Mission Grey Daily Brief - February 10, 2025
Summary of the Global Situation for Businesses and Investors
The global situation is marked by geopolitical tensions and economic uncertainty. President Donald Trump has implemented a series of policies that have significant implications for international relations and global trade. The war in Ukraine continues to escalate, with North Korea supporting Russia and a Russian oligarch warning of a potential world war. Trump's policies have also impacted allies such as Canada, Mexico, and Australia, as well as rivals like China. Trump's tariffs and trade policies have disrupted supply chains and increased costs for consumers and businesses. Trump's actions have also strained relations with allies and rivals, creating a volatile and unpredictable environment for businesses and investors.
Trump's Tariffs and Trade Policies
President Donald Trump has implemented a series of tariffs and trade policies that have significant implications for international relations and global trade. Trump's tariffs have disrupted supply chains and increased costs for consumers and businesses. Trump's tariffs on China have impacted the pharmaceutical industry, as China supplies the U.S. with approximately 30% of its active pharmaceutical ingredients. Trump's tariffs could lead to shortages or increased costs of generic drugs, putting patients at risk. Trump's tariffs have also impacted Ireland, which is highly exposed to U.S. trade policies due to historic links and an industrial policy that has relied on tax measures attractive to U.S. multinational corporations. Ireland collects much of the corporate tax revenue that a more coherent U.S. tax code would channel back across the Atlantic. Trump's tariffs have also impacted Canada, which is highly integrated with the U.S. auto industry and relies on Canada's heavier crude oils. Trump's tariffs have disrupted supply chains and increased costs for Canadian businesses and consumers. Trump's tariffs have also impacted Mexico, which is highly integrated with the U.S. auto industry and relies on Mexican labor for manufacturing. Trump's tariffs have disrupted supply chains and increased costs for Mexican businesses and consumers. Trump's tariffs have also impacted Australia, which is highly integrated with the U.S. steel and aluminum industry. Trump's tariffs have disrupted supply chains and increased costs for Australian businesses and consumers.
The War in Ukraine and North Korea's Involvement
The war in Ukraine continues to escalate, with North Korea supporting Russia and a Russian oligarch warning of a potential world war. North Korea has sent thousands of soldiers to fight alongside Russian troops, resulting in heavy losses for both sides. A Russian oligarch, Andrey Melnichenko, has warned that a world war could follow if <co:
Further Reading:
Chinese construction risks turning the Yellow Sea into a flashpoint - Business Insider
Elite North Korean troops return to the fight after devastating battlefield losses - New York Post
Putin Ally Warns Trump Escalation in Ukraine 'Will Lead to a World War' - Newsweek
They helped the US fight the Taliban. Now Trump has left these Afghans stranded - The Independent
Trump is intensifying his trade war. Australia may not be immune - Sydney Morning Herald
Trump will formally announce steel and aluminum duties Monday, including on Canada - Toronto Star
Themes around the World:
Financial Market Volatility and Currency Risks
Japan faces a triple market shock with plunging stocks, weakening yen, and rising bond yields reaching multi-decade highs. The yen's depreciation and bond market stress reflect investor anxiety over geopolitical risks and economic uncertainty, complicating monetary policy and increasing volatility in global financial markets.
Surge in Foreign Investment
Thailand experienced a significant increase in foreign investment in 2025, with 869 new global firms approved, marking an 11% rise in investor numbers and a 72% surge in investment value compared to 2024. Key investors hail from Japan, the US, Singapore, China, and Hong Kong, with the Eastern Economic Corridor attracting 33% of total foreign investment, bolstering Thailand's economic growth and industrial development.
Political Instability and Governance Challenges
Pakistan faces ongoing political instability marked by frequent government changes and governance issues. This uncertainty undermines investor confidence, disrupts policy continuity, and complicates long-term business planning, increasing country risk for international investors and multinational corporations operating in Pakistan.
Foreign Investment and Economic Security
Foreign-invested exporters, though a small fraction of firms, contribute disproportionately to South Korea's exports, raising economic security concerns. The government is enhancing screening mechanisms to manage risks from indirect foreign control and national security threats, balancing the benefits of foreign capital inflows with safeguarding critical supply chains and domestic industrial strength.
Pound Sterling Volatility and Currency Risks
UK budget uncertainty and fiscal policy ambiguity have intensified GBP volatility, pressuring the pound against major currencies. This volatility affects import costs, export competitiveness, and investor risk appetite, complicating forex trading strategies and international business operations dependent on currency stability.
Industrial Competitiveness and Supply Chain Reshaping
Saudi Arabia leverages its strategic location and resource wealth to become a key player in regional industrial clusters. The Kingdom is capitalizing on global supply chain restructuring by developing advanced manufacturing, mining, and petrochemical sectors, supported by infrastructure mega-projects and policies promoting local content and export-oriented production.
Fiscal Pressure Ahead of Autumn Budget
The upcoming Autumn Budget faces intense pressure to balance rising public spending with fiscal discipline. The government confronts a £25-30 billion fiscal gap, likely necessitating tax increases or spending cuts. These measures could dampen economic growth, influence corporate profitability, and alter the UK's attractiveness for foreign investment.
Oil Production and Sanctions Impact
Venezuela's oil output remains below pre-crisis levels, with official figures around 1.13 million bpd. U.S. sanctions and operational restrictions limit foreign investment and revenue flows, though Chevron's limited license and Russian chemical imports sustain production. Oil remains the economic backbone, but infrastructure decay and corruption hinder recovery, affecting global energy markets and trade dynamics.
Geopolitical Tensions and Trade Risks
Ongoing geopolitical uncertainties, including US-Russia-Ukraine conflict diplomacy and US-China trade tensions, continue to disrupt global supply chains and investment confidence. Proposed US export controls on advanced AI chips and China's domestic chip production efforts intensify trade frictions, impacting multinational corporations, technology transfer, and cross-border investment strategies.
Critical Minerals and Resource Sovereignty
Canada's vast reserves of critical minerals like nickel, copper, and rare earth elements position it as a strategic player in global supply chains. However, public sentiment favors limiting foreign investment to protect sovereignty, potentially slowing development. This tension impacts investment flows, regulatory policies, and the pace of resource exploitation essential for clean technologies and economic security.
Infrastructure Deficiencies and Load-Shedding Impact
Persistent electricity shortages and infrastructure bottlenecks, particularly in logistics hubs like the Port of Durban, increase operational costs and disrupt supply chains. Load-shedding has eased but remains a concern, limiting South Africa's competitiveness and deterring investment in energy-intensive sectors.
Credit Rating Upgrades and Market Optimism
Recent upgrades by S&P Global and removal from the FATF grey list have boosted market sentiment, leading to a strong rally in equities, bonds, and the rand. This improved credit profile enhances South Africa’s attractiveness to investors, though sustained economic growth and job creation remain critical to maintaining momentum and justifying valuations.
Political and Regulatory Risks
Political risk has risen to the second most pressing concern, with new regulatory red tape affecting offshore investors and potential industrial retrenchments. Political instability and regulatory changes can disrupt investment flows, supply chains, and operational continuity, requiring coordinated government and business responses.
Taiwan's Semiconductor Dominance
Taiwan, led by TSMC, controls over 90% of advanced chip fabrication, making it a critical hub for global AI hardware supply chains. This dominance fuels economic growth but creates supply chain bottlenecks and geopolitical vulnerabilities, impacting international trade and investment strategies worldwide.
Emergence of Quantitative Finance Sector
Israel is poised to become a global hub for quantitative finance innovation, leveraging its technical talent and academic strengths. The sector's growth, supported by AI and regulatory changes, offers new export opportunities in financial technologies, potentially reshaping Israel's economic profile and attracting international investment in fintech and asset management.
Economic Slowdown and Recovery Challenges
South Africa faces a persistent economic slowdown, ranked as the top business risk with 78% of firms reporting losses. This sluggish growth impacts liquidity, investment, and consumer demand, creating volatility and uncertainty that undermine business confidence and balance sheets. Proactive risk management and scenario planning are essential to navigate this environment.
Delays in Hydrogen Bus Fleet Deployment
Aberdeen's hydrogen bus fleet faces ongoing delays due to fuelling station technical issues, with no confirmed return date. The 15 buses have been inactive since September 2024, impacting public transport decarbonization efforts. While refurbishment and new mobile fuelling facilities are underway, the delay highlights challenges in hydrogen refuelling infrastructure reliability, affecting operational timelines and investor confidence in hydrogen mobility projects.
US-China Economic Tensions Impact
Australia is increasingly exposed to economic disruptions from US-China rivalry, including trade wars and geopolitical tensions over Taiwan. These dynamics threaten Australia's trade and investment environment, requiring strategic economic resilience and diversification to mitigate risks from shifting global power balances and potential financial crises linked to US debt and currency instability.
Trade Agreements and Regional Integration
Indonesia's participation in regional trade agreements like the ASEAN Economic Community and RCEP enhances market access and reduces trade barriers. These agreements facilitate smoother cross-border trade and investment but also increase competition from regional players.
Artificial Intelligence and Market Volatility
Massive investments in AI have driven market valuations, particularly in tech giants like Nvidia, but also raised concerns about speculative bubbles and employment impacts due to automation. AI-related job dismissals accelerated in 2025, affecting labor markets and consumer sentiment. Regulatory debates on AI export controls add uncertainty, influencing investor risk appetite and sector rotations in equity markets.
Persistent Weak Korean Won
South Korea is experiencing a sustained period of a weak won, with forecasts indicating exchange rates above 1,400 won per dollar through 2026. This structural currency depreciation, driven by increased outbound investments and limited catalysts for appreciation, undermines export competitiveness and raises import costs, negatively impacting corporate profit margins and domestic consumption.
Inflation and Labour Market Dynamics
Inflation remains elevated but shows signs of peaking, while wage growth slows and unemployment rises to a four-year high. These dynamics constrain consumer spending and business activity, posing challenges for monetary policy and economic growth, with the Bank of England closely monitoring inflation trends ahead of potential interest rate adjustments.
Artificial Intelligence and Market Volatility
Massive investments in AI have driven market valuations, particularly in tech stocks like Nvidia, but also raised concerns about an AI bubble. AI adoption is accelerating job dismissals, impacting labor markets and consumer sentiment. Regulatory debates and export restrictions on AI technologies add uncertainty, influencing investor risk appetite and sector rotations in U.S. equity markets.
Structural Economic Challenges and Demographic Decline
South Korea confronts deep structural vulnerabilities including demographic freefall with a fertility rate of 0.75 and an aging population projected to reach 46.5% over 65 by 2067. Combined with economic stagnation, high household debt, and intensifying regional competition, these factors threaten long-term growth, labor supply, innovation capacity, and national security sustainability.
Credit Risk and Sovereign Risk Premium Decline
Turkey's five-year credit default swap (CDS) dropped to its lowest level since May 2018 at 233 basis points, signaling reduced perceived sovereign risk. This decline reflects improved economic fundamentals and policy measures, enhancing Turkey's attractiveness for foreign investors and lowering financing costs for businesses.
Financial Market Volatility and Credit Outlook
Global financial markets exhibit increased volatility driven by cryptocurrency selloffs, economic growth concerns, and geopolitical risks. Despite this, credit conditions remain resilient with stable defaults and healthy investor appetite. However, uneven sectoral and regional performance, coupled with policy uncertainties, could challenge market stability and influence cross-border investment strategies in 2026.
Stable Political Environment
Uruguay maintains a stable democratic political system, fostering a predictable business climate. This stability attracts foreign investment and supports long-term trade agreements, reducing country risk for international investors and multinational corporations operating in the region.
Corruption and Institutional Risks
Corruption has risen as a critical systemic risk in Ukraine's financial sector, now ranked second after the war itself. Weaknesses in law enforcement and judicial systems exacerbate business risks, undermining investor confidence and complicating financial operations. These governance challenges remain a significant barrier to improving the investment climate and economic recovery.
Government Emergency Investment Plan
President Sheinbaum is collaborating with the private sector, including business magnate Carlos Slim, to launch an emergency investment plan focused on infrastructure, housing, and connectivity. The plan involves new legislation to mobilize private capital for socially beneficial yet profitable projects, aiming to counteract economic slowdown and stimulate growth through public-private partnerships and increased infrastructure spending.
China's Global Lending Strategy
China has extended over $2.2 trillion in loans and grants globally since 2000, with a strategic shift towards lending to wealthy nations like the US, UK, and EU. This financing targets critical infrastructure, minerals, and high-tech sectors, enhancing China's geopolitical leverage and raising concerns about economic statecraft and supply chain control.
Demographic Shifts and Labor Market Trends
China's aging population and changing labor dynamics influence wage structures and talent availability. These demographic trends affect manufacturing competitiveness and consumer market evolution, prompting businesses to adjust workforce strategies and product offerings accordingly.
Currency Volatility Risks
In Turkey, currency exchange rate fluctuations are the foremost risk for businesses, causing significant financial strain. With a 73.3% impact on companies, this volatility affects operational costs, investment decisions, and profitability, necessitating robust risk management strategies to mitigate exposure and maintain competitiveness in international trade and investment.
Political Instability and Market Volatility
Political uncertainty, highlighted by Prime Minister Netanyahu's pardon request and government instability, has increased market volatility. This uncertainty complicates budget approvals and economic decision-making, potentially raising local risk premiums and affecting foreign and domestic investment flows.
Rising Protectionism Against China
Mexico is adopting a more protectionist stance towards China, imposing tariffs on key imports like auto parts and electronics. This shift aims to preserve free trade with North America but risks retaliatory measures from China, potentially disrupting supply chains, increasing production costs, and inflating consumer prices, thereby affecting Mexico's export competitiveness and investor confidence.
Fiscal Challenges and Credit Risks
France's failure to finalize the 2026 budget on schedule raises concerns over meeting deficit reduction targets, with potential reliance on special legislative procedures. Credit rating agencies have issued warnings, reflecting fiscal pressures that could increase borrowing costs and dampen investor sentiment. The ongoing budget battles exacerbate economic uncertainty, impacting public finances and long-term growth prospects.
US-Taiwan Trade and Defense Pressures
The US demands Taiwan relocate 50% of semiconductor manufacturing to the US and increase defense spending to as much as 10% of GDP, while imposing tariffs on Taiwanese imports. Taiwan resists these demands due to operational and economic constraints, creating complex diplomatic and economic tensions impacting trade and investment strategies.