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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

Trump signs executive order to cancel student visas of ‘Hamas sympathizers’ who protested Israel’s war in Gaza - The Independent

Trump’s Tariff Showdown with Colombia Signals Turbulent Times Ahead for Latin America - Global Americans

What Hegseth thinks of Russia and China as he takes the Pentagon reins - Axios

Themes around the World:

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Impact of Russian Propaganda and Information Control

Russia’s intensified propaganda efforts, including indoctrination through education and media censorship, aim to justify prolonged conflict and undermine Ukrainian sovereignty. This information warfare influences public perception, complicates diplomatic resolutions, and affects international support dynamics. The resulting political instability can deter foreign direct investment and disrupt Ukraine’s integration into global markets.

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Strategic Trade Deals with Key Partners

Recent UK trade agreements with the US, India, and the EU aim to restore the UK's global trade identity post-Brexit. These deals reduce tariffs on key exports, enhance market access, and seek to diversify trade partnerships, supporting export growth and mitigating risks from geopolitical trade disruptions.

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China's Control Over Critical Minerals

China's dominance in rare earth and critical minerals essential for military hardware and clean energy technologies presents a strategic challenge for Australia. The Australian government is actively litigating against China-linked companies to protect its critical minerals sector, vital for defense and economic sovereignty. This geopolitical tension influences foreign investment policies and supply chain security in Australia.

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Indonesia's Role in Middle-Power Diplomacy

As part of the MIKTA group, Indonesia collaborates with Mexico, South Korea, Turkey, and Australia to promote multilateralism and inclusive global governance. MIKTA focuses on peacebuilding, youth engagement, and sustainable development goals, providing Indonesia a platform to influence global economic and political agendas. This middle-power diplomacy enhances Indonesia's international stature and supports stable trade and investment environments.

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Transportation System Integration Challenges

Indonesia's transportation infrastructure remains fragmented, lacking full integration across modes and regions. The government prioritizes completing the National Transportation System Law (RUU Sistranas) to enable coordinated planning and management, which is vital for improving logistics efficiency, reducing costs, and supporting economic growth.

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Airfare Affordability and Foreign Ownership

Canada’s Competition Bureau recommends relaxing foreign ownership restrictions in the airline industry to increase competition and lower airfares. Current caps limit market entry and pricing flexibility, affecting travel costs and connectivity. Enhanced competition could stimulate tourism, business travel, and supply chain logistics, improving overall economic efficiency and consumer choice in the aviation sector.

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Volatility in Global Oil Prices and Fuel Supply

Ongoing Middle East conflicts have caused sharp spikes and volatility in global oil prices, directly impacting Australian petrol costs. With Australia importing about 80% of its liquid fuels, this volatility threatens inflation, consumer costs, and transport sector stability. Government warnings against price gouging and calls for regulatory oversight highlight the sensitivity of fuel supply chains and their influence on economic conditions.

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Geopolitical Tensions and Regional Security Risks

Escalating conflicts in the Middle East, particularly between Israel and Iran, pose direct security threats to Russia’s strategic interests in Central Asia. Potential destabilization of Iran could create security vacuums exploited by foreign actors, threatening regional stability and complicating Russia’s geopolitical environment, with implications for trade routes, energy supplies, and investment security in Eurasia.

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Rising Security and Crime Concerns

Turkey ranks low on global safety indexes due to internal conflicts, terrorism threats, and organized crime, including drug trafficking via Turkish-flagged vessels. These security challenges disrupt supply chains, increase operational risks, and necessitate enhanced due diligence and risk mitigation strategies for international trade and investment.

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International Legal Advocacy and Global South Solidarity

South Africa's leadership in international legal actions against Israel at the International Court of Justice and formation of the Hague Group reflects its commitment to human rights and international law. This advocacy enhances South Africa’s geopolitical profile but may provoke diplomatic tensions with Western powers, influencing foreign relations and trade partnerships.

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Social and Political Movements Impact

Emerging social movements, including international delegations engaging with Kurdish political figures and domestic opposition calls for unity, reflect ongoing societal tensions. These dynamics influence Turkey's internal stability and international relations, potentially affecting market sentiment, regulatory changes, and the overall business climate.

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Rising Municipal Tariffs and Cost Pressures

Significant increases in municipal tariffs, notably a 12.7% electricity hike approved by NERSA, exceed inflation and strain households and businesses. These cost pressures elevate operational expenses, reduce disposable income, and may dampen investment attractiveness, complicating South Africa’s economic recovery and competitiveness in global markets.

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U.S.-Africa Trade Engagement Pivot

The Trump administration's shift from aid to trade-focused partnerships with West African nations aims to secure critical mineral supplies and counter Chinese and Russian influence. This strategic engagement targets economic development through commerce, but aid cuts risk exacerbating regional instability, affecting migration patterns and security concerns relevant to U.S. interests.

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US Sanctions on Mexican Banks

The US Treasury sanctioned three major Mexican financial institutions—CIBanco, Intercam, and Vector Casa de Bolsa—for laundering millions linked to drug cartels, disrupting cross-border financial transactions. This unprecedented move strains Mexico-US financial cooperation, risks investor confidence, and complicates supply chains reliant on these banks, while prompting Mexican government intervention to stabilize the banking sector.

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U.S. Trade Policy and Tariff Impacts

President Trump’s tariff policies continue to influence global trade dynamics, causing companies to reassess sourcing and supply chain strategies. The administration’s aggressive stance on tariffs, including threats of high duties on imports from key partners, creates uncertainty for international investment and trade relations, affecting profitability and operational planning for multinational corporations.

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US Tariff Policies and Trade Impact

The ongoing imposition and threat of US tariffs under Donald Trump's administration significantly affect Australia's trade dynamics, particularly with tariffs on steel, aluminium, pharmaceuticals, and other exports. These tariffs create uncertainty, influence Australia's GDP, and necessitate strategic economic responses, including interest rate adjustments and diplomatic efforts to mitigate adverse effects on key sectors like pharmaceuticals and manufacturing.

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Rising Municipal Tariffs and Inflation Impact

Municipal service tariffs, including electricity, have increased significantly above inflation, with NERSA approving a 12.7% electricity tariff hike in 2025. These increases strain household finances and business operating costs, potentially reducing consumer spending and increasing production expenses. The tariff hikes influence investment climate perceptions and may affect the competitiveness of South African businesses internationally.

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Energy Security and Oil Price Volatility

India's heavy reliance on crude oil imports (60-65% via Strait of Hormuz) exposes it to supply disruptions and price spikes amid Middle East tensions. Rising Brent crude prices (currently $73-$77/barrel) threaten inflation, increase import bills, and pressure the rupee. Energy supply chain disruptions could squeeze corporate margins, impacting sectors from refining to manufacturing.

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Impact of US and International Sanctions

US military strikes on Iran's nuclear facilities and the resulting international reactions have intensified economic uncertainty. The IMF highlights risks to global energy prices and economic growth, reflecting how sanctions and military actions against Iran can disrupt global markets and trade, affecting multinational corporations and investors.

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EU-Canada Strategic Partnership

The new EU-Canada Strategic Partnership focuses on enhancing trade, competition, and economic security with an emphasis on clean energy, critical minerals, and industrial cooperation. This alliance aims to diversify energy supply chains, bolster competitiveness through carbon pricing cooperation, and integrate Canada into global renewable energy initiatives, significantly impacting trade policies and investment strategies.

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Inflation and Consumer Price Trends

Japan's core consumer prices rose 3.7% year-on-year in May, maintaining inflation above the Bank of Japan's 2% target since April 2022. Persistent inflation impacts consumer spending, wage negotiations, and corporate cost structures, influencing investment decisions and operational costs for businesses engaged in Japan.

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Climate Change and Extreme Weather Events

Pakistan faces severe climate vulnerabilities with unprecedented heatwaves, floods, and droughts impacting agriculture, health, and infrastructure. Rising temperatures above 50°C disrupt labor productivity, food security, and energy demand, while floods cause economic losses exceeding $30 billion. These climate shocks exacerbate poverty, strain public services, and threaten long-term economic stability.

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Japan-U.S. Trade and Security Tensions

Recent escalations in U.S. policy under President Trump, including threats of 25% tariffs on Japanese car exports and demands for increased Japanese defense spending, have strained the longstanding Japan-U.S. alliance. These tensions risk disrupting bilateral trade flows, complicating supply chains, and injecting uncertainty into investment strategies dependent on stable U.S.-Japan relations.

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Electric Vehicle and Advanced Manufacturing Innovation

Emerging developments in electric motorcycles and advanced manufacturing technologies, such as 3D printing for automotive parts, signal Vietnam's growing role in innovation-driven industries. This trend supports supply chain modernization, attracts foreign direct investment, and aligns with global sustainability goals, enhancing Vietnam's competitiveness in international markets.

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Geopolitical Risks Impacting Supply Chains

Ongoing conflicts in the Middle East, Ukraine, and rising tensions with Russia and Iran pose significant risks to UK supply chains, particularly energy and critical minerals. The government acknowledges potential disruptions from hostile state activities, necessitating strategic preparedness and diversification to safeguard trade routes, manufacturing inputs, and digital infrastructure vital for business continuity.

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Geopolitical Risks from Ukraine Conflict

Ongoing US-Ukraine defense cooperation and partial US arms supply disruptions highlight geopolitical volatility affecting Germany. The conflict’s regional instability influences supply chains, energy security, and investment risk assessments. Germany’s role in diplomatic efforts and economic support to Ukraine underscores its exposure to Eastern European security dynamics impacting international business operations.

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Climate Change and Environmental Resilience

Egypt is prioritizing climate resilience and desertification mitigation, with national strategies aligned to the 2050 Climate Strategy and regional leadership roles. Investments in nature-based coastal defenses and green incentives support sustainable development. These efforts influence agricultural productivity, resource security, and regional stability, critical factors for long-term economic planning and international cooperation.

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China's Rare Earths Leverage

China dominates global rare earth mining (70%) and refining (90%), critical for tech, military, and green energy sectors. This control provides strategic leverage in US-China trade talks, shifting negotiations from tariffs to export controls. It enhances China's industrial supply chain dominance and self-sufficiency, impacting global supply chains and technology sectors reliant on these minerals.

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Industrial Energy Subsidy Revocation

The government’s revocation of industrial electricity discounts marks a shift towards fiscal consolidation amid rising production costs. This policy change will increase operational expenses for manufacturers, compelling reassessment of cost structures and pricing strategies. The move signals a transition to more targeted subsidy schemes, impacting industrial competitiveness and investment decisions in energy-intensive sectors.

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US-Canada Trade War and Tariffs

Ongoing US-imposed tariffs on Canadian sectors, notably automotive and steel/aluminum, are straining bilateral trade relations. These tariffs have led to economic uncertainty, job losses in manufacturing, and slowed growth in key provinces like Ontario. The trade tensions necessitate strategic negotiations and diversification of trade partnerships to mitigate risks to supply chains and investment.

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Political Instability and Governance Risks

South Africa's political landscape is marked by elite power struggles, coalition tensions, and selective accountability, undermining democratic legitimacy. Corruption and cadre deployment persist, affecting policy continuity and investor confidence. This political uncertainty poses risks to governance, reform implementation, and the broader business environment.

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Mexican Government Bank Interventions

In response to US sanctions, Mexican authorities imposed temporary managerial interventions on CIBanco and Intercam to protect clients and maintain financial stability. This government action aims to reassure investors and depositors but highlights vulnerabilities in Mexico’s financial regulatory environment and could affect confidence in the banking system amid ongoing cartel-related allegations.

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Financial Stability Amid Global Uncertainty

The Reserve Bank of India highlights financial system resilience despite global growth slowdown and geopolitical spillovers. However, stress is building in financial markets, with increased volatility and sensitivity to shocks. Structural shifts like trade fragmentation, technological disruption, and geopolitical hostilities complicate policy interventions, requiring vigilant, agile regulatory responses to safeguard growth and stability.

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Deportee Support Program Inefficiencies

Mexico’s government program to support deported nationals from the US has been underutilized due to deportees being sent to southern states with limited job opportunities. This geographic mismatch hampers reintegration efforts, potentially increasing social instability and labor market pressures in key economic regions.

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US Tariff Policy Uncertainty

US President Trump's ambiguous stance on tariff deadlines and willingness to negotiate introduces unpredictability in trade policies affecting Germany and the EU. This uncertainty complicates business planning, supply chain management, and investment decisions, emphasizing the need for agile strategies to mitigate tariff-related risks.

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Digital Economy and Gaming Culture

The rapid popularity and competitive achievements in gaming titles like Elden Ring: Nightreign reflect Vietnam's growing digital economy and youth engagement with e-sports. This trend offers opportunities for investment in technology, digital entertainment, and related infrastructure, while also emphasizing the need for regulatory frameworks to support sustainable growth.