
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.
Further Reading:
China's economy facing quadruple blow despite spending boom - Newsweek
February 10: The front page of Times of Malta 10, 25 and 50 years ago - Times of Malta
Iran Makes Threat Over Key World Oil Supply Route - Newsweek
News Wrap: Ceasefire at risk as Hamas accuses Israel of breaking parts of agreement - PBS NewsHour
The tragedy of the Democratic Republic of Congo - The New Statesman
Trump Tariff Escalation, Libya Mass Graves, Tractors v. Mercosur - Worldcrunch
Trump is intensifying his trade war. Australia may not be immune - Sydney Morning Herald
Trump unleashes chaos by distraction upon the international community - PBS NewsHour
Trump will formally announce steel and aluminum duties Monday, including on Canada - Toronto Star
Themes around the World:
Geopolitical Risks and Middle East Impact
Ongoing tensions in the Middle East, particularly the Israel-Iran conflict and potential disruptions in the Strait of Hormuz, pose significant risks to Japan's energy security and trade. Approximately 80% of crude oil through the strait is destined for Asia, making Japan vulnerable to oil price volatility and supply chain disruptions, impacting international trade and investment strategies.
U.S. Dependence on Chinese Rare Earths
The U.S. faces critical vulnerabilities due to its heavy reliance on China for rare earth minerals and permanent magnets essential for military and civilian technologies. China controls 60-90% of global refining and processing capacity, creating a strategic choke point that threatens national security, supply chains, and economic stability. Efforts to rebuild domestic capabilities and diversify supply chains are urgent but fragmented.
Industrial Policy and Customs Enforcement
Egypt’s government formed a mini committee to combat customs evasion, protect local industries, and safeguard state revenues. Efforts include infrastructure upgrades in industrial zones, stricter licensing, and promoting local manufacturing content, aiming to enhance industrial competitiveness, reduce illicit trade, and strengthen supply chain integrity.
Digital Fraud and E-Commerce Risks
The rise of sophisticated online scams exploiting social media and e-commerce platforms poses risks to consumer trust and digital commerce growth in Vietnam. These fraudulent schemes necessitate stronger cybersecurity measures and regulatory oversight, influencing international trade dynamics and cross-border digital transactions.
Political Polarization and Conservative Rise
Brazil’s political landscape is sharply divided, with Bolsonarist conservatives matching Lula’s support at 35%. This polarization reflects global conservative surges emphasizing nationalism and traditional values, influencing policy debates and legislative dynamics. The growing evangelical political influence shapes social and economic policies, creating uncertainty but also potential for deregulation and pro-business reforms.
Supply Chain Resilience and Rare Earth Ambitions
Japan is actively pursuing rare earth element production to reduce dependence on China amid global supply constraints. This strategic move aims to secure critical materials for high-tech industries, enhancing supply chain resilience. However, ongoing geopolitical tensions and limited global supply pose challenges, influencing international trade dynamics and investment in resource-related sectors.
Diplomatic Engagement to Boost Trade
Senior UK diplomats are actively engaging domestic businesses through roadshows to promote exports and international partnerships, targeting key growth sectors like defence, clean energy, and advanced manufacturing. This government-led initiative aims to unlock £7bn in economic growth by connecting 70,000 ready-to-export firms with global markets, reinforcing trade diplomacy as a core element of economic strategy.
North Atlantic Arctic Port Alliance
Ports in Nova Scotia and Northern Europe formed the Northern Lights Ports Alliance to develop Arctic maritime infrastructure aligned with NATO priorities and climate goals. Sydney Harbour in Nova Scotia is positioned as a key hub for offshore wind energy and naval operations, supporting Canada’s Arctic sovereignty and energy diversification. This alliance enhances trade resilience, supply chain security, and geopolitical influence in the strategically vital Arctic region.
Foreign Exchange Reserves and Currency Strength
Israel's foreign exchange reserves reached a record $228.25 billion, representing 41.6% of GDP, bolstering financial stability and currency resilience. The strong shekel, appreciating against major currencies, affects export competitiveness and import costs, influencing trade balances and multinational business operations within Israel.
China's Military Modernization and Regional Tensions
China's upcoming large-scale military parade and increased military exercises underscore its ambition to build a 'world-class' military by 2049. Heightened assertiveness in territorial disputes and Taiwan-related tensions reflect a more proactive defense posture, raising geopolitical risks that could impact regional stability, foreign investment confidence, and global supply chain security.
Economic Uncertainty and Business Confidence
Despite economic headwinds including inflation, rising operational costs, and geopolitical instability, UK finance and tech professionals show cautious optimism for 2025. Businesses are adopting selective hiring and operational resilience strategies to navigate fiscal challenges, while concerns over government policy and global protectionism persist, influencing investment and growth decisions.
Political Instability and Governance Risks
Turkey faces significant political instability characterized by authoritarian governance, erosion of judicial independence, and increasing political repression. Reports highlight the politicization of the judiciary, disregard for European Court of Human Rights rulings, and suppression of opposition figures. This environment undermines rule of law, deters foreign investment, and increases country risk for international businesses operating in Turkey.
Geopolitical Realignment and Trade Risks
Brazil’s foreign policy under President Lula is shifting away from the US towards China, Russia, and Iran, straining traditional alliances. This realignment impacts trade relations, digital governance, and political ties, risking reduced access to Western markets and technology. The pro-Iran stance and digital censorship requests heighten geopolitical and business uncertainties.
Escalating U.S. Tariff Policies
The Trump administration's aggressive tariff strategy, including threats of up to 70% tariffs and targeting transshipment practices, has introduced significant uncertainty in global trade. These tariffs disrupt supply chains, increase costs for U.S. businesses and consumers, and provoke retaliatory measures, complicating international negotiations and investment decisions.
Geopolitical Security Threats
India faces multi-front security challenges including hostile borders with Pakistan, China, and Bangladesh, alongside internal sabotage targeting critical infrastructure such as railways, aviation, and maritime sectors. These threats disrupt supply chains, endanger public safety, and impose significant economic costs, undermining national stability and investor confidence in India's operational environment.
European Inflation and Monetary Policy Impact
Rising energy prices driven by geopolitical instability are pushing inflation higher across Europe, including France. This inflationary pressure constrains central banks, such as the ECB, from easing interest rates, complicating economic growth prospects. Businesses face increased input costs, affecting competitiveness and investment decisions, while consumers experience reduced purchasing power, influencing demand and supply chain dynamics.
Government Regulatory Powers and Investment Climate
Bill C-5 grants the Canadian federal cabinet expansive powers to approve projects deemed in the national interest, aiming to streamline approvals and enhance investor confidence. However, critics warn this centralization risks cronyism, reduces private sector input, and may deter investment amid concerns over transparency and unilateral decision-making.
Humanitarian Crisis and Displacement
The Kremlin's offensive and buffer zone strategy have triggered massive internal displacement, with over 3.6 million Ukrainians displaced and more expected. Underfunded humanitarian aid and infrastructure destruction exacerbate social instability, posing challenges for workforce availability, consumer markets, and operational continuity for businesses.
Geopolitical Risks from Iran and Russia
Heightened physical threats from Iran in the UK now rival those from Russia, targeting dissidents and interests with potential collateral damage. Concurrently, UK sanctions on Russian military and chemical weapons actors intensify geopolitical tensions. These security risks affect investor sentiment, supply chain security, and necessitate increased defence spending.
Climate Change and Environmental Resilience
Egypt is prioritizing climate resilience and desertification mitigation, with national strategies aligned to the 2050 Climate Strategy and regional leadership roles. Investments in nature-based coastal defenses and green incentives support sustainable development. These efforts influence agricultural productivity, resource security, and regional stability, critical factors for long-term economic planning and international cooperation.
US-Mexico Political and Security Tensions
Rising diplomatic friction marked by US officials labeling Mexico as an adversary over drug trafficking and cartel influence, alongside US pressure on Mexico to extradite politicians with alleged narco ties. These tensions complicate bilateral cooperation, risk trade disruptions, and create political uncertainty impacting investor confidence and cross-border security collaboration.
France’s Labour Market and High-Paying Sectors
France's top-paying jobs cluster in aviation, corporate management, healthcare, legal, and finance sectors, with executives and specialized professionals earning above €100,000 annually. This wage structure influences talent acquisition, labor costs, and competitiveness, affecting foreign investment decisions and operational strategies in high-value industries.
Inflation and Consumer Price Dynamics
Japan's core consumer prices rose 3.7% year-on-year in May, maintaining inflation above the Bank of Japan's 2% target since April 2022. Persistent inflation pressures influence monetary policy, consumer spending, and corporate costs, affecting investment strategies and supply chain pricing within Japan's economy.
Shifting Foreign Policy and Geopolitical Alignments
Under President Lula, Brazil is distancing itself from the US, adopting a pro-Iran stance and strengthening ties with China and Russia. This realignment affects trade, digital governance, and diplomatic relations, risking alienation from Western markets and technology sources. The geopolitical shift introduces uncertainties for international investors and complicates Brazil’s global economic integration.
Security and Crime Risks Affecting Trade
Turkey's low ranking on the Global Peace Index reflects internal security challenges, including high crime rates and political instability. Additionally, increasing incidents of drug trafficking via Turkish-flagged vessels expose vulnerabilities in maritime security, potentially leading to stricter inspections, reputational damage, and increased costs for international shipping and trade.
Unemployment, Informal Economy, and Economic Resilience
Discrepancies in official unemployment statistics versus informal sector activity reveal a complex labor market. The informal economy, potentially contributing up to 25% of GDP, supports millions and offers resilience amid high official unemployment, influencing consumer markets, labor supply, and social stability.
Thailand-Cambodia Border Tensions
Ongoing unresolved disputes along the Thai-Cambodian border, including military standoffs, visa restrictions, and trade bans, exacerbate regional instability. Heightened military patrols, border closures, and diplomatic friction risk disrupting cross-border trade, labor flows, and supply chains, while nationalist sentiments and potential escalation pose significant geopolitical and security risks.
Escalating Tariff Policies and Trade Wars
The Trump administration's aggressive tariff hikes, including up to 70% on imports from various countries and additional 10% tariffs on BRICS-aligned nations, have heightened global trade tensions. These policies disrupt supply chains, increase costs for U.S. businesses and consumers, and risk triggering a recession, while complicating international trade negotiations and provoking retaliatory tariffs.
Climate Change and Food Security Risks
South Africa faces severe climate-related disruptions including droughts and floods, threatening agricultural productivity and food security. As an African G20 president, the country highlights the urgent need for climate adaptation financing. Failure to address these risks jeopardizes supply chains, rural livelihoods, and economic stability, impacting both domestic markets and export reliability.
Monetary Policy and Interest Rate Cuts
Mexico’s central bank cut benchmark interest rates to 8.0%, the lowest in nearly three years, aiming to stimulate economic growth amid inflationary pressures and trade uncertainties. This monetary easing influences investment strategies, borrowing costs, and economic outlook, but signals cautious optimism given persistent inflation above target.
Japan-China Trade Relations and Export Bans
Japan is actively urging China to lift bans on exports to 10 Japanese prefectures, which have disrupted bilateral trade flows. These restrictions affect key industrial inputs and components, complicating supply chains and manufacturing operations. The resolution of these trade barriers is critical for restoring smooth trade, investment confidence, and supply chain resilience between the two economic giants.
Inflation Trends and Monetary Policy Challenges
Brazil’s inflation slowed to 0.26% monthly in June 2025 but remains above target at 5.27% annually. Rising housing and electricity costs strain households, especially low-income groups. The Central Bank maintains a high 15% interest rate to control inflation, increasing borrowing costs and dampening economic growth prospects, impacting consumer spending and business investment decisions.
Domestic Political Unity and Nationalism
Strong nationalist sentiment and calls for unity against external threats dominate Iran's political discourse. Parliamentary criticism of conciliatory government remarks highlights internal pressures for a hardline stance, affecting policy stability and signaling to investors the importance of political cohesion in risk assessment.
Cybersecurity and Defense Sector Opportunities
Heightened geopolitical risks and cyber threats from Iran and proxies have increased demand for cybersecurity and defense technologies. Companies specializing in AI-driven intelligence, cyber defense, and secure communications are positioned for growth, attracting investor interest as governments and businesses prioritize infrastructure protection and military modernization.
Energy Dependence and Inflationary Pressures
Pakistan’s heavy reliance on imported petroleum exposes its economy to global oil price volatility, especially amid Middle East unrest. Rising crude prices inflate domestic fuel costs, widen the current account deficit, and fuel inflation, adversely affecting production costs, consumer purchasing power, and overall economic stability, thereby complicating trade competitiveness and investment climate.
International Sanctions and Economic Coercion
Iran, alongside other states, condemns unilateral Western sanctions as violations of international law that hinder sustainable development. These sanctions disrupt supply chains, particularly in energy, food, and heavy industries, forcing Iran towards self-sufficiency and innovation. However, sanctions continue to pose significant barriers to foreign investment and complicate Iran’s integration into global markets.