Mission Grey Daily Brief - February 22, 2025
Summary of the Global Situation for Businesses and Investors
The global situation remains tense, with Russia's full-scale invasion of Ukraine entering its third year and hundreds of thousands killed or wounded, tens of thousands missing, and millions of refugees. Ukrainian forces, outnumbered and outgunned, struggle to hold back Russia's slow but steady advances. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the U.S. Congress, where defending Ukraine from Russia has had bipartisan support. Trump's embrace of Russia represents a major about-face in U.S. foreign policy, echoing Putin's narrative and signalling a desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia.
Meanwhile, Australia warns airlines over Chinese 'live fire' exercises, Sweden investigates a cable break in the Baltic Sea, and Israel mourns the return of the remains of four murdered hostages, including Shiri Bibas, her son Ariel, and baby Kfir.
Ukraine-Russia War
The Russia-Ukraine war continues to be a significant concern for businesses and investors, with hundreds of thousands killed or wounded, tens of thousands missing, and millions of refugees. Ukrainian forces, outnumbered and outgunned, struggle to hold back Russia's slow but steady advances. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the U.S. Congress, where defending Ukraine from Russia has had bipartisan support. Trump's embrace of Russia represents a major about-face in U.S. foreign policy, echoing Putin's narrative and signalling a desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia.
The Ukrainian people are rallying around a defiant President Volodymyr Zelenskyy, who publicly criticized Trump for promoting Russian "disinformation", with public trust in Zelenskyy at 57%. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the U.S. Congress, where defending Ukraine from Russia has had bipartisan support. Trump's embrace of Russia represents a major about-face in U.S. foreign policy, echoing Putin's narrative and signalling a desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia.
The Ukrainian people are rallying around a defiant President Volodymyr Zelenskyy, who publicly criticized Trump for promoting Russian "disinformation", with public trust in Zelenskyy at 57%. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the U.S. Congress, where defending Ukraine from Russia has had bipartisan support. Trump's embrace of Russia represents a major about-face in U.S. foreign policy, echoing Putin's narrative and signalling a desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia.
China-Australia Tensions
Australia has warned airlines about Chinese 'live fire' exercises, with Foreign Minister Penny Wong confronting her Chinese counterpart over drills off the east coast. This follows EAM Jaishankar's meeting with Chinese Foreign Minister Wang on the sidelines of the G20 meet, where they discussed the Ukraine war and the need for a peaceful resolution. Jaishankar also met with U.S. Secretary of State Antony Blinken, where they discussed the importance of the Indo-Pacific region and the need to counter China's growing influence.
Baltic Sea Cable Break
Swedish authorities are investigating a damaged cable discovered in the Baltic Sea, the latest in a string of recent incidents of ruptured undersea cables that have heightened fears of Russian sabotage and spying in the region. Late last month, authorities discovered damage to the undersea fiber-optic cable running between the Latvian city of Ventspils and Sweden's Gotland. A vessel belonging to a Bulgarian shipping company was seized but later released after Swedish prosecutors ruled out initial suspicions that sabotage caused the damage. The most recent break was found off the island of Gotland, south of Stockholm, in the Swedish economic zone, with the cable running between Germany and Finland. Prime Minister Ulf Kristersson said the government takes all reports of damage to infrastructure in the Baltic Sea very seriously.
Israel-Hamas Conflict
Israel mourns the return of the remains of four murdered hostages, including Shiri Bibas, her son Ariel, and baby Kfir. Hamas handed over the remains under a shaky ceasefire deal, but Israel's military said the body returned was not that of Shiri Bibas. Russia is preparing to declare victory in its war with Ukraine within days, following a public falling out between Trump and Zelenskyy and U.S. pressure to do a deal.
Further Reading:
Australia warns airlines over Chinese ‘live fire’ exercises
BBC forced to apologise as EastEnders star says a racial slur live on air
Elon Musk Wields Chainsaw Gifted To Him By Argentina President "For Bureaucracy"
G20 Meeting | EAM S Jaishankar Meets Chinese FM Wang On The Sidelines Of G20 Meeting | News18
Hamas hands over remains of four Israeli hostages including two children
Holly Willoughby faces new court battle as her media company is ordered to pay eye-watering tax bill
Israel continues to mourn as bodies of murdered hostages returned
Sweden is investigating a cable break in the Baltic Sea
Ukrainians Rally Around Zelensky as Trump and Putin Denigrate Him
Ukrainians rally around their president after Trump seeks to denigrate him
Ukrainians rally around their president after Trump’s harsh comments
Themes around the World:
Power Costs Pressure High-Tech Manufacturing
Electricity demand from semiconductors and AI is rising rapidly, with forecasts of 9 billion kWh annual growth through 2033 and TSMC potentially exceeding 11% of Taiwan’s total consumption by 2030. Higher fuel costs and tariff adjustments could gradually erode margins for power-intensive manufacturers.
Energy Shock and Cost Inflation
Oil-market disruption tied to Middle East tensions has pushed French fuel inflation sharply higher, with fuel prices up 14.2% and diesel averaging above €2.20 per liter. Higher transport, aviation, and industrial input costs threaten margins, pricing, and consumer demand.
BoE Faces Stagflation Risk
The Bank of England held rates at 3.75% but warned inflation could reach 6.2% under a prolonged energy shock, while growth forecasts were cut. Elevated borrowing costs, G7-high gilt yields, and policy uncertainty complicate investment planning and financing conditions.
Chinese EV Global Expansion
Chinese automakers are offsetting domestic price wars by accelerating exports and overseas production, especially in Europe. JPMorgan expects Chinese brands could reach 20% of western Europe’s market by 2028, reshaping automotive supply chains, pricing benchmarks, localization decisions and competitive dynamics for incumbents.
EU Accession Reforms Shape Market
Ukraine says it faces 145 EU requirements, but reform delivery remains uneven, especially on anti-corruption and rule of law. Accession progress will determine regulatory harmonization, market access, customs modernization, and investor confidence, while delays prolong compliance and policy uncertainty.
Tariff Volatility Reshapes Trade
Frequent U.S. tariff changes, including a new 10% global tariff after court challenges, are raising landed costs, disrupting demand planning, and accelerating sourcing shifts away from China. Businesses face persistent policy uncertainty, higher compliance burdens, and more fragmented trade flows.
Tariff Regime Legal Volatility
US trade policy remains highly unpredictable after courts struck down major tariffs, yet new duties are being rebuilt through Section 122, 232 and 301 tools. Importers face refund complexity, abrupt cost changes, and harder pricing, sourcing and investment decisions.
Freight Costs Rise With Conflict
Middle East disruption, elevated oil prices, and persistent Red Sea rerouting are increasing fuel surcharges, tightening trucking capacity, and complicating port forecasts. US container imports rose 12.4% month on month in March, but major ports still reported annual declines, highlighting unstable logistics conditions for importers.
Semiconductor Supercycle Drives Trade
AI-linked memory demand is powering South Korea’s export boom, with April semiconductor shipments reaching $31.9 billion, up 173.5% year on year. The concentration supports growth and investment, but raises exposure to cyclical swings, pricing volatility, and sector-specific shocks.
Reserves, Intervention and FX Management
Authorities are defending macro stability through reserve use and managed currency depreciation. Reported gross reserves stood near $171 billion, with swap-ex net reserves around $36 billion, but intervention costs remain material. Businesses face continued hedging needs, repatriation scrutiny and volatile import pricing.
Defense Industry Investment Expansion
Ukraine’s defense sector is becoming a major industrial and technology growth engine, supported by EU guarantees, grants, and joint ventures. Recent programs aim to mobilize about €400 million in strategic technologies, opening opportunities in drones, navigation, communications, and dual-use manufacturing partnerships.
Aggressive Tax Audits Escalate
Multinationals are reporting harsher audits from Mexico’s tax authority, including challenges to credits, deductions and appeals. With tax collection having risen about 5% in real terms last year, foreign companies face growing fiscal exposure, documentation burdens and higher risk of prolonged disputes.
Export Controls Reshape Tech Trade
US-China technology restrictions are reinforcing Taiwan’s strategic role in trusted semiconductor supply chains while complicating sales into China. New US export-control initiatives targeting AI chips and semiconductor equipment increase compliance burdens, encourage allied coordination, and may alter customer demand, licensing, and production geography.
US-China Trade Friction Escalates
Despite a temporary truce, new US Section 301 and 232 tariff pathways, sanctions on Chinese refiners, and reciprocal Chinese countermeasures are raising trade uncertainty, complicating pricing, market access, sourcing decisions, and long-term investment planning for multinational firms.
Credit Outlook Supports Capital Inflows
Moody’s upgraded Thailand’s outlook to stable and affirmed its Baa1 rating, citing eased tariff risks, stronger investment momentum and improved political continuity. This should support financing conditions and investor confidence, though rising public debt and weak long-term growth remain constraints.
Automotive Supply Chain Realignment
Mexico’s automotive industry faces pressure from U.S. tariff policies and changing rules of origin, even as producers keep investing. With about 770,000 direct jobs tied to the sector, output shifts could ripple through suppliers, logistics providers, and regional export volumes.
High Rates, Sticky Inflation
The central bank cut Selic to 14.50%, but inflation expectations remain deanchored, with 2026 IPCA projections at 4.8%-4.86%, above the 4.5% ceiling. Elevated borrowing costs will keep credit tight, restrain consumption, and raise capital costs for exporters and investors.
Currency Strength, Export Competitiveness
The real has strengthened alongside high interest-rate differentials and commodity support, helping contain imported inflation and attracting financial inflows. For businesses, this lowers some import costs but can compress export margins, complicate hedging, and alter market-entry pricing strategies.
China-Plus-One Supply Chain Gains
Policy reforms, investment facilitation, and targeted electronics incentives are reinforcing India’s role in diversification away from China. The government says FDI could reach $90 billion in FY2025-26, supporting multinationals seeking alternative production bases with improving domestic supplier depth and policy support.
Export Surge Amid Cost Pressures
Thailand’s March exports jumped 18.7% year on year to a record US$35.16 billion, but imports rose 35.7%, leaving a US$3.34 billion deficit. Strong external demand supports manufacturers, yet higher logistics, shipping and energy costs threaten margins and supply-chain reliability.
External Account Vulnerability
Pakistan’s trade deficit widened to $4.07 billion in April, a 46-month high, while imports surged 28.4% month on month. Despite reserves rebuilding toward $17–18 billion, external financing needs remain high, leaving importers and foreign investors exposed to balance-of-payments stress.
Security Threats to Logistics
Cargo theft, extortion, organized crime and border-route disruptions are materially raising operating costs across Mexico’s trade corridors. Companies moving goods to the United States face higher insurance, tighter risk-management requirements, and greater continuity risks for just-in-time supply chains.
Stricter Rules of Origin
U.S. negotiators are pushing to raise North American sourcing requirements, reportedly toward 100% for key components such as engines, electronics and software, versus roughly 75% today. That would force supplier reconfiguration, deeper localization and higher compliance costs across manufacturing chains.
Energy Export Capacity Expansion
Canada is expanding export infrastructure through the Trans Mountain pipeline, Kitimat LNG exports, and Enbridge’s C$4 billion Sunrise gas pipeline project. Greater energy capacity improves market diversification and supply security, while creating opportunities across infrastructure, services, and long-term commodity trade.
Fiscal Strain and Tax Risk
France’s public deficit remains among the eurozone’s highest at 5.1% of GDP in 2025, with debt at 115.6%. Persistent budget pressure raises risks of further tax increases, reduced support schemes, and tighter scrutiny of corporate margins and investment plans.
BOI Incentives Shape Market Entry
Thailand’s investment regime is increasingly bifurcated between standard foreign business licensing and BOI promotion. BOI can allow 100% foreign ownership, tax holidays of three to eight years, and duty relief, but with stricter monitoring and narrower operating scope.
Services Exports and Digital Hub
Turkey is prioritizing high-value services, raising tax deductions to 100% for qualifying exported services if earnings are repatriated. Annualized services exports reached $122.2 billion and the services surplus nearly $63 billion, supporting opportunities in software, gaming, health tourism and shared services.
Mercosur deal boosts tensions
The EU-Mercosur agreement entered provisional force on 1 May, cutting tariffs on cars, pharmaceuticals, and wine into a 700-million-consumer market. France strongly opposes it over agricultural competition, creating political friction, sectoral winners and losers, and compliance uncertainty for agri-food investors.
Energy Damage Constrains Industry
Repeated attacks on power and gas assets are undermining industrial output, increasing backup-power costs, and creating operational volatility. Naftogaz reported multiple facilities hit in 24 hours, while energy-sector damage continues to pressure manufacturers, logistics operators, and investors assessing production continuity.
Defence Spending Creates Opportunities
Rising security threats and higher defence spending are boosting aerospace, munitions, drones, and advanced manufacturing. BAE expects 9% to 11% earnings growth, but delays to the UK defence investment plan mean suppliers still face uncertainty over procurement timing.
Trade Diversification Beyond United States
Nearly 80% of Canada’s merchandise exports still go to the United States, underscoring structural dependence despite decades of diversification efforts. Ottawa is pursuing new ties with India, Mercosur, Europe and a limited China arrangement, but execution risk remains high.
LNG Expansion Reshapes Energy Trade
Shell’s C$22 billion ARC acquisition strengthens feedstock supply for LNG Canada and improves prospects for Phase 2, which could attract C$33 billion in private investment. Expanded LNG capacity would deepen Asia exposure, support infrastructure spending and diversify hydrocarbon export markets.
Tax Reform Implementation Shift
Brazil is moving ahead with consumption tax reform, including CBS and IBS collection via split payment, with testing in 2026 and rollout from 2027. Companies must adapt invoicing, ERP, treasury, and compliance processes as indirect-tax administration changes materially.
Weak Growth, Fiscal Stimulus
Thailand’s 2026 growth outlook has been cut to 1.5%-1.6%, prompting discussion of roughly 500 billion baht in new borrowing and broad consumer relief. For investors, this signals softer domestic demand, rising sovereign policy intervention, and potential pressure on public finances.
Suez Corridor Security Shock
Red Sea and Bab el-Mandeb disruption remains Egypt’s biggest external business risk, slashing canal income by about $10 billion and cutting traffic sharply. Shipping diversions raise freight, insurance and inventory costs while weakening Egypt’s logistics revenues and FX inflows.
High-Tech FDI Surge
Vietnam’s first-quarter 2026 registered FDI reached $15.2 billion, up 42.9% year on year, while disbursed FDI hit $5.41 billion, a five-year high. Capital is shifting toward semiconductors, AI, data centers, and green manufacturing, strengthening Vietnam’s strategic role in supply-chain diversification.