Industrial Cost Pass-Through Stress

Surging naphtha and energy costs are disrupting petrochemicals, steel, construction materials, and other basic industries, with some firms unable to pass increases onto customers. Smaller manufacturers are especially exposed, raising risks of margin compression, delayed deliveries, and supplier financial strain.

USMCA Review and Tariff Risk

Mexico’s July 1 USMCA review is emerging as the main source of trade uncertainty, with pressure on autos, steel, energy and Chinese investment. Given that roughly 80–82% of Mexican exports go to the United States, prolonged negotiations could reshape tariffs, rules of origin and investment timing.

Public investment and logistics constraints

Federal infrastructure investment rose 49.7% in real terms in January-February to R$9.5 billion, offering some support to transport and logistics capacity. However, discretionary spending remains exposed to fiscal compression, limiting execution certainty for ports, roads, and broader supply-chain modernization.

Fiscal Strain and Budget Reprioritization

Israel’s 2026 budget sharply increases defense spending to about NIS 143 billion, widens the deficit target to 4.9% of GDP and cuts civilian ministries. Businesses should expect tighter public finances, delayed infrastructure priorities and policy volatility around taxes and state support.

Market diversification and local content

Thailand is actively shifting export strategy away from concentrated end markets, with over 30% of exports reliant on a few destinations. Officials are pushing India, South Asia, China and the Middle East while promoting higher local content to reduce import dependence.

US-Taiwan Trade Security Alignment

The February 2026 US-Taiwan Agreement on Reciprocal Trade would cut tariffs on up to 99% of goods while binding Taiwan more closely to US export controls, sanctions alignment and anti-diversion rules, reshaping compliance, market access and technology partnership strategies.

Research and Industrial Upgrading Push

Trade and security arrangements with Europe are expanding cooperation in advanced technologies, clean energy, quantum, defence, and critical-mineral processing, with possible access to Horizon Europe funding strengthening Australia’s appeal for high-value R&D, manufacturing partnerships, and skilled-talent investment.

Auto Sector Faces Policy Shock

Autos remain Japan’s most commercially significant export vulnerability, with negotiations focused on reducing current 25% US tariffs on vehicles and parts. Prolonged uncertainty could disrupt production footprints, supplier contracts, and capital allocation across North American and Japanese automotive supply chains.

Targeted Aid for Exposed Sectors

Paris is rejecting broad fuel subsidies but considering neutral treasury measures such as deferred tax and social payments for fishing, transport, and hospitality. Companies in exposed sectors should prepare for selective liquidity support rather than economy-wide relief or price caps.

E-commerce Parcel Rules Tighten

France is intensifying checks on low-value e-commerce imports after introducing a €2 tax on small parcels, with an EU levy lifting charges to €5 from July. Retailers using Chinese cross-border fulfillment face higher compliance, border friction and cost pressure.

Middle East Energy Shock

Japan’s heavy import dependence leaves business exposed to energy disruption. About 95.1% of crude imports come from the Middle East, and LNG flows via Hormuz face risk, pushing Tokyo to release reserves, boost coal generation and seek alternative supply routes.

Privatization and Asset Sales Advance

Egypt plans four divestment deals worth $1.5 billion, with additional sales, airport concessions, and IPOs in the pipeline under its state ownership policy. The program could open entry points for foreign investors, though execution pace and valuation gaps remain important uncertainties.

Higher Rates Tighten Financing

The Federal Reserve kept rates at 3.5%-3.75% while inflation risks rose, and markets have largely priced out near-term cuts. With 10-year Treasury yields near 4.4% and mortgages around 6.22%, investment costs, refinancing, and working-capital conditions remain restrictive.

Energy Shock Hits Costs

Middle East conflict has raised fuel shortages, freight costs and inflation risks for Thailand, pressuring exports, tourism and industrial margins. Policymakers are reconsidering subsidies and energy pricing, while businesses face higher logistics expenses, input volatility and tougher budgeting across import-dependent sectors.

Supply chain bottlenecks in nickel

Nickel supply chains face short-term disruption from delayed mine work-plan approvals, weather-related mining interruptions and a tailings-dam incident affecting MHP operations. Tight saprolite availability has pushed delivered ore prices above $67 per wmt, raising procurement risk for battery and metals producers.

Political and Policy Volatility

Budget passage deadlines, possible early elections if the budget fails, and disputes over divisive legislation add policy uncertainty. Businesses face a fluid regulatory environment, uneven compensation frameworks and greater unpredictability around medium-term governance and reform priorities.

Energy Import Vulnerability and Subsidies

Indonesia remains exposed to imported oil and gas, especially from the Middle East, while global price spikes sharply increase subsidy costs. This creates operational risk through fuel volatility, logistics costs, and possible policy adjustments affecting transport, manufacturing, and energy-intensive sectors.

Battery Ecosystem Scales Up

France launched ‘France Batterie’ with 40 industrial and research partners, targeting 100-120 GW of capacity by 2030 and secure raw materials. More than €3 billion has been invested since 2019, creating opportunities in EV supply chains, recycling and equipment.

LNG Exposure Threatens Operations

Energy security is a major operational vulnerability: about one-third of Taiwan’s LNG previously came from Qatar, while onshore reserves are only around 11 days, rising to 14 next year. Any prolonged disruption could affect power-intensive manufacturing, including semiconductors and chemicals.

Localization and Labor Adjustment

Saudi labor-market reforms continue to deepen localization requirements alongside private-sector expansion. More than 2.48 million Saudis have joined the private sector, creating compliance and workforce-planning implications for multinationals, especially around hiring quotas, training investment, operating costs, and management localization.

Logistics Bottlenecks and Rail Gaps

Logistics inefficiencies remain the biggest drag on trade competitiveness, with costs nearing R1 billion daily and over 50% of physical-economy value absorbed by logistics. Weak container rail links, port delays and Durban-Gauteng corridor congestion raise export costs and supply-chain risk.

Media Access and Information Risk

Campaign conditions highlight deteriorating media freedom and information asymmetry. Independent journalists have faced obstruction and physical removal, while pro-government networks dominate messaging. For businesses, weaker information transparency increases political-risk monitoring costs, reduces policy predictability and complicates stakeholder engagement during regulatory or reputational disputes.

China Exposure and Demand Weakness

Exports to China fell 10.9% in February, highlighting weaker demand and concentration risks for firms tied to the Chinese market. For international businesses, this strengthens the case for diversifying revenue, supply chains, and sourcing footprints across Japan, Europe, and Southeast Asia.

Supply Chains Need Redundancy

German manufacturers are adapting to repeated disruptions from Hormuz, semiconductor shortages and tariffs by building stockpiles, early-warning systems and alternative sourcing. Volkswagen alone manages procurement from over 65,000 suppliers, underscoring the scale of resilience investments now required.

Semiconductor AI Demand Concentration

AI-led chip demand continues to power Taiwan’s economy, with export orders up 23.8% year on year in February and TSMC holding about 69.9% of global foundry revenue. This strengthens Taiwan’s strategic importance but deepens concentration and supply continuity risks.

Stronger data enforcement cycle

Brazil’s ANPD is set to expand enforcement in 2026, with more than 200 new staff and a budget expected to exceed double 2025 levels. Multinationals should expect stricter inspections, sanctions and tighter rules around data governance and digital operations.

Chip Export Control Loopholes

The Supermicro case exposed Taiwan as a possible transshipment point for restricted Nvidia AI servers, involving roughly US$2.5 billion in trade since 2024. Weak criminal penalties risk stricter enforcement, reputational damage, and higher due-diligence burdens across semiconductor supply chains.

Textile Export Competitiveness Pressure

Textiles generate about 60% of Pakistan’s exports and employ over 15 million workers, but rising energy costs, customs delays and freight uncertainty are eroding competitiveness. Industry groups warn orders are shifting to Bangladesh, India, Vietnam and Turkey.

Energy Market Shock Transmission

Disruption around Iran and Hormuz is feeding through to global oil, gas, freight, and inflation dynamics well beyond Iran itself. With around one-fifth of global oil normally transiting Hormuz, sustained instability can reshape sourcing strategies, inventory planning, and hedging costs across multiple industries.

Cape Route Opportunity, Port Weakness

Middle East shipping disruptions have increased Cape traffic, with reroutings reportedly up 112%, but South Africa’s ports remain among the world’s worst performers. Congestion, outdated infrastructure and weak bunkering capacity mean many vessels bypass local ports, limiting trade and services gains.

Non-Oil Growth and Reform Momentum

Saudi Arabia’s non-oil economy continues to expand, with Q4 2025 GDP up 5% year on year and non-oil activity growing 4.3%. This strengthens domestic demand and investment appeal, but also raises expectations for continued regulatory reform and private-sector execution capacity.

Fuel Subsidies Distort Energy Economics

Jakarta will keep subsidized fuel prices unchanged even with oil above US$100 per barrel, absorbing costs through the budget. This cushions short-term consumer demand and logistics costs, but increases fiscal strain and policy risk for energy-intensive businesses.

External Aid And Reform Risk

Ukraine’s macro-financial stability still depends heavily on donor flows that are increasingly tied to reform execution and EU politics. Analysts warn missed reform benchmarks could jeopardize billions in support, while a separate €90 billion EU package remains vulnerable to member-state opposition.

EU Customs Union Advantage

Turkey’s integration with the EU remains a major commercial anchor. A draft EU Industrial Accelerator Act would treat Turkish goods as EU-origin for eligible public procurement, potentially improving export competitiveness, localization incentives, and regional supply-chain positioning for manufacturers serving Europe.

Retaliation Risk Expands Globally

US tariff and trade actions are provoking countermeasures from major partners, especially China, which launched six-month trade-barrier probes into US restrictions. Businesses face elevated risks of retaliatory tariffs, regulatory friction, delayed market access, and more politicized cross-border commercial relationships.

NATO Integration Raises Security Priority

Finland’s deeper NATO integration and large Arctic exercises involving 25,000-32,000 personnel strengthen deterrence and infrastructure relevance, but also elevate security sensitivity for operators. Defense spending, procurement, cybersecurity and critical asset protection are becoming more central to business continuity and investment planning.