Major US-Indonesia Trade Agreement

Indonesia is finalizing a trade deal with the United States, expected to reduce tariffs from 32% to 19%. This agreement will enhance market access, boost exports, and reshape bilateral trade dynamics, offering significant opportunities for international investors.

Supply Chain Diversification Mandates

US policy now ties tariff relief to Taiwanese firms’ US manufacturing presence, incentivizing relocation of up to 40% of Taiwan’s semiconductor supply chain. This shift aims to mitigate concentration risk but challenges Taiwan’s domestic industry and global logistics.

Energy Transition Drives High Costs

Germany’s shift away from Russian energy and nuclear power has resulted in persistently high energy prices and supply insecurity. This undermines industrial competitiveness, deters investment, and increases vulnerability in critical infrastructure, with significant implications for energy-intensive sectors and supply chains.

EU Tightens Oil Price Cap Measures

The European Union will lower the Russian oil price cap to $44.1 per barrel from February 2026, intensifying restrictions on Russian crude and refined products. Russia has responded with export bans under price cap contracts, further complicating global energy supply chains and compliance for international traders.

Political and Alliance Stability at Risk

The crisis tests the cohesion of NATO and the transatlantic alliance, with economic coercion undermining trust among allies. The UK’s support for Greenland’s sovereignty and collective security is at odds with US demands, raising diplomatic and security risks for international businesses.

Geopolitical Risks and Policy Volatility

India faces heightened geopolitical risks, including US sanctions threats, trade deal delays, and shifting global alliances. These factors create policy volatility, impacting FDI flows, supply chain strategies, and the predictability of the business environment for international firms.

Geopolitical Pressures On US Allies

China’s escalation of trade controls against Japan tests US support for key allies and disrupts critical industries. These pressures complicate regional alliances, impact supply chains, and heighten risks for multinational firms operating in East Asia and North America.

Border Conflict Disrupts Stability

The recent Thai-Cambodian border conflict led to over 100 deaths and half a million displaced, disrupting trade and supply chains. Fragile ceasefires and ongoing tensions threaten cross-border commerce, investor confidence, and regional logistics operations.

Record Export Growth to United States

Mexico’s exports to the US reached historic highs in late 2025, with a 6.7% increase to $48.5 billion in October. This strengthens Mexico’s position as the US’s top trading partner, but exposes it to US protectionist policies and sudden regulatory shifts.

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.

Chronic Economic Instability and Reform Imperative

Pakistan faces persistent economic instability, marked by declining foreign investment, high debt, and inflation. Structural reforms, improved governance, and policy consistency are urgently needed to restore investor confidence and enable sustainable growth, directly impacting international business strategies.

Labor Mobility and Skills Partnerships

Germany is expanding labor mobility agreements, especially with India, to address skilled labor shortages. Visa facilitation, joint education initiatives, and skilling partnerships are expected to ease talent flows, benefiting sectors such as healthcare, IT, and advanced manufacturing.

Regulatory Reforms to Attract Investment

The Korean government is streamlining regulations and enhancing incentives to attract foreign investment, particularly in advanced industries. These reforms aim to improve the business environment, foster innovation, and maintain Korea’s status as a preferred destination for international capital and technology partnerships.

AI and Technology-Driven Competitiveness

Rapid advances in AI and digitalization are boosting China’s productivity and global influence. The government’s support for tech IPOs and AI adoption is reshaping value chains, but also intensifies competition and export controls, impacting cross-border technology flows and business strategies.

Mega-Projects and Infrastructure Investment

Saudi Arabia is reallocating capital from delayed real estate projects to logistics, tourism, and infrastructure, including giga-projects like NEOM and the Red Sea. These initiatives are central to supply chain strategies and offer significant opportunities for foreign contractors, technology firms, and financiers.

Massive Western Financial and Security Aid

The EU approved a €90 billion loan and the US is negotiating an $800 billion postwar recovery package for Ukraine. These funds, tied to reforms and military needs, are vital for budget stability, reconstruction, and investor confidence, but are contingent on ongoing anti-corruption efforts.

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.

Rising Environmental and Trade Standards

Global trade is increasingly shaped by mandatory environmental and sustainability standards, as seen in the US ban on Vietnamese seafood. Thailand’s robust regulatory framework offers opportunities to capture market share, but exporters must ensure full compliance and traceability to maintain access and competitiveness.

Foreign Investment Flows Amid Volatility

Despite rising market volatility and a slight increase in sovereign risk, Indonesia saw Rp1.44 trillion in foreign capital inflows in early January 2026, mainly into equities and securities. Persistent inflows signal continued international investor interest, though bond and currency risks remain.

Supply Chain Diversification And Regionalization

Global supply chains are diversifying away from both US and China dependencies, driven by tariffs, sanctions, and geopolitical risks. Regional integration and technological advances are enabling new trade models, affecting sourcing, logistics, and risk management for international businesses.

EU-Mercosur Trade Agreement Tensions

France’s opposition to the EU-Mercosur trade deal has triggered mass farmer protests and political divisions. The agreement, set to be signed despite French resistance, could flood markets with cheaper imports, threatening French agriculture and food sovereignty.

Aggressive US Industrial Policy Shift

The 2025 US National Security Strategy prioritizes economic, technological, and energy dominance through reindustrialization, energy independence, and strategic subsidies. This shift challenges multilateral norms, risks marginalizing allies, and increases regulatory complexity for international investors and supply chain planners.

Crypto Asset Regulation Tightens

From January 2026, all UK crypto transactions must be reported to HMRC, ending privacy and imposing strict compliance on exchanges. This reform increases regulatory oversight, tax collection, and transparency, but may deter investment and innovation in the sector.

Vision 2030 Giga-Projects Acceleration

Saudi Arabia’s giga-projects, such as Qiddiya and NEOM, are advancing rapidly, with major infrastructure and entertainment investments. These projects aim to diversify the economy, create up to 85,000 jobs by 2030, and generate significant non-oil revenue, attracting global investors and supply chain partners.

Regulatory Reform and Industrial Strategy

The UK’s 10-year growth plan emphasizes simplifying regulation, investing £113bn in infrastructure, and fostering innovation in sectors like clean energy, life sciences, and manufacturing. These reforms aim to enhance competitiveness and attract global capital, but their implementation and impact remain closely watched.

China’s Growing Role and Risks

China remains Brazil’s top export destination, with purchases rising 6% in 2025 to US$100 billion, mainly in soy, beef, and sugar. However, recent Chinese quotas on beef imports and increased use of trade defense instruments pose new risks for Brazilian supply chains.

Reliance on Remittances Over Exports

Pakistan’s economy is increasingly sustained by remittances and debt rather than exports. The export-to-GDP ratio dropped to 10.4% in 2024, widening vulnerabilities and highlighting the urgent need for export-led reforms, infrastructure upgrades, and improved trade agreements.

Suez Canal Disruptions and Security

Geopolitical tensions and attacks in the Red Sea have led to a sharp decline in Suez Canal traffic, with tonnage operating at 70% below 2023 averages. This has increased shipping costs, rerouted global supply chains, and significantly reduced Egypt’s canal revenues.

Regulatory and Trade Policy Uncertainty

Frequent policy shifts in trade, energy, and foreign investment—driven by geopolitical tensions and domestic priorities—create a volatile regulatory environment. Businesses face challenges in long-term planning, compliance, and risk management, particularly in sectors exposed to global supply chains and export markets.

Deteriorating Investment Climate and Human Rights Concerns

Widespread repression, mass casualties, and international condemnation have further eroded Iran’s investment climate. Heightened scrutiny over human rights abuses and governance failures increases reputational and regulatory risks for foreign investors and partners.

Geopolitical Tensions Disrupt Trade

Escalating US–China and US–Venezuela tensions heighten global trade uncertainty, impacting Thai exports, energy prices, and supply chains. Businesses face increased logistics costs and market volatility, especially in energy-intensive and export-oriented sectors, requiring robust risk management and market diversification strategies.

Geopolitical Position and Regional Integration

South Africa’s strategic role in the African Continental Free Trade Area and its growing ties with the UAE and other partners enhance its position as a gateway to Africa. This regional integration supports trade diversification and supply chain resilience.

Demographic and Labor Market Pressures

Vietnam’s fast-aging population and tightening labor market threaten long-term growth. Productivity gains, workforce upskilling, and automation are urgent priorities, as labor shortages and rising costs could erode Vietnam’s competitiveness as a manufacturing and supply chain hub.

Foreign Investment Climate Deteriorates

Sanctions, currency instability, and political unrest have sharply reduced foreign direct investment. The environment is marked by opaque regulations, high corruption, and unpredictable policy shifts, deterring new entrants and expansion.

Supply Chain Diversification and Resilience

India is positioning itself as an alternative to China for global supply chains, leveraging policy incentives, infrastructure upgrades, and trade agreements. However, external shocks—such as US tariffs and currency volatility—remain key risks for supply chain stability and export growth.

Structural Reforms and Economic Policy

The government is implementing structural reforms focused on inflation control, fiscal discipline, and sustainable growth. These reforms, including energy and climate policies, aim to boost competitiveness, reduce external dependency, and support long-term investment and supply chain stability.