Mission Grey Daily Brief - February 11, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. The conflict in the DRC has the potential to spiral into a wider regional war, impacting mineral-rich regions and displacing civilians. Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. Rising tensions in the Middle East, including a fragile ceasefire between Israel and Hamas, and Iran's threat to shut down the Strait of Hormuz, could have significant implications for global oil trade. China's demographic crisis, marked by a decline in marriages and a shrinking population, poses challenges for the country's long-term economic growth.

Conflict in the Democratic Republic of Congo

The Democratic Republic of Congo (DRC) is currently experiencing a brutal conflict that has the potential to spiral into a wider regional war. The conflict is centred around the eastern region of the country, which is rich in minerals and has never enjoyed much stability. The Rwanda-backed rebel group M23 has made significant advances in the region, seizing the capital of North Kivu state and moving south to expand its territory. The humanitarian consequences of the violence are profound, with sexual violence as a weapon of war, children forced to fight, and millions displaced. The conflict is the latest episode of a decades-long struggle in the region, with about 6 million people killed and more than 3 million displaced in the most recent fighting.

The DRC is a prime example of the "resource curse", where an abundance of raw materials leads to authoritarian regimes and civil wars. The country has approximately $24 trillion worth of natural resources, including cobalt, copper, niobium, tantalum, coltan, diamonds, gold, silver, zinc, manganese, tin, uranium, and coal. However, about a fifth of its population relies on aid to survive. The weak state institutions and corrupt governments have failed to benefit the people or invest in essential infrastructure.

The regional summit aimed at ending the violence ended with a call for an immediate and unconditional ceasefire. However, many fear that a ceasefire is less likely than escalation to a wider regional war. The fate of civilians in the region, who are frequently the subject of ethnically targeted attacks, is at stake.

Trump's Trade War

Trump's trade war has led to retaliation from China, with China's economy facing a quadruple blow despite a spending boom. The deflationary crisis in China is compounded by sluggish domestic consumption, an out-of-character production slump, and the recent imposition of tariffs from the United States. As the world's leading industrial manufacturer and top exporter of goods, the health of the Chinese economy has profound knock-on effects for global supply chains and markets.

If China remains trapped in its deflationary spiral, an influx of cut-price Chinese goods into global markets could create intense competitive pressures for global manufacturers. As the world's second-largest importer, a weakened Chinese economy could slash demand for foreign products and deprive exporters of a critical marketplace.

Trump has indicated that he is open to a deal and might not impose tariffs if countries agree to buy more US products, particularly its oil and gas. However, the seemingly ad hoc nature of Trump's announcements of tariffs has caused chaos, confusion, and some abrupt about-faces. The practical difficulties and costs of collecting duties from massive volumes of relatively low-value items have also been a major factor.

Rising Tensions in the Middle East

Rising tensions in the Middle East could have significant implications for global oil trade. A fragile ceasefire between Israel and Hamas is at risk, with Hamas accusing Israel of breaking parts of the agreement. Trump's proposed U.S. takeover of Gaza after the war has the potential to inflame tensions in the region.

Iran's armed forces have warned that they could shut down the Strait of Hormuz if ordered by top officials, a move that would disrupt global oil trade. The Strait of Hormuz is a vital waterway for global energy markets, handling about 20 percent of the world's oil trade. Any disruption could trigger a surge in oil prices and escalate tensions between Iran and Western nations.

China's Demographic Crisis

China is facing a demographic crisis, marked by a decline in marriages and a shrinking population. The number of marriages in China fell to 6.1 million last year, 20% lower than in 2023 and down by more than 50% since 2013. The marital malaise is part of a bigger demographic crisis facing China. Although China boasts the world's second-largest population, at 1.4 billion people, the country's population is declining.

Until 2015, the state enforced a "one-child" policy to avoid urban overcrowding. However, since then, the high costs of child care and education have stymied government efforts to encourage people to have children. The shrinking population poses challenges for the country's long-term economic growth and social stability.

Conclusion

The global situation is currently characterised by a brutal conflict in the Democratic Republic of Congo, Trump's trade war, rising tensions in the Middle East, and China's demographic crisis. These events have the potential to impact global supply chains, markets, and oil trade, as well as regional stability and social cohesion. Businesses and investors should closely monitor these developments and consider their potential impact on their operations and investments.

Themes around the World:

Semiconductor Industry Policy Overhaul

South Korea passed a landmark law to strengthen its semiconductor sector, establishing a presidential commission and special funding. The law aims to secure technological leadership in AI chips, centralize support, and incentivize regional development, directly impacting global tech supply chains and investment flows.

Industriekrise und Exportdruck

Deutschlands Wachstum bleibt schwach (2025: +0,2%; Prognose 2026: +1,0%), während die Industrie weiter schrumpft. US-Zölle und stärkere Konkurrenz aus China belasten Exporte und Margen; Investitionen verlagern sich, Lieferketten werden neu ausgerichtet und Kosten steigen.

Mass Protests and Political Instability

Widespread protests since late 2025, met with violent crackdowns and internet blackouts, have resulted in thousands of deaths and tens of thousands of arrests. The unrest reflects deep societal grievances, undermines regime legitimacy, and creates unpredictable risks for business continuity and investment.

Shifting Trade Partnerships and Diversification

US unpredictability has prompted partners like India, the EU, and others to seek alternative trade relationships, including new deals with China. This diversification reduces US leverage, alters global trade flows, and impacts long-term market positioning for multinationals.

Korea semiconductor industrial policy reboot

A new Special Act creates a presidential commission, dedicated funding and cluster support to strengthen the entire chip supply chain. Regulatory streamlining and regional incentives can attract foreign suppliers, but unresolved labor flexibility debates may constrain rapid R&D and ramp-ups.

Domestic Economic Policy and Inflation Management

Turkey’s central bank continues cautious monetary easing as inflation falls to 30.9% in late 2025, with targets of 16% for 2026. Policy predictability, declining inflation, and supportive infrastructure investments are expected to foster a more stable business environment, though volatility remains a concern.

BOJ tightening and yen swings

Rising Japanese government bond yields and intervention speculation are increasing FX and funding volatility. Core inflation stayed above 2% for years and debt is about 230% of GDP, raising hedging costs, repatriation risk, and pricing uncertainty for exporters and importers.

Manufacturing Push Through Deregulation

India aims to triple exports to $1.3 trillion by 2035 by prioritizing manufacturing in 15 sectors and launching the National Manufacturing Mission. The focus is on regulatory simplification, building manufacturing hubs, and reducing red tape rather than heavy subsidies, to boost competitiveness and attract investment.

Supply Chain Diversification and Resilience

Brazilian and regional supply chains are undergoing realignment due to geopolitical tensions, climate events, and infrastructure investments. Companies are investing in logistics, digital tools, and nearshoring to mitigate disruption risks and enhance operational reliability across the Americas.

Renewable Energy Transition Partnerships

Indonesia is accelerating its energy transition through partnerships with global firms, notably China’s GCL, to develop renewable and waste-to-energy projects. These initiatives support emissions reduction targets and open new opportunities for clean energy investment.

Regulatory Reform and Industrial Competitiveness

German industry leaders urge accelerated regulatory reforms, including reduced bureaucracy and faster permitting for industrial projects. Structural changes are seen as essential to counteract stagnation, improve competitiveness, and ensure Germany remains a leading destination for global business operations.

U.S. tariff and ratification risk

Washington is threatening to lift tariffs on Korean goods from 15% to 25% unless Seoul’s parliament ratifies implementation laws tied to a $350bn Korea investment pledge. Exporters face pricing shocks, contract renegotiations, and accelerated U.S. localization pressure.

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.

Geopolitical Tensions and Regional Risks

Rising tensions with Iran and the UAE, along with broader Gulf instability, pose risks to business continuity, investment security, and supply chain reliability. Strategic risk management and contingency planning are essential for international firms operating in the region.

Escalating US Tariff Policy Volatility

Recent months have seen the US intensify its use of tariffs as a strategic tool, with threats of 100% tariffs on Canadian goods and new sectoral levies. This volatility increases uncertainty for global supply chains and investment planning, impacting cross-border trade flows and business costs.

Power stability, grid bottlenecks

Eskom reports 200+ days without load-shedding and higher availability, boosting operational continuity. However, slow transmission expansion and contested unbundling constrain new generation connections, risking future curtailment for energy-intensive firms and delaying renewable-led decarbonisation plans.

EV incentives and industrial policy resets

Les dispositifs de soutien aux véhicules électriques se reconfigurent: fin du leasing social après 50 000 véhicules, ajustements de bonus et débats fiscaux (malus masse EV lourd supprimé). Cela crée volatilité de la demande, impacts sur chaînes auto, batteries, réseau et occasion.

Tax and GST compliance digitization

Authorities are shifting to data-driven, risk-based enforcement: expanded e-invoicing and automated “nudge” campaigns, plus proposed e-way bill reforms toward trusted-dealer, tech-enabled logistics. This raises auditability and system-risk exposure, especially for MSMEs and cross-border traders.

Afreximbank and Regional Integration

South Africa’s accession to Afreximbank unlocks up to $11 billion in funding for infrastructure, energy, and industrialization. This supports value-added manufacturing, Black business participation, and deeper integration into the African Continental Free Trade Area, enhancing regional trade prospects.

CBAM and green compliance pressure

EU officials explicitly linked deeper trade integration to climate alignment, warning Turkish exporters about Carbon Border Adjustment Mechanism exposure without compatible carbon pricing and reporting. Carbon-cost pass-through could hit steel, cement, aluminum and chemicals, driving urgent decarbonization and MRV investments.

Wage growth versus inflation

Spring ‘shunto’ negotiations aim to sustain at least 5% wage hikes for a third year, after two years above 5%, to restore falling real wages. Outcomes will influence domestic demand, retail pricing, service-sector margins, and labor cost assumptions for multinationals operating in Japan.

Political-Military Influence on Policy

Military leadership’s direct involvement in economic negotiations and investment decisions signals institutional fragility. This dynamic introduces unpredictability in regulatory enforcement and business climate, impacting long-term planning and foreign investor confidence.

IMF-Led Economic Reform Momentum

Recent IMF engagement and disbursement of $1.2 billion have driven fiscal discipline, tax reforms, and macroeconomic stabilization. While these measures boost investor confidence, they also entail stringent conditions affecting trade, investment, and operational flexibility for foreign businesses.

Immigration Tightening Hits Talent Pipelines

New US visa restrictions affect nationals of 39 countries, and higher barriers for skilled work visas are emerging, including steep sponsorship costs and state‑level limits. Firms should anticipate harder mobility, longer staffing lead times, and higher labor costs for R&D and services delivery.

FDI Attraction And Industrial Ecosystems

Vietnam ranks among the world’s top 15 FDI destinations, leveraging administrative reform, ESG-compliant infrastructure, and integrated industrial parks. Enhanced support services and financial incentives are driving sustainable industrial development and long-term investor retention.

West Bank escalation and sanctions

Rising settler violence, expanded Israeli operations and growing international scrutiny increase risks of targeted sanctions, legal challenges and heightened compliance screening. Multinationals must reassess counterparties, project sites and procurement to avoid exposure to human-rights-related restrictions and activism-driven disruptions.

Export controls on advanced computing

U.S. national-security export controls on AI chips, tools, and know-how remain a central constraint on tech trade with China and other destinations. Companies must harden classification, licensing, and customer due diligence, while planning for sudden rule changes and market loss.

Gaza border operations and disruption risk

Rafah crossing reopening is proceeding with tight security screening and limited volumes (initially ~150–200 people/day), affecting movement and regional stability perceptions. Escalation or administrative disputes can disrupt Sinai logistics, labor mobility, and investor risk appetite.

Data protection enforcement and cyber risk

CNIL’s €5m fine over the France Travail breach (36.8m affected) highlights tougher enforcement expectations. Companies face increased scrutiny on IAM, MFA, vendor access, and breach response, impacting cloud architecture, outsourcing models, and regulatory exposure.

US-Mexico Security and Border Cooperation

Security concerns—drug trafficking, border management, and cartel violence—remain central in US-Mexico relations. High-level diplomatic engagement is ongoing, with both governments prioritizing cooperation to safeguard cross-border trade and supply chain stability amid persistent risks.

Investment liberalization and market access

Saudi investment is surging, with total investment topping SR1.5 trillion ($400bn) in 2025 and FDI stock reaching SR1.05 trillion ($280bn) by Q3 2025. Capital markets opened wider from Feb. 1, reshaping entry, financing, and partnership strategies.

Hormuz chokepoint maritime insecurity

Heightened US-Iran confrontation is already depressing Gulf shipping activity and increasing war-risk premiums. Iran threatens disruption of the Strait of Hormuz and adjacent waterways; even limited incidents can spike freight rates, insurance, and delivery times for energy and container cargo.

Infrastructure Control and Sovereignty Disputes

The Australian government’s push to reclaim the Chinese-leased Port of Darwin underscores growing concerns over foreign control of strategic assets. The dispute has direct implications for logistics, trade flows, and foreign investor confidence in Australia’s infrastructure sector.

Labor Market Saudization Intensifies

The government has raised Saudization rates to 60% in key private sector roles, including marketing and sales, and restricted senior positions to nationals. These measures impact expatriate hiring, increase compliance costs, and require strategic workforce adjustments for international businesses.

Export Controls on AI Compute

Evolving Commerce/BIS restrictions on advanced AI chips and related technologies are tightening licensing, end‑use checks, and due diligence. Multinationals must segment products, manage re‑exports, and redesign cloud/AI deployments to avoid violations and sudden shipment holds in sensitive markets.

Energy Sector Reform and Investment

Mexico is opening its energy sector to private and foreign investment through mixed contracts and partnerships, especially in oil and power generation. However, Pemex’s financial instability and regulatory uncertainty persist, impacting energy costs, supply reliability, and long-term investment decisions.