due to lack of bold structural reforms in tax broadening, privatisation, and energy sector restructuring. Circular debt remains unresolved, threatening long-term fiscal sustainability despite short-term gains like inflation reduction and current account surplus. Without reforms, economic growth and investor confidence face significant risks in FY26 and beyond.
U.S.-China Trade Tensions and Business Decisions
Despite escalating tariffs and trade tensions, many U.S. firms remain in China due to its large market and stable policies. However, tariff hikes increase costs for U.S. companies and consumers, complicate supply chains, and create strategic dilemmas about reshoring versus maintaining China operations amid geopolitical uncertainties.
Monetary Policy and Economic Stagnation Risks
Russia's central bank maintains high interest rates (up to 21%) to combat inflation, but this tight monetary policy risks tipping the economy into recession. Leading bankers warn that only significant rate cuts to around 12% could revive growth, as current rates suppress investment, corporate profits, and consumer demand, contributing to technical stagnation.
Digital Economy Expansion and Foreign Tech Investment
Chinese tech giants Alibaba and Tencent are significantly expanding in Thailand's digital economy through e-commerce, streaming, and cloud infrastructure investments. This bolsters Thailand's ambition to become a Southeast Asian digital hub, fostering innovation and competitiveness. However, rising competition from global players like Google and Amazon intensifies the digital landscape, influencing future economic growth trajectories.
Political and Economic Leadership Changes
Recent UK government reshuffles and appointments aim to strengthen economic expertise ahead of a challenging budget. However, political uncertainty and speculation over tax hikes contribute to market nervousness. Leadership decisions will be critical in restoring fiscal credibility, shaping investor confidence, and influencing the UK's economic trajectory and international business environment.
Diplomatic Negotiations and Conflict Outlook
Ongoing diplomatic efforts to resolve the Ukraine conflict remain fraught, with slow battlefield advances and persistent Russian aggression. The uncertainty surrounding peace talks impacts investor confidence, reconstruction planning, and regional stability, necessitating cautious risk assessment for businesses engaged in Ukraine and neighboring markets.
Inflation and Economic Growth Outlook
Mexico’s inflation showed a slight uptick in August 2025, complicating monetary policy and fiscal planning. The government projects 1.8%-2.8% GDP growth for 2026, but private analysts forecast a more cautious 1.5%, reflecting uncertainties in trade agreements and global economic conditions impacting business operations.
China's Strategic Global Pivot and Trade Realignment
Facing US tariffs and slowing exports, China is pivoting towards strengthening trade ties with ASEAN, BRICS nations, and Russia, while reviewing trade laws to support new trade models and digital commerce. This strategic realignment aims to reduce US dependency, diversify export markets, and sustain economic growth, influencing global trade flows and geopolitical alliances.
Psychosocial Impact of Public Executions
The rise in public executions in Iran has been condemned for causing severe psychological harm and social instability. Such human rights concerns contribute to reputational risks for businesses and may trigger further international sanctions or boycotts, affecting Iran's global trade relations.
Manufacturing Sector Challenges
Manufacturing sentiment remains fragile with PMI readings hovering near contraction levels. Export demand is subdued due to tariffs and global competition, while domestic demand shows modest growth. Cost pressures are easing slightly, but the sector faces ongoing challenges from infrastructure inefficiencies and policy uncertainties.
US Tariffs Impact Traditional Industries
New US reciprocal tariffs, higher on Taiwan (20%) than on South Korea or Japan, are straining Taiwan's traditional manufacturing sectors such as machinery, petrochemicals, and steel. These tariffs, combined with Chinese competition, threaten the viability of these industries, causing factory closures and forcing strategic reassessments amid a shifting trade policy landscape.
Taiwan's Semiconductor Industry Leadership
Taiwan remains the global leader in semiconductor manufacturing, producing over 60% of the world's chips and 90% of advanced nodes. TSMC's substantial investments in domestic and international fabs, including in the US and Europe, reinforce its technological edge. The industry's rapid innovation cycles, especially driven by AI demand, underpin Taiwan's economic strength and global supply chain influence.
National Investment Strategy Driving Economic Transformation
Launched in 2021, the National Investment Strategy is central to Vision 2030, targeting increased private sector GDP contribution, higher FDI, and expanded non-oil exports. It has facilitated over 800 reforms, attracted regional headquarters of global firms, and set ambitious investment goals to elevate Saudi Arabia into the world’s top 15 economies.
Economic Contraction and Stagnation
Germany's economy contracted by 0.3% in Q2 2025, revised down from an initial 0.1%, marking a deeper slowdown. Key sectors like manufacturing, construction, and investment declined, while exports fell and imports rose, weakening trade balance. This stagnation risks a third consecutive year of contraction, undermining Germany's role as Eurozone growth engine and complicating recovery prospects until 2026.
Political Instability Disrupts Supply Chains
The Ukraine conflict exemplifies how political instability and government changes disrupt global supply chains. Sudden policy shifts, sanctions, and regulatory volatility affect tariffs, ownership rules, and export controls, complicating compliance and increasing costs. Businesses must adopt proactive legal and operational strategies to manage these evolving geopolitical risks and maintain supply chain resilience.
Currency Movements and Foreign Exchange
The Australian dollar has strengthened against the US dollar and Japanese yen, supported by widening yield spreads between Australian and US bonds and easing inflation. Currency fluctuations influence export competitiveness, import costs, and foreign investment flows, requiring businesses to manage forex risks carefully in their international operations and supply chains.