Mission Grey Daily Brief - February 23, 2025
Summary of the Global Situation for Businesses and Investors
As the third anniversary of the Russia-Ukraine war approaches, the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. In other news, Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, and Swedish authorities are investigating a damaged cable in the Baltic Sea, which has heightened fears of Russian sabotage and spying in the region.
Ukraine-Russia War
The Russia-Ukraine war is approaching its third anniversary, and the Ukrainian people are rallying around President Volodymyr Zelenskyy, who has been denigrated by US President Donald Trump and Russian President Vladimir Putin. Trump's false claims that Zelenskyy is a dictator and started the war have been criticised by Democrats and Republicans in the US Congress, and even some of Zelenskyy's harshest domestic critics have begun defending him. Trump's harsh words for Zelenskyy have drawn criticism from Democrats and even some Republicans in the US Congress, where defending Ukraine from Russia has had bipartisan support. However, Vice President JD Vance admonished Zelenskyy for publicly warning Trump about falling for Russian disinformation.
Trump's false claims have caused a political rift with the US, as Ukrainian forces, outnumbered and outgunned, increasingly struggle to hold back Russia's slow but steady advances. Trump has also signalled his desire to rapidly bring the fighting to a close on terms that Zelenskyy and many in the West say are too favourable to Russia. Reports have emerged of US and Russian officials meeting in Saudi Arabia to discuss a possible ceasefire without input from Ukraine.
Meanwhile, Russia is preparing to declare victory in the war, and preparations are underway for a face-to-face meeting between Trump and Putin. Senior US officials have suggested Ukraine will have to give up its goals of joining NATO and retaining the 20% of its territory seized by Russia. No Ukrainian officials were present at the Saudi meeting, and European allies have also expressed concerns that they are being sidelined.
Israel-Hamas Ceasefire Deal
Hamas has freed three more Israeli hostages as part of a fragile ceasefire deal, which has paused over 15 months of war but is nearing the end of its first phase. The latest hostage release, to be followed by the freeing of hundreds of Palestinians imprisoned by Israel, is going ahead after tensions mounted over a grisly and heart-wrenching dispute triggered this week when Hamas initially handed over the wrong body for Shiri Bibas, an Israeli mother of two young boys abducted by militants.
The dispute over the body's identity raised new doubt about the ceasefire deal, and negotiations over a second phase, in which Hamas would release dozens more hostages in exchange for a lasting ceasefire and an Israeli withdrawal, are likely to be even more difficult. The six hostages being freed are the last living ones to be released under the ceasefire's first phase. The new releases brought a moment of joy and relief for families, but with the ceasefire's future uncertain, fears remain over the fate of the remaining hostages seized during the Oct. 7, 2023, attack by Hamas that killed 1,200 in Israel and ignited the war.
Damaged Cable in the Baltic Sea
Swedish authorities are investigating a damaged cable that was discovered in the Baltic Sea, according to Swedish news agency TT. The breakage is 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, TT reported Friday. The cable runs between Germany and Finland. Prime Minister Ulf Kristersson said on the social media platform X on Friday that the government takes all reports of damage to infrastructure in the Baltic Sea very seriously.
Russia-Ukraine War and Business
The Russia-Ukraine war has had a devastating impact on both countries, with hundreds of thousands killed or wounded, tens of thousands missing, and millions fleeing the country. The war has also had a significant impact on the global economy, with rising energy prices and supply chain disruptions.
For businesses, the war has created significant uncertainty and risk, particularly for those with operations in the region. The war has also disrupted global supply chains, particularly for energy and food, which has led to higher prices and reduced availability.
To mitigate these risks, businesses should diversify their supply chains and consider alternative sources of energy and food. They should also monitor the situation closely and be prepared to adapt their operations as needed.
Further Reading:
BBC forced to apologise as EastEnders star says a racial slur live on air
Hamas frees 3 more Israeli hostages
Sweden is investigating a cable break in the Baltic Sea
Three More Israeli Hostages Freed By Hamas As Gaza Ceasefire Deal Advances
Trump-Putin summit preparations are underway, Russia says
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:
Escalating US-China Trade Tensions
Ongoing US tariffs and Chinese countermeasures, including export controls and sanctions, are reshaping global trade flows. These tensions drive supply chain diversification, increase compliance risks, and force businesses to adapt strategies for both market access and operational resilience.
Geopolitical Tensions and Supply Chain Realignment
Geopolitical competition, especially with China, is prompting US firms to restructure supply chains, diversify sourcing, and invest in regional trade agreements. These shifts are reshaping global trade flows and increasing operational complexity for international businesses.
US-China Trade Tensions Escalate
Renewed US tariffs, including a 25% levy on countries trading with Iran, have reignited trade frictions. Despite a 19.5% drop in US-bound exports, China posted a record $1.2 trillion trade surplus in 2025, highlighting resilience but also raising risks of further escalation and global supply chain disruptions.
Investment Climate Amid Geopolitical Tensions
Geopolitical instability, including US-EU disputes and global conflicts, has led to increased market volatility and cautious investment. French markets have seen declines, and sectors like tech and industry face job cuts, prompting investors to adopt more defensive and selective strategies.
Shifts in Global Capital Flows and FPI Behavior
US monetary policy, tariff uncertainty, and geopolitical risks have triggered large-scale foreign portfolio investor outflows from emerging markets, notably India. While US and European investors maintain selective exposure, volatility in currency and bond markets is prompting a reassessment of risk and asset allocation strategies.
US Foreign Investment Scrutiny Rises
Foreign investment in the US faces heightened scrutiny, particularly in strategic sectors and from Chinese investors. Regulatory barriers and national security reviews are increasingly shaping cross-border M&A, technology transfers, and capital flows.
Escalating US-UK Trade Tensions
President Trump’s imposition of 10–25% tariffs on UK exports in response to the Greenland dispute has triggered a transatlantic trade crisis. The UK faces heightened supply chain costs, investment uncertainty, and potential recession risks, with the EU preparing significant retaliatory measures.
Shifting Patterns in Foreign Investment
Foreign direct investment in China fell 9.5% in 2025, reflecting investor caution amid regulatory tightening and geopolitical friction. However, select countries like Switzerland and the UAE increased their stakes, highlighting nuanced opportunities and the need for market-specific strategies.
Heightened Geopolitical and Security Risks
The risk of military escalation is acute, with the US considering strikes and Iran warning of readiness for conflict. Regional instability, including weakened alliances and ongoing tensions with Israel and the US, increases operational risk for businesses and investors in the region.
Mercosur-EU Trade Agreement Reshapes Landscape
The landmark Mercosur-EU agreement, covering over 90% of bilateral trade, will eliminate most tariffs and create one of the world’s largest free trade zones. While it promises a €6 billion GDP boost by 2044 and expanded market access, it also introduces strict regulatory and environmental standards, impacting supply chains, investment, and compliance costs.
Tariff Policy and China Trade Dynamics
Mexico’s export growth to the US persists despite tariff tensions, with effective rates around 3.5%—far lower than China’s 32%. Mexico’s alignment with US protectionist measures against China strengthens its position as America’s top trading partner, but exposes it to policy volatility.
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.
Regulatory Modernization and Investment Climate
Recent reforms, including streamlined mining licenses, improved investor protections, and digital property platforms, are enhancing Saudi Arabia’s regulatory environment. These measures aim to reduce red tape, increase transparency, and attract long-term international investment across sectors, though implementation and policy stability are closely watched by global investors.
Critical Infrastructure and Supply Chain Vulnerabilities
Sanctions, sabotage, and decentralization of import authority to border provinces have disrupted Iran’s logistics and energy infrastructure. Businesses face heightened risks of supply interruptions, regulatory unpredictability, and challenges in securing essential goods and services.
US-Canada Trade Tensions Escalate
President Trump’s threats of 100% tariffs on Canadian exports, triggered by Canada’s partial trade agreement with China, mark a dramatic shift in North American trade relations. These tensions inject volatility into cross-border supply chains, investment planning, and the upcoming CUSMA review.
US-China Trade Decoupling Dynamics
Despite high US tariffs, China’s exports have surged by reallocating supply chains through third-party countries. US efforts to reduce reliance on Chinese goods are being circumvented, impacting sourcing, pricing, and competitive positioning for international businesses.
Political Stability Amid Global Tensions
Brazil’s diversified international relations and diplomatic tradition help mitigate risks from external interference, notably from the US. Political stability and global leadership ambitions support a favorable environment for long-term investment and trade strategies.
Strategic Use of Tariffs in US Trade Policy
The US increasingly leverages tariffs not only for economic aims but as instruments of foreign policy and negotiation. This approach affects global trade patterns, introduces market uncertainty, and requires businesses to adapt to rapidly shifting tariff regimes and compliance requirements.
Renewable Energy Policy Uncertainty
Despite record renewable capacity additions, delayed energy policy frameworks and political debates undermine investor confidence. France’s continued reliance on imported fossil fuels heightens exposure to geopolitical shocks and threatens long-term energy independence.
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.
Critical Minerals Strategy Reshapes Trade
Australia’s $1.2 billion critical minerals reserve, focused on antimony, gallium, and rare earths, aims to reduce reliance on China and stabilize supply chains. This initiative underpins new trade agreements, attracts investment, and enhances Australia’s role in global technology and defense supply networks.
Suez Canal Disruptions and Revenue Loss
Regional conflicts, particularly the Gaza war, have caused significant disruptions to Suez Canal traffic, resulting in an estimated $9 billion revenue loss over two years. Rerouted shipping increases global supply chain costs and reduces Egypt’s vital foreign exchange earnings, impacting trade and fiscal stability.
Energy Transition and Industrial Competitiveness
Germany is accelerating its energy transition by phasing out coal, building new gas plants, and subsidizing industrial power prices. While aiming for climate goals, the high cost of the transition and energy security concerns are prompting significant government intervention to support energy-intensive industries.
Manufacturing Competitiveness and PLI Schemes
Production-Linked Incentive (PLI) schemes have attracted $22.2 billion in investments across 14 sectors, generating $207.9 billion in new production and 1.26 million jobs. These policies are boosting electronics, pharmaceuticals, and specialty chemicals, enhancing India’s role in global value chains.
Post-Brexit Trade Policy Evolution
The UK's trade policy continues to evolve post-Brexit, with new trade agreements and ongoing negotiations with the EU and other partners. Shifting tariffs, regulatory divergence, and customs changes are impacting international trade flows and business planning.
Regulatory and Geopolitical Frictions Rise
Escalating trade disputes, tariffs, and new cybersecurity rules in the EU and India target Chinese firms and supply chains. These frictions increase operational uncertainty, compliance costs, and market access risks for international investors and exporters.
Accelerated Trade Policy Reforms
India’s government has rapidly expanded free trade agreements with the UK, New Zealand, Oman, and EFTA, recalibrating trade policy to diversify export markets and attract FDI. These reforms enhance global market access but also expose India to external risks, including US tariffs and global trade disruptions.
Remittances and External Account Volatility
Remittances remain a critical source of foreign exchange, recently surpassing $41 billion annually. However, Pakistan’s current account remains vulnerable to shifts in remittance flows, export performance, and import demand, creating volatility that affects currency stability and investment confidence.
China-Pakistan Economic Cooperation Expansion
The second phase of CPEC is broadening from infrastructure to agriculture, technology, and minerals. New agreements focus on joint ventures, technology transfer, and value chain development, positioning China as Pakistan’s key strategic and economic partner, but also raising dependency and sovereignty concerns.
Challenging Investment Climate and M&A
Brazil’s investment environment is marked by high interest rates, fiscal constraints, and political polarization. M&A activity remains subdued, but the Mercosur-EU agreement and foreign interest in mining, energy, and technology sectors could stimulate strategic investments and sectoral shifts.
Robust Public Investment Surge
Turkey’s 2026 Public Investment Program allocates nearly 1.92 trillion TRY across 13,887 projects, prioritizing infrastructure, energy, health, education, and earthquake resilience. This unprecedented scale of investment is set to enhance logistics, energy independence, and social infrastructure, directly impacting supply chains and regional connectivity.
Domestic Reforms and Infrastructure Investment
Canada is fast-tracking $1 trillion in investments across energy, AI, critical minerals, and trade corridors, alongside tax reforms and interprovincial trade liberalization. These initiatives aim to boost competitiveness and supply chain resilience, presenting significant opportunities for global investors.
Real Estate Liberalization and Mega-Projects
Recent legal reforms allow foreign ownership of land and property, sparking global investor interest. Mega-projects like NEOM and the Red Sea Project, combined with digitalization and AI-driven innovation, are transforming the real estate sector and urban infrastructure landscape.
US Military and Financial Support Remains Critical
The US continues to provide substantial military and financial aid to Israel, underpinning its security and economic resilience. This support shapes Israel’s defense posture, investment climate, and risk environment, but also ties business operations to evolving US-Israel policy dynamics and potential geopolitical backlash.
Energy Transition and Hydrogen Leadership
Saudi Arabia is rapidly scaling investments in clean hydrogen, green ammonia, and renewables, surpassing $34 billion in energy transition spending. Major projects and international JVs are positioning the Kingdom as a future leader in low-carbon energy exports and supply chain integration.
Innovation Drive and Industrial Upgrading
Despite headwinds, China continues to invest in AI, green energy, and advanced manufacturing. The government’s focus on innovation and technological self-reliance aims to move up the value chain and sustain competitiveness, but faces challenges from external restrictions and internal imbalances.