Industrial policy reshapes investment

Federal incentives and procurement preferences for semiconductors, EVs, batteries, and critical minerals are accelerating domestic buildouts while tightening local-content expectations. Multinationals may gain subsidies but must manage higher US operating costs, labor constraints, and complex reporting requirements tied to funding.

America First and Investment Nationalism

The US is pursuing an 'America First' agenda, leveraging tariffs and investment controls to promote domestic industries and national security. This approach complicates relations with allies, influences defense procurement, and increases compliance burdens for multinational firms.

SME Vulnerability and Integration Challenges

Small and medium-sized enterprises, contributing 35% of GDP, remain exposed to global disruptions due to limited access to technology and finance. Adapting to new trade rules and integrating into global supply chains are critical challenges for sustaining SME growth and broader economic resilience.

Export-Led Growth Amid Weak Demand

China’s 2025 growth was driven by record exports and a $1.2 trillion trade surplus, offsetting a 20% drop in US-bound shipments. However, domestic demand remains subdued due to a prolonged property crisis and weak consumer confidence, raising sustainability concerns.

Regional Integration and Trade Bloc Leverage

South Africa’s leadership in the African Continental Free Trade Area and regional infrastructure partnerships enhances its role as a gateway to Africa, supporting supply chain diversification and positioning the country as a hub for multinational investment and trade.

Electric Vehicle Market Disruption

Reduced tariffs allow up to 49,000 Chinese EVs annually into Canada at 6.1%, boosting affordable options and competition. This move could reshape the auto sector, attract Chinese investment, and challenge domestic manufacturers, while provoking US concerns over supply chain security and market share.

Low inflation and financing conditions

L’inflation française a touché 0,4% en janvier (plus bas depuis 2020), favorisant une baisse du Livret A à 1,5%. Coût du capital potentiellement plus bas (crédit immobilier ~3,1%), mais consommation et prix de services modérés influencent prévisions de ventes et salaires.

Debt Management and Fiscal Sustainability Challenges

Egypt’s reliance on local and international debt issuance remains high, with EGP 843 billion in local debt planned for February 2025 and $2 billion in international bonds for FY 2025/26. Fiscal sustainability concerns persist, influencing sovereign risk and borrowing costs.

Current Account Deficit and Financing

Brazil’s current account deficit reached US$68.8 billion in 2025 (3.02% of GDP), financed mainly by long-term foreign investment. While trade balances remain positive, deficits in services and primary income require ongoing capital inflows to sustain external stability.

Automotive Sector Policy Shifts

The automotive industry is navigating trade tensions, policy uncertainty, and a flood of cheap imports, particularly from China. The government is considering tariff adjustments and new energy vehicle policies, with the sector’s future hinging on reform momentum and global market access.

Supply Chain Risks and Opportunities in Battery Reuse

The shift to a circular battery economy introduces new risks—such as validation, logistics, and regulatory compliance—but also rewards. Companies that master traceability, recycling, and second-life applications can secure supply, reduce costs, and enhance ESG performance.

Nearshoring Drives Industrial Expansion

Mexico’s nearshoring boom is doubling industrial space demand, with vacancy rates near 1% and rents rising 16%. US firms increasingly shift supply chains to Mexico for cost, proximity, and resilience, fueling investment in manufacturing, logistics, and workforce upskilling.

Massive Public Investment Program 2026

Turkey’s 2026 Investment Program allocates 1.92 trillion TRY to 13,887 projects, prioritizing infrastructure, earthquake resilience, energy, and logistics. This large-scale public spending aims to boost economic growth and supply chain capacity, but also tests fiscal discipline.

Visa Reforms to Attract Global Talent

The UK is overhauling its visa system to attract highly skilled migrants, especially in AI and deep tech, with faster processing and fee reimbursements. This policy seeks to offset US visa restrictions and support the UK’s ambition to be a global innovation hub.

Trade Diversification and New Markets

With exports to the US and China declining, Germany is actively pursuing trade agreements with India, Mexico, Australia, and the UAE. This diversification aims to reduce reliance on traditional markets, mitigate geopolitical risks, and unlock new growth opportunities for German exporters.

Supply Chain Realignment for Shelter Materials

The new legal requirements are driving increased demand for specialized construction materials, ventilation, and reinforced concrete. This is prompting supply chain adjustments, nearshoring strategies, and opportunities for international suppliers, but also risks of bottlenecks and price volatility.

US–Taiwan tariff deal reshapes trade

A pending reciprocal tariff arrangement would reduce US tariffs on many Taiwanese goods (reported 20% to 15%) and grant semiconductors MFN treatment under Section 232. In exchange, large Taiwan investment pledges could shift sourcing and pricing dynamics for exporters.

Sectoral Divergence: Defense Gains, Cyclicals Suffer

While export-driven sectors like automotive and luxury goods face losses, defense companies such as Rheinmetall and Renk have seen stock gains amid heightened geopolitical tensions. This divergence underscores shifting investor sentiment and the growing importance of security-related industries in Germany’s economic landscape.

China decoupling in advanced tech

Tightened export controls and new duties on advanced semiconductors/AI chips are reshaping global electronics supply chains. Firms face licensing, compliance, and redesign costs, while China accelerates substitution. Expect higher component prices, longer qualification cycles, and intensified scrutiny of technology transfers.

Sluggish Growth and Structural Reform

Thailand’s GDP growth is projected at just 1.5–2.0% for 2026, the lowest in three years, driven by weak exports, currency appreciation, and political uncertainty. This stagnation is prompting urgent calls for structural reforms, impacting investment strategies and business confidence.

Strategic Investments in Recycling Infrastructure

The French government and EU are mobilizing over €1.5 billion to strengthen domestic battery recycling and reuse capacity. This investment wave is attracting international partners, reshaping the competitive landscape, and fostering joint ventures in battery circularity.

Human Rights, Sanctions, and Diplomacy

China’s use of sanctions in response to foreign criticism—especially on human rights—remains a diplomatic lever. Recent lifting of sanctions on UK politicians signals selective engagement, but ongoing concerns over governance and rights continue to affect reputational and operational risks.

Resilient Policy Reforms and Governance

Recent reforms include tax simplification, legal modernization, and improved ease of doing business. These measures support startups, MSMEs, and foreign investors, fostering a more transparent, predictable, and growth-oriented business environment that underpins India’s economic ascent.

Real Estate Liberalization and Mega-Projects

Recent legal reforms allow foreign ownership of land and property, sparking global investor interest. Mega-projects like NEOM and the Red Sea Project, combined with digitalization and AI-driven innovation, are transforming the real estate sector and urban infrastructure landscape.

Fiscal Stabilization and Policy Reform

South Africa is nearing a fiscal turning point, with debt-to-GDP stabilizing and primary surpluses returning. Improved fiscal credibility has strengthened the rand and bonds, but sustaining reforms and managing coalition politics remain critical for long-term investor confidence.

Energy Transition Investment Challenges

Canada’s energy transition investment fell 8.8% to $33.4 billion, losing its top 10 global ranking. Policy uncertainty and declining EV spending threaten competitiveness. Integrated strategies for renewables, grids, and electrified transport are critical for future growth and investor confidence.

Robust Non-Oil Growth Bolsters Economic Outlook

Saudi Arabia’s GDP grew 4.5% in 2025, with non-oil sectors expanding 4.9%. Sustained growth in non-hydrocarbon industries is enhancing economic resilience, supporting demand for international goods and services, and diversifying the Kingdom’s role in global supply chains.

Energy Transition and Power Security

Eskom’s reforms and renewable energy expansion have reduced load shedding, but high electricity costs and grid vulnerabilities persist. Recent tariff relief for energy-intensive industries aims to prevent deindustrialization, yet long-term competitiveness depends on sustainable pricing and infrastructure modernization.

Energy policy and OPEC+ restraint

Saudi-led OPEC+ is keeping output hikes paused through March 2026, maintaining quotas amid surplus concerns and Iran-related volatility. For businesses, oil revenue sensitivity influences public spending, FX liquidity, project pacing, and input costs, especially energy-intensive industries.

Escalating US-China Trade Tensions

Ongoing US tariffs and Chinese countermeasures, including export controls and sanctions, are reshaping global trade flows. These tensions drive supply chain diversification, increase compliance risks, and force businesses to adapt strategies for both market access and operational resilience.

India-Canada Energy and Minerals Reset

Canada and India are negotiating broad accords on energy, critical minerals, and AI, aiming to double bilateral trade by 2030. This diplomatic reset opens new markets for Canadian resources, supports supply chain diversification, and strengthens Canada’s position in Asian growth markets.

Critical Minerals and Geopolitical Competition

Indonesia’s dominance in nickel and tin places it at the center of U.S.-China competition for critical minerals. While new trade frameworks with the U.S. offer market access, there are risks of resource dependency and the need for robust industrial policy to ensure domestic value addition and supply chain security.

Defense build-up reshapes industry

La hausse des crédits militaires (+6,5 à +6,7 Md€, budget armées ~57,2 Md€) accélère commandes (sous-marins, blindés, missiles) et renforce exigences de conformité, sécurité et souveraineté. Opportunités pour fournisseurs, mais arbitrages budgétaires pèsent sur autres programmes d’investissement.

Tariff volatility and litigation

Aggressive, frequently revised tariffs—often justified under emergency authorities—are raising input costs and retail prices while chilling capex. Ongoing court challenges, including a pending Supreme Court ruling, create material uncertainty for exporters, importers, and contract pricing through 2026.

Defense Buildup and Regional Alliances

Japan is doubling defense spending and deepening alliances with the US, Australia, and others to counter China. Expanded military capabilities and joint industrial policies are reshaping the Indo-Pacific security architecture, with direct implications for foreign investment and supply chains.

Canada’s Strategic Autonomy and Defense Spending

Canada is doubling defense spending by 2030 and building domestic resilience in critical sectors. This policy aims to strengthen sovereignty and reduce vulnerability to external coercion, impacting procurement, industrial partnerships, and the defense supply chain landscape.