US-Canada Trade Tensions Escalate

The US has threatened 100% tariffs on Canadian exports if Canada deepens trade with China, creating significant uncertainty for supply chains, cross-border investment, and the upcoming USMCA renegotiation. This volatility directly impacts market access and business planning for international firms.

Industrial policy reshapes investment

CHIPS/IRA-style incentives and local-content rules steer capex toward U.S. manufacturing, batteries, and clean tech, while raising compliance complexity for multinationals. Subsidies can improve U.S. project economics, but may trigger trade frictions, retaliation, and fragmented global production strategies.

High rates, easing cycle

The Central Bank kept Selic at 15% and signaled potential cuts from March as inflation expectations ease, but fiscal uncertainty keeps real rates among the world’s highest. Credit costs, consumer demand, and project IRRs remain sensitive to policy communication and politics.

US tariff volatility, autos exposure

Washington’s surprise move to lift “reciprocal” tariffs to 25% (from 15%) on Korean autos, lumber and pharma heightens policy risk. Autos are ~27% of Korea’s US exports; firms may accelerate US localization, reroute supply chains, or hedge pricing.

Foreign real estate ownership opening

New rules effective Jan. 22 allow non-Saudis to own property across most of the Kingdom via a digital platform, boosting foreign developer and investor interest. This supports regional HQ and talent attraction, while restrictions in Makkah/Madinah and licensing remain key constraints.

Water scarcity and urban infrastructure failures

Gauteng’s water constraints—Johannesburg outages lasting days to nearly 20—reflect aging networks, weak planning and bulk-supply limits. Operational continuity risks include downtime, hygiene and labour disruptions, higher onsite storage/treatment costs, and heightened local social tensions.

Food import inspections disrupt logistics

New food-safety inspection rules (Decree 46) triggered major port and border congestion: 700+ consignments (~300,000 tonnes) stalled in late January and 1,800+ containers stuck at Cat Lai. Compliance uncertainty raises lead times, storage costs and inflation risks.

US interim trade reset

A new US–India interim framework cuts peak US tariffs to ~18% on many Indian goods, with some lines moving to zero, while India lowers duties on US industrial and select farm products. Expect near-term export uplift but ongoing uncertainty around Section 232 outcomes.

BoJ tightening, yen volatility

The Bank of Japan’s post-deflation normalisation (policy rate at 0.75% after December hike) keeps FX and JGB yields volatile, raising hedging costs and repricing M&A and project finance. Authorities also signal readiness to curb disorderly yen moves.

Energy roadmap uncertainty easing

La Programmation pluriannuelle de l’énergie (PPE) 2035, retardée plus de deux ans, doit paraître par décret. Elle confirme 6 EPR (8 en option) et investissements éolien offshore, solaire, géothermie; l’incertitude passée a freiné appels d’offres.

Cybersecurity enforcement and compliance

Regulators are escalating cyber-resilience expectations. A landmark ASIC case imposed A$2.5m penalties after a breach leaked ~385GB of client data affecting ~18,000 customers, signalling higher compliance burdens, greater board accountability, and heightened due diligence requirements for vendors handling sensitive data.

Mining regulation and exploration bottlenecks

Mining investment is constrained by slow permitting and regulatory uncertainty. Exploration spend fell to about R781 million in 2024 from R6.2 billion in 2006, and permitting delays reportedly run 18–24 months. This deters greenfield projects, affects critical-mineral supply pipelines.

Civil defence and business continuity demands

Government focus on reserves, realistic exercises, and city resilience planning raises expectations for private-sector preparedness. Multinationals should update crisis governance, employee safety protocols, and operational continuity plans, including data backups, alternative sites, and supplier switching.

Foreign creditor feedback loops

Japan’s >$1 trillion Treasury holdings and yen-defense dynamics create a two-way risk channel: FX interventions could trigger Treasury sales, pushing US yields higher. This threatens global risk-off episodes, impacts dollar funding, and raises hedging and refinancing costs worldwide.

Dollar and rates drive financing costs

Federal Reserve policy expectations and questions around inflation trajectory are driving dollar swings, hedging costs, and trade finance pricing. Importers may see margin pressure from a strong dollar reversal, while exporters face demand sensitivity as global credit conditions tighten or ease.

Water infrastructure failure risk

Water and sanitation systems face an estimated R400 billion rehabilitation backlog, with many municipalities rated “poor” or “critical.” Recent Gauteng outages affected up to 10 million people after power trips. Operational disruption risks include plant shutdowns, hygiene, and industrial downtime.

Tax audits and digital compliance

SAT is intensifying data-driven enforcement, including audits triggered from CFDI e-invoices alone, while offering a 2026 regularization program that can forgive up to 100% of fines and surcharges. Multinationals must harden vendor due diligence, invoice controls, and customs-tax consistency.

Supply Chain Regionalization and Diversification

Geopolitical polarization and rising tariffs are accelerating the shift toward regionalized and diversified supply chains. Companies are prioritizing resilience, flexibility, and scenario planning over cost efficiency, with Southeast Asia, Eastern Europe, and Latin America emerging as alternative hubs.

Trade facilitation and digital licensing

Authorities aim to cut investment licensing from ~24 months to under 90 days via a unified digital platform, while reducing customs clearance from 16 days to five (target two) and moving ports to 7-day operations. Execution quality will determine actual savings.

Defense export surge into Europe

Hanwha Aerospace’s ~$2.1bn Norway deal for the Chunmoo long-range fires system underscores Korea’s growing defense-industry competitiveness and government-backed “Team Korea” diplomacy. It signals expanding European demand, offset/industrial-partnership opportunities, and tighter export-control and compliance requirements.

Investment screening and national security

U.S. inbound (CFIUS) and outbound investment scrutiny is increasingly tied to economic security, especially for China-linked capital, data, and dual-use tech. Deal timelines, mitigation terms, and ownership structures are becoming decisive for cross-border M&A, JV approvals, and financing certainty.

Escalating Cross-Strait Geopolitical Risks

China’s intensifying military drills and threats of reunification by force heighten the risk of conflict, blockades, or supply chain disruption. This persistent tension is a critical risk factor for international investors and global business operations.

Energy sourcing and sanctions exposure

Trade diplomacy increasingly intersects with energy decisions, with US tariff relief linked to expectations on reducing Russian oil purchases and boosting US energy imports. Companies should plan for price volatility, sanctions and reputational risk, and potential knock-on effects on shipping insurance and payments.

Eastern Economic Corridor Infrastructure Push

Thailand is accelerating infrastructure megaprojects in the Eastern Economic Corridor, including the U-Tapao Airport City PPP and a proposed Disneyland-style complex. These initiatives are designed to attract FDI, boost tourism, and create a high-tech industrial hub, but require policy continuity and investor confidence.

External debt rollovers, FX buffers

Pakistan’s reliance on short-term bilateral rollovers and Chinese commercial loans keeps reserves fragile; a recent $700m repayment cut gross reserves to about $15.5bn. Tight buffers raise devaluation risk, restrict profit repatriation and disrupt import-dependent supply chains.

Immigration and skilled-visa uncertainty

U.S. immigration policy uncertainty is rising, affecting global talent mobility and services delivery. A bill was introduced to end the H‑1B program, while enhanced visa screening is delaying interviews abroad. Companies reliant on cross‑border teams should plan for longer lead times and potential labor cost increases.

Fiscal slippage raises funding costs

Breaches of the 2025 spending cap and widening deficits are pushing gross debt higher (about 78.7% of GDP) and inflating “restos a pagar” (R$391.5bn). Markets may demand higher risk premia, increasing hedging, financing and project-delivery risk.

Maritime and insurance risk premia

Geopolitical volatility continues to reshape Asia–Europe logistics. Even as Red Sea routes partially normalize, rate swings and capacity overhang drive volatile freight pricing. China exporters and importers should plan for sudden rerouting, longer lead times, and higher war-risk insurance.

Energy market reform and grid

Electricity market reforms and grid-connection constraints remain pivotal as the UK scales renewables and electrification. Policy choices on pricing, network charges and incremental CfD changes affect power purchase agreements, site selection for energy-intensive industry, and returns in clean infrastructure.

Outbound investment screening expands

New U.S. outbound investment restrictions for semiconductors, quantum, and advanced AI create approval or notification burdens for cross-border deals and R&D. Companies must reassess Asia tech exposure, ring-fence sensitive IP, and build deal timelines around regulatory review risk.

Property slump and policy easing

Reports indicate easing of “three red lines” developer leverage oversight, signaling stabilization intent after defaults. Yet falling prices and weak confidence constrain growth and local-government revenue, affecting demand forecasts, supplier solvency, and payment/collection risk in China operations.

Currency Watchlist and Baht Volatility

The US Treasury has placed Thailand on its currency monitoring list due to trade and current account surpluses. The Bank of Thailand is tightening gold trading rules to curb speculative capital flows, which may impact exchange rates, compliance costs, and cross-border financial operations.

Treasury market liquidity drains

Large Treasury settlements and heavy auction calendars can pull cash onto dealer balance sheets, reducing liquidity elsewhere. Tightened repo and margin dynamics raise volatility across risk assets, complicate collateral management, and increase the chance of disruptive funding squeezes for corporates.

Supply-chain bloc formation pressures

US-led efforts to build critical-minerals “preferential zones” with reference prices and tariffs signal broader de-risking blocs. Companies may face bifurcated supply chains, dual standards, and requalification of suppliers as trade rules diverge between China-centric and allied networks.

Semiconductor tariffs and reshoring push

A new 25% tariff on certain advanced semiconductors, alongside ongoing incentives for domestic capacity, is reshaping electronics and AI hardware economics. Firms face higher input costs near-term, while medium-term investment flows shift toward U.S. fabs amid persistent dependence on foreign suppliers.

LNG buildout and Asian markets

Canadian LNG export capacity is advancing through projects such as LNG Canada and Cedar LNG, with long-term supply contracts emerging. This supports upstream and midstream investment, but depends on regulatory certainty, Indigenous agreements, and global LNG pricing.