German Automotive Sector Under Pressure

German automakers face declining exports due to US tariffs, fierce competition from Chinese EVs, and sluggish domestic demand. The sector, vital for exports and employment, is restructuring with increased local production and new subsidies for electric vehicles to meet EU climate targets.

Currency Volatility and Financial Innovation

Pakistan’s rupee remains vulnerable amid external deficits and debt pressures. The government’s partnership with World Liberty Financial for a dollar-pegged stablecoin aims to boost remittance flows and financial inclusion, but regulatory, ethical, and geopolitical risks remain for cross-border transactions and digital finance.

Strategic Export Controls and Technology Restrictions

China has prioritized export controls on dual-use goods and sensitive technologies, targeting countries like Japan and reviewing foreign acquisitions. These measures, aimed at protecting national security, increase compliance risks and uncertainty for multinational firms operating in or sourcing from China.

Energy Security and Geopolitical Intervention

The US’s assertive energy doctrine, exemplified by intervention in Venezuela, reflects a strategy to secure hydrocarbon dominance and counter rivals like China and Russia. This approach influences global energy markets, supply chain decisions, and investment risks in resource-rich regions.

Institutional Revitalization and Regulatory Cooperation

Canada and China have reactivated dormant trade and investment commissions, signed MOUs on energy, agriculture, and animal health, and pledged regular ministerial dialogues. These institutional mechanisms aim to resolve trade barriers and foster regulatory alignment, impacting market access and compliance.

Manufacturing Incentives and Domestic Value Addition

India’s 2026 budget and ongoing reforms focus on boosting domestic manufacturing, scaling up PLI schemes, and increasing value addition in sectors like semiconductors, EVs, and renewables. These measures aim to position India as a global manufacturing hub and reduce vulnerability to external shocks.

Regulatory Modernisation and Governance

Pakistan is digitising government processes, reforming local governance, and updating compensation and property laws. These changes aim to streamline business procedures, improve transparency, and attract foreign direct investment, though implementation challenges persist.

Regional Security and Political Risks

Egypt faces persistent regional security risks from conflicts in Gaza, Sinai, and neighboring states. Military modernization, migration pressures, and volatile alliances affect investor sentiment, supply chain reliability, and cross-border operations, requiring robust risk management.

Surge in Foreign Direct Investment

India attracted $51 billion in FDI over six months and $748 billion over the past 11 years, reflecting strong global investor confidence. Government reforms, manufacturing incentives, and startup support are driving this surge, positioning India as a premier global investment destination.

Security Risks and Regional Tensions

Persistent cross-border terrorism, especially from Afghanistan, and heightened tensions with India threaten supply chains, infrastructure, and investor sentiment. Security alliances with China and Saudi Arabia aim to mitigate risks, but instability remains a critical factor for international business operations.

Energy Transition Faces Supply Constraints

France’s accelerated shift to electrification and decarbonization is challenged by hardware shortages, grid bottlenecks, and mineral dependencies. Energy supply tensions and infrastructure delays threaten industrial competitiveness and reliability for international operations.

Retaliatory Trade Measures Expand

China’s anti-dumping probe into Japanese semiconductor chemicals, alongside bans on cultural and seafood imports, signals a willingness to weaponize trade policy. These actions create uncertainty for Japanese exporters and global supply chains, especially in high-tech sectors.

Supply Chain Diversification and Realignment

Indian exporters are actively shifting supply chains, establishing subsidiaries in the US and Africa, and targeting new markets in Europe and Asia to offset US tariff risks. This trend is accelerating India’s integration into alternative global value chains and reducing overdependence on single markets.

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.

Resilient Power and Infrastructure Investment

India’s power sector is set for Rs 4.5 lakh crore ($54 billion) investment by 2032, focusing on grid upgrades, renewable integration, and energy storage. Infrastructure development supports long-term demand, supply-chain reliability, and the green transition.

Regulatory Instability and Economic Reforms

Iran’s government has responded to unrest by replacing the central bank governor and promising reforms. However, regulatory unpredictability, inflation, and currency collapse undermine investor confidence and complicate compliance for foreign businesses.

China-Australia Trade Tensions Escalate

China’s imposition of a 55% tariff on Australian beef exports exceeding a 205,000-tonne quota threatens up to AU$1 billion in trade, highlighting persistent vulnerability in Australia’s export-dependent sectors and the need for diversified market strategies.

Trade Policy and Shifting Global Partnerships

Germany’s export model faces headwinds from US tariffs, weak Chinese demand, and euro appreciation. The India-EU FTA, advanced during Chancellor Merz’s India visit, aims to diversify trade partners and strengthen ties with India, reflecting a strategic pivot amid global trade tensions.

Energy Transition and Renewables Surge

Saudi Arabia is rapidly expanding renewable energy capacity, with solar and wind projected to deliver nearly 20% of electricity by 2029. The Kingdom’s energy transition, supported by facilities like CATL’s Riyadh hub, is critical for decarbonization, industrial competitiveness, and compliance with global standards such as the EU’s Carbon Border Adjustment Mechanism.

Inflation Moderation and Currency Stability

Annual inflation fell to 10.3% in December 2025 from 23.4% a year earlier, mainly due to lower food prices. However, non-food inflation remains high, and the Egyptian pound is under pressure from debt and import needs, affecting consumer demand and business costs.

Political Stability Amid Regional Shifts

Mexico’s government, led by President Sheinbaum, faces mounting external pressures but maintains domestic stability and high-level dialogue with the US. The broader Latin American shift toward market-friendly policies is boosting investor sentiment, but geopolitical risks remain elevated.

Sectoral Reforms in Gems, Jewellery, and Services

India’s gem and jewellery sector, valued at $28.7 billion, seeks duty cuts, SEZ reforms, and policy changes to maintain competitiveness amid global demand shifts. Services and technology sectors are also expanding, with India’s GCCs expected to reach $100 billion in annual revenue by 2030.

Inflation and Monetary Policy Uncertainty

US inflation remains above the Federal Reserve’s 2% target, with annual CPI at 2.7%. Political interference and delayed data due to government shutdowns complicate monetary policy, increasing uncertainty for investment, borrowing costs, and currency stability.

Regulatory and Fiscal Policy Evolution

Ongoing reforms in GST, tax policy, and fiscal decentralization are shaping India’s investment climate. States are seeking greater fiscal autonomy and infrastructure funding, while regulatory changes continue to impact business operations, compliance, and long-term strategic planning.

Regulatory Reforms and Private Sector Incentives

The government is implementing new tax incentives, customs reforms, and digitalization to attract investment and support local industry. IMF reviews and international partnerships are driving structural changes, but bureaucratic hurdles and military influence still challenge private sector growth.

Centralized Leadership and Policy Continuity

Vietnam’s Communist Party, under To Lam’s likely continued leadership, is consolidating power and driving ambitious reforms. This centralization ensures policy stability for investors but raises concerns about checks and balances, impacting governance and business predictability.

Export-Led Growth Ambitions Face Constraints

Pakistan targets $60 billion in exports by 2030, but structural financial constraints—such as government dominance in banking, high energy costs, and weak credit for exporters—limit competitiveness. Achieving export goals requires deep reforms in fiscal, monetary, and industrial policy to unlock sustainable growth.

US-Israel Strategic Aid Recalibration

Recent US legislative debates and Israel’s stated intent to reduce military aid dependence signal a shift in the bilateral relationship. The $38 billion aid package expiring in 2028 and negotiations for a new 20-year deal impact Israel’s defense sector, technology partnerships, and investor risk assessments.

Structural Weaknesses and Slow Growth

Thailand faces deep structural economic issues, with GDP growth forecast at only 1.5–2.0% for 2026. Overreliance on exports and tourism, rising household debt, and declining competitiveness threaten long-term prospects, risking Thailand’s regional position and attractiveness for investors.

Biofuels and Clean Energy Transition

Canada’s new biofuel production incentives and regulatory amendments aim to strengthen domestic renewable fuel sectors. These measures respond to US policy shifts and global competition, impacting agri-business, energy investment, and supply chain adaptation.

Collapse of Russian Gas Exports to Europe

Russian pipeline gas sales to Europe plunged 44% in 2025, reaching historic lows as the EU phases out imports by 2027. Russia’s pivot to China cannot fully offset lost revenue, eroding its leverage and reshaping European energy security.

Trade Growth Lagging Global Average

UK trade is projected to grow at 2.3% annually over the next decade, below the global average of 2.5%. Deepening ties with the EU and other rule-based economies is seen as crucial to reversing this trend, as trade with the US and China stagnates due to geopolitical tensions.

Labor Market and Regulatory Evolution

Mexico’s labor market is adapting to increased demand from nearshoring and supply chain shifts, but regulatory changes, workforce development, and compliance remain critical. Evolving labor standards and business regulations will shape operational costs and investment strategies.

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.

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.

Long-Term Erosion of Investment Climate

The cumulative effect of sanctions, revenue losses, and regulatory uncertainty is eroding Russia’s attractiveness for foreign direct investment. Persistent instability and heightened compliance risks are prompting international businesses to reassess or exit the Russian market.