Fragile Economic Recovery at Risk

Germany’s modest economic rebound is jeopardized by renewed transatlantic trade tensions. After years of stagnation and a 0.2% GDP growth in 2025, new tariff threats and global uncertainty could derail forecasts for 1.3% growth in 2026, especially as exports to the US fell 9.4% year-on-year, highlighting vulnerability to external shocks.

Logistics Modernization and 3PL Expansion

Mexico’s third-party logistics (3PL) market is forecast to nearly double to $26.8 billion by 2033, driven by nearshoring, e-commerce, and infrastructure investment. Enhanced customs coordination, digitalization, and cross-border logistics partnerships are improving supply chain efficiency and supporting regional integration.

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.

Security Risks and US-Mexico Tensions

Escalating cartel violence and threats of US military intervention heighten operational and reputational risks. Security remains a top concern for international businesses, with border volatility, supply chain disruptions, and diplomatic tensions affecting investment confidence and cross-border logistics.

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.

Disrupted Export Logistics and Supply Chains

Russian attacks on ports and logistics hubs have cut Ukraine’s export earnings by $1 billion in Q1 2026, forcing rerouting via rail and reducing agricultural and industrial exports by up to 47%. Ongoing risks threaten the stability of global supply chains reliant on Ukrainian goods.

Private Sector Role in Recovery and Innovation

Major global firms and financial institutions, including BlackRock, are actively shaping Ukraine’s recovery strategy. The focus is on mobilizing private capital, modernizing infrastructure, and fostering innovation, especially in energy and technology, despite ongoing operational risks from conflict.

Geopolitical Tensions Undermine Stability

The Greenland dispute has strained transatlantic alliances, with Finland caught between US demands and EU solidarity. Heightened geopolitical risk undermines the predictability of the business environment and complicates long-term investment strategies.

Shifting Global Trade Alliances

Amid US tensions, France and the EU are accelerating diversification of trade partnerships, finalizing deals with Mercosur, Indonesia, and Japan. This realignment aims to reduce reliance on US markets, but introduces new complexities and risks for multinational supply chains and investment strategies.

Infrastructure Expansion Faces Local Resistance

Major infrastructure and tech projects, such as Nvidia’s Kiryat Tivon campus, are transforming Israel’s economic landscape. However, local opposition, concerns over land use, and social tensions may delay projects, increase costs, and complicate stakeholder engagement for international investors and operators.

Landmark India-EU Free Trade Agreement

India’s comprehensive FTA with the EU, concluded in January 2026, eliminates tariffs on 90% of Indian exports and expands market access for goods and services. This deal will significantly boost bilateral trade, attract FDI, and enhance supply chain resilience, positioning India as a key alternative to China.

Logistics and Infrastructure Modernization

Mexico’s third-party logistics market is forecast to grow from $14.4 billion in 2024 to $26.8 billion by 2033, driven by nearshoring, e-commerce, and technology adoption. Investments in freight corridors, bonded warehouses, and customs efficiency are strengthening supply chain competitiveness.

Shifting Energy Trade Flows to Asia

India and Turkey have reduced Russian fossil fuel imports due to sanctions, while China has increased purchases, benefiting from steep discounts. These shifts are altering global supply chains, with China now accounting for nearly half of Russia’s fossil fuel export revenues, impacting trade patterns and pricing.

US Secondary Sanctions on Iran Trade

The US imposed a 25% tariff on all countries trading with Iran, significantly affecting global energy and commodity flows. This move, alongside new sanctions on Iranian entities, increases compliance risks and operational complexity for multinationals engaged in cross-border trade, especially in energy and finance.

US-China Trade Tensions Escalate

Renewed US tariffs, including a 25% levy on countries trading with Iran, have reignited trade tensions with China. Despite US efforts, China posted a record $1.19 trillion trade surplus in 2025 by diversifying exports to Africa, Southeast Asia, and Latin America, demonstrating resilience and shifting global trade dynamics.

Environmental and Social Risk Management

Large-scale battery projects face heightened scrutiny over pollution and safety risks, with calls for independent risk assessments. Environmental compliance is becoming a decisive factor for project approval, affecting investment timelines and stakeholder relations.

Sustainable Development And Regulatory Compliance

Vietnam’s wood and agricultural sectors are adapting to stringent international sustainability and legality standards, especially from the US and EU. Compliance with deforestation-free and traceability requirements is now essential for continued access to major export markets.

Tech Sector Investment Amid Uncertainty

Despite geopolitical turmoil, Israel’s government and private sector continue to invest heavily in technology, with initiatives like the Yozma Fund and major projects such as Nvidia’s new campus. These investments sustain Israel’s global tech leadership but are vulnerable to regional instability and global capital flow shifts.

Critical Uncertainty Over War Settlement

Trilateral talks involving Ukraine, the US, and Russia signal possible movement toward a negotiated end to the conflict. However, the lack of clarity on security guarantees, territorial status, and enforcement mechanisms leaves businesses facing profound uncertainty over the future investment and operating environment.

International ‘Board of Peace’ Governance Experiment

The US-led ‘Board of Peace’—involving multiple global actors—aims to oversee Gaza’s reconstruction and security. Israel’s recent agreement to participate marks a policy shift. However, questions over legitimacy, authority, and buy-in from Palestinians and Hamas create operational and reputational risks for international businesses.

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.

Foreign Investment Hits Six-Year High

Foreign ownership of Korean stocks reached 37.18%, the highest since 2020, with strong inflows into semiconductors, shipbuilding, defense, and nuclear power. This trend reflects global investor confidence but also exposes Korea to external shocks and geopolitical tensions.

Regulatory Reforms for Foreign Investment

Sweeping reforms to business, visa, and property laws are opening more sectors to foreign ownership, simplifying bureaucracy, and enhancing expat residency options. These changes aim to boost FDI and position Thailand as Southeast Asia’s leading expat and investment destination.

Sanctions Enforcement and Geopolitical Risk

France has escalated enforcement of Russia-related sanctions, including high-profile maritime interdictions. This raises compliance risks for energy, shipping, and finance sectors, and signals a stricter stance on trade with sanctioned entities, impacting supply chain security.

Currency Collapse and Hyperinflation

Iran's rial has plunged to record lows, now trading at 1.4–1.5 million per US dollar, with inflation nearing 50%. This currency crisis, driven by sanctions, mismanagement, and corruption, has triggered mass protests, eroded purchasing power, and created severe import and operational challenges for businesses.

Environmental Governance and ESG Pressures

Environmental and labor issues, particularly in mining and palm oil, have led to regulatory crackdowns, including permit revocations for violators. International investors face growing ESG expectations, and Indonesia’s ability to enforce standards will shape its reputation and access to sustainable finance.

Pivot to High-Value Investment Sectors

Thailand is shifting its economic strategy to attract foreign direct investment in high-tech, green infrastructure, and wellness tourism. This pivot aims to address sluggish growth, but requires legal reforms, transparency, and infrastructure upgrades to succeed.

Trade Policy Uncertainty and AGOA Extension

The renewal of the African Growth and Opportunity Act (AGOA) provides temporary relief, but ongoing US-South Africa trade tensions and annual eligibility reviews create uncertainty. Loss of preferential access could significantly impact exports, especially in manufacturing and agriculture, affecting jobs and investment.

US Tariffs and Trade Policy Uncertainty

Despite 20% US tariffs on Vietnamese exports, trade volumes to the US have reached record highs. However, ongoing tariff threats and negotiations inject volatility into Vietnam’s export-led growth model, compelling businesses to diversify markets and adapt to shifting global trade policies.

Internal Unrest and Political Crackdown

Mass protests over economic hardship and government repression have resulted in thousands of deaths and ongoing internet blackouts. Political instability and human rights concerns heighten unpredictability for foreign investors and may trigger further international punitive measures.

Debt Management and Fiscal Sustainability Challenges

Egypt’s reliance on local and international debt issuance remains high, with EGP 843 billion in local debt planned for February 2025 and $2 billion in international bonds for FY 2025/26. Fiscal sustainability concerns persist, influencing sovereign risk and borrowing costs.

Rising Construction and Compliance Costs

The Shelter Act’s imprecise technical guidelines and lack of clear state subsidies shift the financial burden to developers and buyers. This raises the cost of new projects, complicates financial planning, and may slow new investments, affecting supply chains for shelter materials and construction services.

Structural Economic Challenges and Reform Agenda

Thailand faces its lowest economic growth in a decade, driven by high household debt, corruption, and an aging workforce. Political parties are prioritizing SME support, anti-corruption, digital infrastructure, and EEC revitalization, but structural reforms remain critical for sustainable long-term growth.

Critical Minerals and Mining Ambitions

With $2.5 trillion in mineral reserves, Saudi Arabia is investing $110 billion to become a regional mining and processing hub. Strategic partnerships, especially with the US, aim to reduce supply chain dependence on China and position the Kingdom as a key player in global mineral supply chains.

Circular Economy Initiatives Gain Momentum

France is advancing circular economy models for EV batteries, with startups and industrial players piloting second-life and recycling projects. These initiatives are increasingly supported by public policy, enhancing resource efficiency and opening new business models for investors.

Surge in Green Energy Investment

A landmark $2 billion Saudi-Turkish solar energy deal will add 2,000 MW capacity, supplying 2.1 million homes and boosting local industry. This reflects Turkey’s drive to reach 120,000 MW renewable capacity by 2035, attracting foreign capital and supporting energy transition.