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Mission Grey Daily Brief - February 14, 2025

Summary of the Global Situation for Businesses and Investors

The global situation is currently dominated by the potential peace talks between the US and Russia to end the war in Ukraine, which has approached its third anniversary. The US Defense Secretary Pete Hegseth has suggested that Ukraine should abandon its hopes of joining NATO and reclaiming all its occupied territory. This has caused concern among European allies, who are wondering how they can maintain post-WWII security and fill the gap in security assistance that the Biden administration provided to Ukraine. Meanwhile, Turkey's president has arrived in Pakistan to boost trade and economic ties, and Ireland is using its relationship with the US to talk down the prospect of a trade war with the EU. Lastly, the US hostage envoy Boehler has stated that Iran is holding American hostages, which has not impacted stocks.

Potential Peace Talks Between the US and Russia

The potential peace talks between the US and Russia to end the war in Ukraine have caused concern among European allies, who are wondering how they can maintain post-WWII security and fill the gap in security assistance that the Biden administration provided to Ukraine. The US Defense Secretary Pete Hegseth has suggested that Ukraine should abandon its hopes of joining NATO and reclaiming all its occupied territory. This has signalled to Kyiv that the administration's view of a potential settlement is remarkably close to Moscow's vision. Putin has declared that any peace deal must ensure that Ukraine gives up its NATO ambitions and withdraws its troops from the four regions that Russia annexed in September 2022 but never fully captured. Hegseth has indicated that Trump is determined to get Europe to assume most of the financial and military responsibilities for the defense of Ukraine, including a possible peacekeeping force that would not include US troops. Hegseth has also insisted that NATO should play no role in any future military mission to police the peace in Ukraine and that any peacekeeping troops should not be covered by the part of NATO's founding treaty that obliges all allies to come to the aid of any member under attack.

Vice President JD Vance and Secretary of State Marco Rubio are expected to meet Ukrainian President Volodymyr Zelenskyy on Friday for talks that many hope will shed light on Trump's ideas for a negotiated settlement to the war. Trump has been vague about his specific intentions, other than suggesting that a deal will likely result in Ukraine being forced to cede territory that Russia has seized since it annexed Crimea in 2014. Trump has been highly skeptical of that aid and is expected to cut or otherwise limit it as negotiations get underway in the coming days.

Turkey-Pakistan Trade and Economic Ties

Turkey's president has arrived in Pakistan to boost trade and economic ties, and the two countries are expected to sign a number of agreements during the 7th Session of the Pakistan-Turkiye High Level Strategic Cooperation Council (HLSCC). Pakistan and Turkey are bound by historic fraternal ties, and the visit by Erdogan is expected to serve to further deepen the brotherly relations and enhance multifaceted cooperation between the two countries. Pakistan has witnessed a surge in militant violence in recent months, and has deployed additional police officers and paramilitary forces to ensure the security of the Turkish leader and his delegation. The visit comes hours after the U.S. Embassy issued a travel advisory, citing a threat by Pakistani Taliban against the Faisal mosque in Islamabad and asked its citizens to avoid visits to the mosque and nearby areas until further notice.

Potential Trade War Between the EU and the US

Ireland is using its relationship with the US to talk down the prospect of a trade war with the EU. Irish ministers have pushed for reaching a compromise that would avoid tariffs and a trade war and are sending nine government members to US cities for St Patrick’s Day as part of a charm offensive. Irish Finance Minister Paschal Donohoe has said that the EU-US trading relationship has made both of those economies richer over time and a trading dispute will cause harm to all. Mr Donohoe has said that Ireland will be using its voice to highlight what is of benefit to Ireland and Europe, and will be using its voice to make the case for trade to be mutually beneficial, talking about how Irish companies are employing Americans and investing in America. Mr Trump has expressed dissatisfaction with the amount of US goods bought by the EU compared to EU goods bought by the US. As he imposed since-suspended tariffs on Mexico and Canada, Mr Trump said of the EU: "They don’t take our cars, they don’t take our farm products, they take almost nothing and we take everything from them." Ireland’s deputy premier and foreign affairs minister Simon Harris has said that there are opportunities for the EU and Ireland to do more business and more trade with the United States, and therefore address some of the deficit that exists in relation to goods. Mr Donohoe, who is president of the group of eurozone finance ministers, has said that balancing trade with the US in more natural ways could be considered.

Iran Holding American Hostages

The US hostage envoy Boehler has stated that Iran is holding American hostages, which has not impacted stocks. The NASDAQ index is now up 21.46 points or 0.11%, while the S&P index is still down -0.14%, the Dow is down -0.35%, and the Russell 2000 of small cap stocks are down -0.62%. The comments of Trump's talk with Putin have helped to push the US stocks off lows (and the Nasdaq into positive territory), and the US-Russia relationship is thawing following a phone call and potential meeting, along with a prisoner swap announced Tuesday.


Further Reading:

Donald Trump says US and Russia to start talks on Ukraine war ‘immediately’ - Financial Times

Europe left reeling by Trump over Ukraine peace talks with Russia - Financial Times

Geopolitics: Hostage envoy Boehler says Iran has Americans - ForexLive

Ireland will use relationship with US to talk down trade war – finance minister - The Independent

Trump says he might meet Putin in Saudi Arabia after call on Ukraine - Axios

Turkey's president arrives in Pakistan's capital on a 2-day visit to boost trade, economic ties - The Independent

Turkiye’s president arrives in Pakistan’s capital on a 2-day visit to boost trade, economic ties - Arab News

Vance will meet Zelenskyy amid concerns about Trump-Putin talks to end the war in Ukraine

Themes around the World:

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Geopolitical Tensions and Security Risks

Turkey faces escalating regional tensions, notably with Israel, Greece, and in Syria, alongside involvement in the Russia-Ukraine conflict. These dynamics threaten trade routes, investment stability, and supply chain resilience, requiring robust risk management for international business.

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Security Risks and Cartel Violence

Escalating cartel violence and US threats of military intervention heighten operational and reputational risks for international businesses. Despite increased arrests and cooperation, criminal organizations still exert significant influence, affecting logistics, investment, and local partnerships.

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EU Accession Progress and Challenges

Ukraine’s path toward EU membership is marked by significant legal and institutional reforms, but faces hurdles from internal politics and EU member state vetoes. The accession process shapes regulatory alignment, market access, and long-term investment prospects.

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Black Sea Grain Export Disruptions

Ongoing Russian attacks on Odesa and other Black Sea ports target civilian ships and port infrastructure, aiming to disrupt Ukraine’s agricultural exports. These disruptions threaten global food security and complicate logistics for international trade partners.

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Trade Policy Uncertainty and EU-Mercosur Tensions

Strong domestic opposition to the EU-Mercosur trade deal, especially from French farmers and parliament, has led to protests and political crises. This uncertainty affects market access, supply chains, and investment strategies for global agribusiness and exporters.

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Rare Earth Export Controls Threaten Industry

Japan’s near-total reliance on Chinese heavy rare earths for EVs and electronics faces disruption, with potential GDP losses up to 0.43% if restrictions persist. This jeopardizes automotive, electronics, and defense sectors, forcing global firms to seek alternative suppliers.

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Infrastructure Modernization and Logistics

Egypt inaugurated its first semi-automated container terminal at Sokhna Port, a $1.8 billion project enhancing trade connectivity and logistics. Continued investment in ports and industrial zones, especially around the Suez Canal, is central to Egypt’s trade strategy.

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China Partnership and Market Risks

China remains Brazil’s largest trading partner, with 2025 exports reaching US$100 billion. However, recent Chinese quotas on beef and potential regulatory shifts highlight both the opportunities and the vulnerabilities of Brazil’s reliance on the Chinese market for key commodities.

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Critical China-Iran Energy Nexus

China purchases over 80% of Iran’s oil, often via independent refiners and shadow fleets to evade sanctions. Any escalation in US pressure or Iranian instability could disrupt this flow, affecting global energy security and bilateral trade dynamics.

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Semiconductor Tariffs and Industrial Pressure

The US is leveraging tariffs to coerce Korean chipmakers into expanding US-based manufacturing. Taiwan secured exemptions with $250 billion investment, while Korea faces pressure for similar commitments. These developments threaten Korea’s semiconductor sector, a cornerstone of its export economy.

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China-Pakistan Economic Corridor 2.0

The upgraded CPEC focuses on industrial, agricultural, and mining collaboration, with expanded infrastructure and technology transfer. This deepens Pakistan’s integration into regional supply chains and enhances opportunities for foreign investors, especially in logistics, manufacturing, and energy.

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Widespread Unrest and Political Instability

Nationwide protests over economic hardship, corruption, and governance have resulted in at least 15 deaths and hundreds of arrests. The unrest signals rising political risk, threatening business continuity and investor confidence.

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Global Investor Confidence Erodes

The weaponization of trade policy and rising geopolitical brinkmanship are eroding global investor confidence. Uncertainty over tariffs, regulatory responses, and alliance cohesion may deter foreign direct investment and delay strategic business decisions in Finland.

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Accelerating Trade Surplus and Export Growth

Vietnam’s trade surplus exceeded $20 billion in 2025, with exports reaching $475 billion and targeting 8% growth in 2026. Foreign-invested sectors drive this performance, while the US and China remain key partners. Trade policy reforms and FTAs underpin expansion, but rising global barriers and origin fraud risks require vigilance.

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Rare Earth Supply Chain Vulnerabilities

Japan’s heavy reliance on Chinese rare earths—still 60-70% of supply—faces new threats as Beijing considers tighter export permit reviews. Prolonged restrictions could cost Japan up to $17 billion annually, impacting global supply chains for EVs, electronics, and defense.

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Supply Chain Resilience and Restructuring

Global supply chain uncertainties, especially in semiconductors and advanced manufacturing, are prompting Korean firms to invest in local capacity and diversify sourcing. This trend enhances resilience but requires ongoing adaptation to geopolitical shocks, regulatory changes, and technology competition.

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Dual-Use Export Controls Expansion

China’s expanded controls on dual-use items—goods with civilian and military applications—target Japan and other countries over security concerns. These measures disrupt technology, aerospace, and defense supply chains, and signal China’s willingness to weaponize trade in geopolitical disputes.

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Energy and Critical Minerals Cooperation with Asia

Recent agreements with China are expanding Canadian oil, LNG, uranium, and clean energy exports to Asia. This diversification of energy partnerships supports Canada’s energy transition but raises questions about foreign investment screening and national security in strategic sectors.

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Regulatory Tightening and Compliance Risks

China is strengthening oversight of outbound investment, foreign acquisitions, and sensitive technologies. New export control laws and anti-dumping investigations increase compliance complexity for multinationals, requiring robust risk management and adaptability to evolving legal frameworks.

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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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China-Brazil Trade Deepening

China remains Brazil’s largest trading partner, with trade volumes rising despite global tensions. Brazil’s exports to China, notably in agriculture and minerals, are growing, but dependency on Chinese demand exposes Brazil to external shocks and policy shifts in Beijing.

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Shift Toward Defensive Industries

Japanese defense and aerospace stocks rallied amid rising geopolitical tensions and export controls. International investors should note the sector’s growing strategic importance, but also the risks of regulatory changes and supply chain bottlenecks linked to regional security dynamics.

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Sectoral Overdependence on Semiconductors

Despite headline export growth, non-semiconductor exports declined 1% in 2025. Korea’s heavy reliance on chips masks underlying vulnerabilities in other sectors, underscoring the need for diversification and innovation in manufacturing and services.

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Mexico’s Strategic Role in Regional Geopolitics

Mexico’s humanitarian oil shipments to Cuba and its diplomatic stance on US interventions highlight its growing influence in Latin American geopolitics. US pressure to end fuel exports and regional instability could impact Mexico’s foreign policy, trade, and energy relations.

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UK-EU Relationship and Brexit Reset

The UK is preparing legislation to align more closely with the EU in areas such as food standards, emissions trading, and electricity markets. This 'reset' could add £5.1bn to the UK economy, but faces political controversy over sovereignty and regulatory alignment, impacting trade and investment decisions.

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USMCA Uncertainty and Trade Tensions

The upcoming review of the USMCA agreement injects significant uncertainty into North American trade. Potential renegotiations or expiration could disrupt tariff-free access, supply chains, and investment planning, with heightened risks from ongoing US protectionist rhetoric and tariff threats.

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Military Dominance and Private Sector Constraints

The Egyptian military’s control over key economic sectors and financial reserves limits private sector growth and transparency. The IMF and investors continue to press for structural reforms and reduced military influence to unlock investment and sustainable growth.

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Labor Market Dynamics and Immigration Policy

The US labor market shows resilience but faces cooling trends, wage pressures, and uneven household financial health. Shifts in immigration policy and demographic changes affect workforce availability, cost structures, and long-term business planning for multinational firms.

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Resilient Power and Infrastructure Investment

India’s power sector is set for Rs 4.5 lakh crore ($54 billion) investment by 2032, focusing on grid upgrades, renewable integration, and energy storage. Infrastructure development supports long-term demand, supply-chain reliability, and the green transition.

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Energy Costs and Power Reliability

South Africa’s energy-intensive industries face existential threats from high electricity costs, despite recent improvements in Eskom’s stability. Regulatory changes now allow distressed sectors to collaborate on energy procurement, but power costs and supply reliability remain critical risks for manufacturing, mining, and export sectors.

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Critical Technologies and Supply Chain Security

Germany is prioritizing cooperation in semiconductors, critical minerals, and digital technologies, especially with trusted partners like India. New joint declarations and centers of excellence aim to reduce overdependence on single suppliers and enhance supply chain resilience in strategic sectors.

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Geopolitical Tensions and Sanctions Risks

Escalating geopolitical tensions, such as Iran’s designation of the Royal Canadian Navy as a terrorist organization, increase risks for Canadian international operations. Sanctions, diplomatic disputes, and retaliatory measures can disrupt supply chains, trade flows, and investment strategies in sensitive markets.

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Labor Market Challenges and Mobility

Germany’s stagnant labor market and skill shortages are prompting policy reforms and new migration agreements, notably with India. Streamlined visas for healthcare and tech professionals are expected to support business operations and competitiveness.

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Geopolitical Leverage of Critical Minerals

China is leveraging its dominance in rare earths and other critical minerals as a tool in geopolitical disputes, notably with Japan. Subtle export restrictions and licensing delays create uncertainty for global manufacturers, especially in high-tech and automotive sectors, and may prompt supply chain realignment.

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Political Instability and Cabinet Turnover

Ongoing government reshuffles, including changes in defense and energy ministries, reflect persistent political instability. This volatility complicates regulatory predictability, investor confidence, and the implementation of long-term business strategies in Ukraine.

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Structural Economic and Regulatory Reforms

South Korea’s 2026 economic strategy emphasizes structural reforms, regulatory streamlining, and industrial innovation. These efforts aim to sustain growth, improve the investment climate, and address underlying challenges such as low productivity, labor market rigidity, and demographic shifts.