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Mission Grey Daily Brief - February 03, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently dominated by the escalating trade war between the United States and its top trading partners, Canada, Mexico, and China. The Trump administration has imposed sweeping tariffs on these countries, citing national security concerns and the need to curb the flow of drugs and undocumented immigrants. This has led to retaliatory tariffs from the affected countries, raising concerns about the future of global trade. The situation is expected to have significant economic consequences for all parties involved, with higher prices and disrupted supply chains being key concerns.

The US-Canada-Mexico-China Trade War

The US-Canada-Mexico-China trade war is a significant development that has the potential to disrupt global trade and impact businesses and consumers worldwide. The Trump administration's decision to impose sweeping tariffs on Canada, Mexico, and China has sparked strong reactions from the affected countries, who have announced retaliatory tariffs of their own. The tariffs are expected to raise prices for American consumers and disrupt supply chains, particularly in key industries such as agriculture, automotive, and energy. The US Chamber of Commerce has warned that the tariffs will upend supply chains and raise prices for American families.

The tariffs are also expected to have significant economic consequences for the targeted countries. Canada and Mexico have announced retaliatory tariffs of their own, while China has threatened to challenge the tariffs through the World Trade Organization. The Trump administration has threatened to expand the tariffs if the targeted countries retaliate, further escalating the situation.

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Further Reading:

Britain cannot depend on Norway for electricity – we need our own power - The Telegraph

Here’s what will get more expensive from Trump’s tariffs on Mexico, Canada and China - CNN

Mexico and Canada hit back with counter tariff retaliation as Trump sparks new trade war - The Independent

North American Trade War? The Geopolitical Impacts for China and the United States - Wilson Center

Restaurant owners fear price increases after Trump imposes tariffs on Mexico, Canada, China - ABC7 New York

Trump announces significant new tariffs on Mexico, Canada and China - CNN

Trump announces significant new tariffs on Mexico, Canada and China, sparking retaliatory actions - CNN

Trump hits Canada, Mexico and China with steep new tariffs, says Americans could "some pain" - CBS News

Trump hits Canada, Mexico and China with steep new tariffs, says Americans could feel "some pain" - CBS News

Trump hits Canada, Mexico and China with steep new tariffs, stoking fears of a trade war - CBS News

Trump hits Canada, Mexico and China with steep new tariffs; Canada retaliates - CBS News

Trump imposes new tariffs on imports from Mexico, Canada and China in new phase of trade war - NPR

Trump says pain from tariffs 'worth the price' as Canada and Mexico retaliate - BBC.com

Trump’s tariffs on Mexico, Canada and China set stage for trade war - Los Angeles Times

Themes around the World:

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Capital Market Growth and ESG Regulation

Taiwan’s IPO market reached record highs in 2025, driven by semiconductor and AI sectors. New ESG and sustainability disclosure regulations are raising compliance standards, influencing investment decisions and corporate governance for international and domestic firms.

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Record Mexico-US Trade Surplus

Mexico’s exports to the US reached a record $48.5 billion in October 2025, with a 6.7% annual increase and a trade surplus of $18.9 billion. This underscores Mexico’s strategic role in US supply chains, but exposes it to US tariff and regulatory risks amid tense bilateral relations.

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Rising Chinese Trade Influence

South Africa’s trade deficit with China is widening, driven by surging imports of Chinese vehicles and manufactured goods. This trend threatens local industries and complicates trade balances, requiring strategic adaptation by businesses to remain competitive in key sectors.

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China’s Beef Tariffs Hit Exports

China imposed a 55% tariff on Brazilian beef exceeding a 1.1 million ton quota, threatening up to US$3 billion in export revenue for 2026. This measure disrupts supply chains and forces Brazilian producers to seek new markets and renegotiate trade terms.

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Supply Chain Diversification Imperatives

Japanese firms are intensifying efforts to diversify suppliers, particularly for critical minerals and advanced components. Moves to secure alternative sources in Australia and North America aim to mitigate the impact of Chinese restrictions and enhance long-term business continuity.

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German Automotive Sector Under Pressure

German automakers face declining exports due to US tariffs, fierce competition from Chinese EVs, and sluggish domestic demand. The sector, vital for exports and employment, is restructuring with increased local production and new subsidies for electric vehicles to meet EU climate targets.

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Energy Transition and LNG Imports Surge

Egypt’s domestic gas production has declined, driving record LNG imports—9.01 million metric tons in 2025, mostly from the US. New agreements with Qatar and Israel aim to secure supply, but Egypt’s shift from exporter to major importer impacts energy costs, industrial competitiveness, and investment strategies.

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Transformation of Labor Market Dynamics

Israel's labor market has shifted from Palestinian to foreign workers, with over 61,000 new permits issued in 2025. This structural change impacts construction, agriculture, and services, raising concerns about labor standards, costs, and long-term workforce stability.

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Retaliatory Tariffs and Regulatory Risks

The EU is considering €93 billion in retaliatory tariffs and regulatory measures targeting US goods and services. Finnish firms operating in or exporting to the US could face new barriers, compliance costs, and restricted market opportunities.

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Labor Market and Social Model Reforms Debate

Political debate is intensifying over labor market and welfare reforms, including proposals to end the 35-hour workweek and tighten unemployment benefits. Such reforms could reshape labor costs, productivity, and the attractiveness of France for foreign investors, but also risk social unrest.

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Infrastructure Modernization and Administrative Complexity

Major infrastructure and energy projects are hampered by complex regulations, slow administrative processes, and financing uncertainties. This delays project delivery, affecting logistics, energy supply, and investment timelines for multinational businesses.

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Comprehensive Crypto Regulatory Shift

The UK is transitioning from a ‘crypto hub’ narrative to a full regulatory regime, with new rules set for October 2027. This shift favors established financial players, raises compliance costs, and will reshape the fintech and digital asset landscape for international investors.

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Technology Export Controls and Sanctions

Taiwan faces evolving export control regimes, especially for semiconductors and AI chips, amid US-China tech competition. New tariffs and sanctions, including US restrictions on certain AI chips, create compliance challenges and impact Taiwan’s global trade flows.

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Export Competitiveness and Structural Weaknesses

Pakistan’s export-to-GDP ratio has fallen to 10.4%, with high costs, poor infrastructure, and inconsistent policies undermining competitiveness. Reliance on remittances and debt, rather than exports, exposes the economy to external shocks, limiting growth and supply chain integration.

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Fiscal Policy and Tax Reform Uncertainty

South Africa faces potential tax increases, including VAT and digital economy taxes, to address revenue shortfalls. Fiscal consolidation and improved ratings have boosted investor sentiment, but persistent debt and policy uncertainty could impact future investment strategies and operational costs.

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Cartel Violence and Organized Crime Risks

Persistent cartel violence, compounded by potential influxes of Venezuelan criminal groups, continues to threaten security, logistics, and investor confidence. Mexico’s border states remain especially vulnerable, requiring robust risk mitigation for supply chains and personnel.

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Strategic Shift Toward China and India

With Western markets closed, Russia has deepened trade ties with China and India, who together bought over €430 billion of Russian fossil fuels since 2022. However, recent US sanctions and tariffs are beginning to erode these relationships and volumes.

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Trade Diversification Reduces China Reliance

Korean exporters have strategically shifted away from China and the U.S., increasing shipments to ASEAN, EU, and India. This diversification mitigates geopolitical risk and supports supply chain resilience, but requires adaptation to new regulatory and market environments.

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Supply Chain Diversification Gains

Southeast Asia, including Thailand, is capturing sourcing share as global supply chains shift away from China due to tariffs and trade tensions. Thailand’s imports to the U.S. rose 28% in 2025, positioning the country as a key alternative for international supply chain strategies.

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China-Japan Rare Earths Standoff

China’s sweeping export controls on rare earths and dual-use goods to Japan have escalated, threatening up to $17 billion in economic losses and severely disrupting high-tech supply chains. Japanese manufacturers face urgent pressure to diversify sourcing and invest in domestic alternatives.

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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.

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Sweeping Tariffs Disrupt Global Trade

The United States implemented a 10% global tariff and reciprocal duties up to 50%, triggering extreme market volatility, retaliatory measures, and a major shift in trade patterns. These tariffs have increased costs, complicated supply chains, and forced businesses to reassess sourcing and investment strategies.

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Energy Transition Drives High Costs

Germany’s shift away from Russian energy and nuclear power has resulted in persistently high energy prices and supply insecurity. This undermines industrial competitiveness, deters investment, and increases vulnerability in critical infrastructure, with significant implications for energy-intensive sectors and supply chains.

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Political and Alliance Stability at Risk

The crisis tests the cohesion of NATO and the transatlantic alliance, with economic coercion undermining trust among allies. The UK’s support for Greenland’s sovereignty and collective security is at odds with US demands, raising diplomatic and security risks for international businesses.

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Fed Independence Faces Political Threats

The US Federal Reserve is under unprecedented political pressure, with DOJ subpoenas against Chair Powell amid Trump administration efforts to influence rate policy. Erosion of central bank independence risks market volatility, higher inflation, and diminished investor confidence in US assets.

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Global Supply Chain Vulnerabilities

China’s tightening of export controls on critical minerals and dual-use goods, especially to Japan, highlights the fragility of global supply chains. These actions, which impact sectors from semiconductors to EVs, force multinationals to reassess sourcing and resilience strategies amid rising geopolitical risk.

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Nearshoring Drives Supply Chain Shifts

Mexico’s proximity to the US and resilient manufacturing sector have accelerated nearshoring, attracting investment and supply chain reconfiguration. Export growth to the US reached 9% in 2025, positioning Mexico as a strategic alternative amid global trade disruptions and China tariffs.

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Foreign Investment Flows Amid Volatility

Despite rising market volatility and a slight increase in sovereign risk, Indonesia saw Rp1.44 trillion in foreign capital inflows in early January 2026, mainly into equities and securities. Persistent inflows signal continued international investor interest, though bond and currency risks remain.

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AGOA Renewal and US Trade Relations

The three-year extension of the US Africa Growth and Opportunity Act (AGOA) provides crucial duty-free access for South African exports, supporting jobs and investment. However, eligibility reviews and strained US relations introduce uncertainty for long-term trade and supply chain planning.

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Semiconductor Industry Dominance

Taiwan’s TSMC holds over 70% global market share in advanced chip manufacturing, driving AI and tech supply chains. Its expansion in the US and record profits underscore Taiwan’s critical role, but also expose it to geopolitical risks and trade policy shifts.

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Supply Chain Diversification and Realignment

Indian exporters are actively shifting supply chains, establishing subsidiaries in the US and Africa, and targeting new markets in Europe and Asia to offset US tariff risks. This trend is accelerating India’s integration into alternative global value chains and reducing overdependence on single markets.

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Regulatory And Tax Policy Volatility

The government has proposed sharp tax hikes and subsidy reforms to address budget shortfalls. Frequent regulatory changes, opaque enforcement, and unpredictable fiscal policy increase compliance costs and risk for international companies and investors.

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Political Risk and 2026 Election Uncertainty

Brazil’s presidential election in October 2026 is a major source of uncertainty for investors. Market sentiment is sensitive to potential shifts in economic policy, fiscal reforms, and institutional stability, with volatility expected in currency and asset prices as the election approaches.

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Critical Minerals and Rare Earths Race

Brazil is emerging as a strategic hub for critical minerals, including lithium and rare earths, amid global supply chain tensions. The EU and Brazil are advancing joint projects, while US-China rivalry intensifies competition for resources, impacting investment flows and industrial policy.

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Supply Chain Diversification Amid Trade Fragmentation

Global trade tensions and US tariff policies are prompting UK firms to accelerate supply chain diversification and near-shoring. This trend is increasing operational complexity and costs, but also offers resilience against geopolitical shocks and trade disruptions.

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Geopolitical Pressures On US Allies

China’s escalation of trade controls against Japan tests US support for key allies and disrupts critical industries. These pressures complicate regional alliances, impact supply chains, and heighten risks for multinational firms operating in East Asia and North America.