Fiscal Consolidation and Tax Reform

Brazil’s 2027 budget targets a R$73.2 billion primary surplus, with debt peaking near 87.8% of GDP in 2029. Simultaneously, consumption-tax reform and tighter tax-benefit rules will reshape compliance costs, pricing, margins, and investment planning across sectors.

US Tariff Pressure Expands

New US metal-content tariff rules and a Section 301 overcapacity probe are raising compliance, pricing and market-access risks for Korean exporters. Appliances, cables, steel-linked goods and some auto parts face margin pressure, while policy uncertainty may reshape production footprints.

Wage Growth and Cost Pass-Through

Spring wage settlements remain strong, with Rengo reporting average increases just above 5% for a third straight year, while real wages rose 1.9% in February. Stronger pay supports consumption, but also encourages broader price pass-through and raises operating costs for employers.

Fiscal Pressure And Policy Risk

Indonesia recorded a first-quarter 2026 budget deficit of Rp240.1 trillion, or 0.93% of GDP, as spending reached Rp815 trillion against revenue of Rp574.9 trillion. Fiscal strain raises the likelihood of revenue-seeking regulation, subsidy adjustments and more intervention in strategic sectors.

Gas export tax uncertainty

Canberra is actively considering reforms to gas taxation, including PRRT changes and possible export levies of 15-25%. With Australia exporting roughly 83% of its LNG, policy changes could reshape project economics, investor returns, domestic energy pricing and long-term capital allocation.

Resilient yet shifting tech investment

Israel’s technology sector continues attracting foreign capital, with roughly $3 billion raised in the first quarter and new R&D tax credits approved. However, investors increasingly seek overseas structures, creating longer-term risks around intellectual property, tax base erosion and operational relocation.

Semiconductor Concentration Remains Critical

Taiwan still produces more than 90% of the world’s most advanced semiconductors, keeping global electronics, AI, and automotive supply chains highly exposed. Any disruption would reverberate quickly through pricing, lead times, procurement strategies, and capital allocation decisions worldwide.

Ports Gain From Rerouting

Shipping disruptions in the Gulf are diverting cargo toward Pakistani ports, boosting transhipment at Gwadar, Karachi and Port Qasim. This creates near-term logistics opportunities, but long-term gains depend on stronger security, customs efficiency, storage capacity and digital infrastructure.

Regional Gas Trade Interdependence

Israel’s gas exports remain strategically important for Egypt and Jordan, reinforcing regional commercial ties despite political strain. Supply interruptions forced neighboring states into rationing and costlier alternatives, underscoring how bilateral energy dependence can shape contract reliability and regional market stability.

Investment Climate Still Uneven

Businesses continue to face policy reversals, high effective tax burdens, opaque regulation and difficult formal-sector operating conditions. Even as ministers court investment in IT, minerals and energy, concerns over ease of doing business and policy continuity still constrain market expansion decisions.

Fiscal Strain and Tax Pressure

France’s 2025 public deficit narrowed to 5.1% of GDP, but debt climbed to €3.46 trillion, or 115.6% of GDP, amid record tax pressure. Rising borrowing costs, possible new tax hikes, and uncertain consolidation plans weigh on investment, margins, and policy predictability.

Structural Competitiveness Erosion

Business groups and foreign investors increasingly describe Germany’s weakness as structural rather than cyclical, citing high taxes, labor costs, bureaucracy and weak digitalization. Industrial production has declined annually since 2022, raising deindustrialization risks and encouraging production or investment shifts abroad.

Iran China India Trade Realignment

Trade patterns are tilting further toward China and, selectively, India, as compliant Western channels remain constrained. China reportedly absorbs over 90% of Iranian oil exports, while India has reappeared under narrow waivers, signaling a more fragmented, politically mediated trade geography.

Suez Disruption and Logistics

Suez Canal instability still materially affects shipping economics. The canal authority suspended its 15% rebate for large container ships, while some major lines continue avoiding the route on security grounds, increasing transit uncertainty, freight costs, and inventory planning complexity.

Tariff Volatility and Litigation

US trade policy remains highly unstable as courts challenge broad import tariffs and the administration shifts between Section 122, 232 and 301 authorities. This raises landed-cost uncertainty, complicates sourcing decisions, and increases compliance burdens for exporters, importers, and investors.

Strong Shekel Squeezes Exporters

The shekel strengthened below NIS 3 per dollar for the first time since 1995, cutting exporters’ margins and raising local-cost burdens. Manufacturers warn a roughly 16-20% currency shift is eroding competitiveness, discouraging hiring, and encouraging production or service relocation abroad.

Industrial Policy and EV Expansion

Britain is using industrial strategy to attract advanced manufacturing, especially autos and EV supply chains. The sector could add £4.6 billion by 2030, with UK-sourced parts demand up 80%, supported by DRIVE35 funding, gigafactory investment, and stronger supplier localization.

China Access Expands Opportunity

Duty-free access to China from 1 May 2026 opens a major export channel and could attract manufacturing investment, including autos. However, gains depend on meeting Chinese regulatory standards, localization requirements, logistics performance, and stronger distribution capabilities in competitive sectors.

Inflation and Rial Collapse

Iran’s macroeconomic instability is worsening, with reported inflation near 47.5%-50.6%, food inflation above 100% in some periods, and sharp rial depreciation. This undermines pricing, procurement, payroll, demand forecasting, and contract viability, while increasing working-capital and currency-conversion risks for foreign counterparties.

Regional conflict disrupts trade

Escalating Middle East conflict and the effective Strait of Hormuz disruption are curbing Saudi exports, delaying freight, and weakening investor confidence. March non-oil PMI fell to 48.8 from 56.1, highlighting immediate risks to cross-border trade, sourcing, and operating continuity.

Sanctions Enforcement Expands Extraterritorially

The United States is escalating sanctions on Iranian oil networks and warning foreign banks, including in China, about secondary sanctions exposure. Firms in shipping, energy, finance and commodities must prepare for stricter due diligence, counterparty screening and sudden disruptions to cross-border transactions.

Supply Chain Exposure to Hormuz

Disruption around the Strait of Hormuz is creating material supply-chain risk for petrochemicals, fuel, and shipping. Naphtha shortages have already forced some manufacturers to halt orders, while import-reliant sectors face procurement uncertainty, inventory stress, and higher working-capital requirements across regional operations.

Defence Industrial Expansion Uncertainty

Higher defence ambitions could stimulate UK manufacturing, technology and exports, but delayed investment plans are creating procurement uncertainty. Reported funding gaps of about £28 billion are already affecting order visibility, supplier decisions and the pace of private capital deployment into defence-adjacent sectors.

Policy Capacity and Governance Strain

Wartime reviews exposed weak contingency planning in aviation, labor administration, and crisis coordination, while protests and political tensions persist. For international firms, this points to execution risk in permits, infrastructure delivery, emergency response, and regulatory consistency during periods of national security stress.

China-Driven Export Dependence

Brazil’s exports to China reached a record US$23.9 billion in Q1 2026, with crude oil exports to China surging 122% and accounting for 57% of Brazil’s oil shipments. Strong demand supports exporters, but concentration raises vulnerability to Chinese policy shifts.

Shipping Routes Face Strategic Risk

Alternative routing through the Red Sea and Saudi Arabia’s Yanbu is easing some crude flows, but maritime risk remains elevated. Korean vessels, chokepoint exposure and possible Houthi or blockade-related disruptions continue to threaten logistics reliability, freight costs and delivery schedules.

Energy Shock and Import Dependence

Thailand’s heavy reliance on imported crude and fertiliser is amplifying cost pressures across industry. Authorities estimate roughly three months of oil and one month of fertiliser reserves, while prolonged disruption could cut GDP growth to 1.3% or lower and raise inflation.

USMCA Rules Tightening Risk

Tariff circumvention concerns are sharpening scrutiny of North American supply chains ahead of the USMCA review. Altana estimates about $300 billion in goods avoid tariffs annually, while suspicious transactions rose 76%, raising compliance costs and threatening Mexico-centered manufacturing strategies.

IMF Reforms and Fiscal Adjustment

Egypt’s IMF programme remains central to macro stability, with a seventh review due 15 June tied to about $1.65 billion and an eighth review in November. Reform compliance shapes exchange-rate credibility, subsidy policy, taxation, and the broader operating environment for foreign investors.

Defence Industrial Base Deepens

AUKUS and Japan defence agreements are creating long-horizon industrial opportunities in shipbuilding, maintenance and advanced manufacturing. New supplier qualification programs and warship contracts support local production, but rising defence budgets and execution complexity will affect labour markets, procurement and project delivery.

Deepening US-China Trade Decoupling

Bilateral goods trade continues to contract as the February US goods deficit with China fell to $13.1 billion and the 2025 deficit dropped 32% to $202.1 billion. Trade is rerouting through Mexico, Vietnam, and Taiwan, reshaping sourcing, market access, and competitive positioning.

Rare Earth Leverage Risks

China’s rare earth controls remain a critical pressure point for global industry, even after a temporary suspension through November 2026. Dependence remains high across autos, electronics and defense supply chains, forcing companies to build inventories, diversify sourcing and reassess geopolitical vulnerability.

Volatile U.S. Tariff Regime

Frequent changes to U.S. tariff measures, court rulings, and replacement authorities have made trade costs highly unpredictable. Baseline duties near 10% and shifting product-specific tariffs are distorting pricing, contract terms, market access decisions, and long-term cross-border investment planning.

Industrial Supply and Power Strain

Sanctions, conflict pressure and trade disruption are increasing strain on Iran’s domestic supply chains, including machinery, electronics, food and industrial inputs imported from China, Turkey and the UAE. Any sustained bottlenecks would weaken manufacturing continuity, project execution and local operating reliability.

Domestic Operational Disruption Escalation

War damage, internet shutdowns, factory closures and logistics bottlenecks are impairing business continuity inside Iran. Industrial stoppages, import shortages and rising unemployment increase execution risk for suppliers, distributors and investors, especially in manufacturing, retail, construction and digitally dependent services.

Semiconductor Labor Disruption Risk

Samsung unions are threatening an 18-day strike that management says could affect roughly half of output at Pyeongtaek. Any prolonged disruption would tighten global memory supply, delay AI-related shipments, and ripple through electronics, automotive, and industrial customer supply chains.