Trade Competitiveness and Exports

A controlled but persistent lira depreciation supports export competitiveness in manufacturing, especially automotive and industrial goods, but imported input dependence offsets benefits. Businesses should expect continued margin volatility as FX policy, energy prices and external demand remain unstable.

Energy Import Shock Exposure

Japan remains acutely vulnerable to Middle East disruption, sourcing roughly 90-95% of crude oil imports from the region. Reserve releases, fuel subsidies and supply stress are raising costs for transport, chemicals, manufacturing and trade-dependent sectors across the economy.

China Decoupling And Trade Diversion

US-China goods trade continues to shrink, with China’s share of US imports down to 7% in 2025 from 23% in 2017. Trade is rerouting through Taiwan, Mexico, Vietnam and ASEAN, reshaping supplier footprints and customs exposure.

Power Security Becomes Critical

Vietnam is accelerating energy diversification as officials warn of possible southern electricity shortages in 2027–2028 from declining domestic gas and LNG constraints. Faster grid upgrades, imports, storage, and renewables deployment will be crucial for high-tech manufacturing, industrial parks, and data-center investment.

Auto Trade and Production Rebalancing

Automotive trade patterns are being reshaped by US pressure and bilateral dealmaking. Auto exports account for roughly 30% of Japan’s exports to the United States, while simplified rules for US-made vehicle imports into Japan signal more localized, politically driven production strategies.

Trade Diversification Pressures

Exports to China jumped 64.2% and to the United States 47.1%, while the European Union rose 19.3%, reinforcing reliance on a few major markets despite broad strength. Businesses should monitor concentration risk, policy shifts and demand changes across key export destinations.

Food security and wheat sourcing

Egypt still imports about 10 million tonnes of wheat annually, even as it targets 5 million tonnes of local procurement and holds roughly six months of strategic reserves. Commodity price volatility and shipping disruptions keep food-processing costs and subsidy pressures elevated.

Public investment and logistics constraints

Federal infrastructure investment rose 49.7% in real terms in January-February to R$9.5 billion, offering some support to transport and logistics capacity. However, discretionary spending remains exposed to fiscal compression, limiting execution certainty for ports, roads, and broader supply-chain modernization.

AUKUS Industrial Uncertainty Persists

Australia’s AUKUS submarine program is driving defence infrastructure and industrial spending, especially in Western Australia, but delivery risks remain contested. For business, this means opportunities in defence supply chains alongside uncertainty over timelines, workforce constraints, and long-term procurement planning.

Oil Export Resilience Under Sanctions

Despite conflict and sanctions, Iran is still exporting about 1.6mn to 2.8mn barrels per day, largely to China, generating roughly $139mn to $250mn daily. This sustains state revenues while complicating sanctions compliance and global energy sourcing decisions.

Energy Infrastructure Vulnerability

Russian strikes continue to damage power and heating assets, creating blackout and winter-readiness risks. Work is underway at 245 facilities, but delayed external support, including €5 billion intended for winter preparation, raises operational uncertainty for manufacturers and critical services.

Trade Defenses Reshape Sourcing

Vietnam is tightening trade-remedy enforcement, including temporary anti-circumvention measures on selected Chinese hot-rolled steel at 27.83%. This signals tougher compliance for importers, higher sourcing complexity for industrial buyers, and greater pressure to diversify suppliers, documentation systems, and product specifications.

Energy Infrastructure Concentration Risk

Iran’s export system remains heavily concentrated around Kharg Island, which handles roughly 90% of crude exports, though Jask, Lavan, and Siri are being expanded. This concentration leaves regional supply chains exposed to military escalation, sabotage, and sudden interruptions in loading and storage operations.

Won Volatility And Hedging

Foreign-exchange instability is becoming a material operating risk. Average daily won-dollar spot turnover hit a record $13.92 billion in March, while the won weakened to 1,486.64 per dollar and intraday moves reached 11.4 won, complicating pricing, margins and treasury planning.

Export Strength, Margin Pressure

Exports rose 9.9% year-on-year in February to US$29.43 billion, with US shipments up 40.5%, but imports surged 31.8%, creating a US$2.83 billion deficit. Strong electronics demand is offset by freight costs, energy volatility and baht pressure squeezing exporter margins.

Targeted Aid Over Broad Subsidies

Paris is rejecting economy-wide fuel or energy subsidies, favoring narrow support for exposed sectors such as transport, farming, fishing, and potentially chemicals. Companies should expect selective relief only, with most input-cost shocks remaining on private balance sheets.

Fiscal Reform and Budget Pressure

Berlin faces difficult choices on debt brake reform, taxes, and spending as budget gaps stretch into the next planning cycle. Businesses should expect uncertainty around VAT, corporate taxation, subsidies, and public investment timing, affecting financing conditions and medium-term demand visibility.

Export Controls Tighten Tech Risk

Semiconductor and AI-server enforcement is intensifying after alleged diversion of roughly $2.5 billion in restricted US hardware to China. Businesses in electronics, cloud, and advanced manufacturing face higher compliance costs, tighter licensing scrutiny, intermediary risk, and potential disruption across technology supply chains.

Transport Protests Threaten Logistics

French hauliers are planning blockades as fuel costs, around 30% of operating expenses, surge and government aid is seen as inadequate. Road protests raise risks of delivery delays, higher domestic freight costs, and disruption around major logistics corridors.

Government Market Interventions

Seoul has activated emergency stabilization measures, including restrictions on naphtha and selected fuel exports plus broader supply-management powers. These interventions may protect domestic industry, but they also create regulatory uncertainty, allocation distortions and compliance requirements for energy, chemical and trading firms.

Danantara Governance Investment Risk

The sovereign fund Danantara is expanding rapidly but faces scrutiny over governance, political interference and capital allocation. It has deployed $1.4 billion into Garuda, $295 million to Krakatau Steel, and targets $14 billion this year, affecting investor confidence and state-partner opportunities.

Sector Strain and Labor Gaps

Weak business investment, prolonged employment declines, and skills shortages are weighing on manufacturing and regional scale-up capacity. Food manufacturing alone supports 489,333 jobs and £42 billion in output, yet rising energy and regulatory costs are increasing insolvency risks and undermining expansion plans.

Punitive Pharma Tariffs Reshape Trade

Washington’s new Section 232 regime imposes up to 100% tariffs on patented drugs and ingredients for noncompliant firms, with 120-180 day deadlines. The policy materially alters import economics, supplier selection, pricing strategies, and market-entry planning for multinational drug manufacturers.

Telecom and Regulatory Centralization

Regulatory changes in telecom and other sectors are raising concerns about competition and operating costs. U.S. officials question the independence of Mexico’s new telecom regulator and criticize spectrum fees among the region’s highest, a combination that can deter digital infrastructure investment and raise connectivity costs for businesses.

Carbon Border Levy Frictions

France is pressing Brussels to pause the EU carbon border levy on imported fertilisers, but the Commission has resisted. The dispute highlights rising compliance costs for carbon-intensive sectors and uncertainty for agrifood, chemicals, steel, and import-dependent supply chains.

US-Taiwan Trade Security Alignment

Taiwan’s February trade pact with the United States cuts tariffs on up to 99% of goods while binding tighter export-control, digital, and investment rules. Businesses face new compliance demands, sanctions alignment, and reduced scope for cross-strait commercial flexibility.

Manufacturing and FDI Push

Ankara is intensifying efforts to attract global capital with incentives for exporters, high-tech industry and strategic manufacturing. Officials say FDI stock has reached about $290 billion, while new proposals include tax advantages, digital visas and streamlined permits for foreign investors.

Russia Sanctions Maritime Enforcement

London has authorized boarding and detention of sanctioned Russian shadow-fleet tankers in British waters. With more than 500 vessels sanctioned and roughly 75% of Russian crude using such ships, shipping, compliance, insurance, and routing risks are rising materially.

Energy Nationalism and Pemex Exposure

Mexico’s energy framework remains a major investment constraint as U.S. officials challenge preferential treatment for Pemex and CFE, permit delays and fuel restrictions. Pemex’s overdue payments above $2.5 billion to U.S. suppliers and broader debt pressures raise counterparty, compliance and operating risks for energy, industrial and logistics investors.

Semiconductor Export Concentration Risk

March exports reached a record $86.13 billion, with semiconductors rising 151.4% to $32.83 billion and driving about 70% of gains. This strengthens Korea’s trade position but heightens exposure to AI-cycle swings, memory pricing, and concentration risk for investors and suppliers.

Oil Shock and Baht Volatility

Thailand’s import dependence leaves it highly exposed to the Middle East oil shock. The baht has fallen more than 5% this month, with volatility near 9%, raising import costs, weakening investor sentiment and increasing hedging, logistics and pricing risks for businesses.

Nearshoring Potential with Constraints

Mexico remains a leading nearshoring destination because of its tariff-free access to the U.S. market and deep manufacturing integration, yet investment conversion is slowing. National investment reached 22.9% of GDP in late 2025, below the government’s 25% target, reflecting uncertainty over USMCA, regulation, infrastructure and security.

Customs and Regulatory Frictions

New customs rules in force since January 2026 reportedly increase broker liability, documentation burdens, sanctions and seizure powers, while health approvals still face delays of up to two years. These frictions raise border compliance costs, slow product launches and complicate inventory planning.

Water And Municipal Infrastructure Stress

Water-system constraints are becoming a practical business risk for industry, mining and urban operations. Government reforms and major projects, including uMkhomazi Dam and Lesotho Highlands Phase 2, may unlock investment, but current shortages and network weakness still threaten continuity.

Tariffs Raise Domestic Cost Base

Recent studies indicate roughly 55-95% of tariff costs are passed through to US importers and consumers, lifting inflation by about 0.5 percentage points. Import-dependent sectors face margin pressure, while foreign suppliers must reassess pricing, inventory, and localization strategies for the US market.

EU-Mercosur trade opening

Provisional EU-Mercosur application starts 1 May, immediately reducing tariffs on selected goods and improving trade-rule predictability. For Brazil, this can reshape export flows, investment planning and sourcing decisions, although legal and political resistance in Europe still clouds full implementation.