Mission Grey Daily Brief - May 10, 2025
Executive Summary
In the last 24 hours, a remarkable confluence of events has shaken the global landscape. The escalating military confrontation between India and Pakistan has not only intensified regional uncertainty but has also reverberated through financial markets in both countries. Simultaneously, the global business environment contends with the disruptive effects of the U.S.-China tariff war, impacting global supply chains, inflation, and strategic diversification efforts from Asia to the Middle East. Meanwhile, signs of a shifting world order are emerging: defense budgets are soaring, central banks are pivoting to stimulus, and great power blocs are drifting further apart, impacting investment flows and market confidence. Today’s brief deciphers the ongoing fallout and outlines key risks and opportunities for international businesses and investors.
Analysis
1. India-Pakistan Conflict: Shockwaves Across South Asia
The most urgent geopolitical flashpoint is the India-Pakistan military escalation, following India's Operation Sindoor—a calculated strike on terror camps in Pakistan, in retaliation for the deadly cross-border attack in Pahalgam. This action, the deepest Indian military incursion into Pakistani territory since 1971, triggered immediate air and drone exchanges, casualties on both sides, and a surge in mutual brinkmanship. Although Indian officials emphasize the operation’s restrained, non-escalatory intent, volatility has rippled through financial markets. India’s Sensex and Nifty indices opened sharply lower—down 800 and 146 points, respectively—but soon stabilized, aided by the country’s robust economic fundamentals, ongoing foreign institutional investor (FII) inflows, and a resilient corporate sector[Stock Market Up...][India-Pakistan ...]. Pakistani markets fared worse, shedding more than 10% in recent sessions amid investor anxiety and impending IMF reviews.
Despite the turbulence, defense stocks skyrocketed in India, with companies like Hindustan Aeronautics and Bharat Electronics posting gains of up to 5%. The rupee, however, slid to a multi-year low. The broader concern is that a prolonged or escalated conflict would damage not only South Asian markets but also critical supply chains and cross-border trade, especially as India has now suspended trade ties with Pakistan and is reviewing the Indus Waters Treaty. Economic officials in New Delhi stress hope for de-escalation, but caution that industries and risk-averse investors will “recoil” until the situation stabilizes[India-Pakistan ...]. International investors would be wise to monitor further developments, particularly given the potential for sudden policy changes and the risk of a more substantial market correction if hostilities persist.
2. Tariff War: U.S.-China Friction Disrupts Global Trade
The U.S.-China tariff war is casting a long shadow over global commerce. President Trump’s introduction of tariffs reaching up to 145% on Chinese goods, and Beijing’s retaliatory 125% tariffs on U.S. exports, have resulted in a dramatic reduction in bilateral trade—Chinese exports to the U.S. plunged 21% in April alone, while American exports to China also fell double digits. These moves are accelerating supply chain diversification away from China, particularly toward Southeast Asia, the Middle East, and Latin America. Notably, U.S. footwear and apparel companies are warning of steep price hikes for consumers, with projections of short-term family spending on such goods surging by up to 70% due to tariff-induced inflation[Diamonds to det...][Forget tariffs ...][China’s exports...]. At a macroeconomic level, these measures risk fueling global inflation, increasing consumer costs, and fragmenting industrial supply chains[Here’s How Tari...][China cuts key ...].
Yet some businesses, like Keen Footwear, are demonstrating the benefits of preemptively diversifying supply chains away from China. The trade shifts are also boosting exports from China to the EU, ASEAN, and Belt and Road nations, even as domestic Chinese manufacturers feel the pinch from both tariffs and dampened U.S. demand. For international companies, this presents both a warning and an opportunity: building resilience requires proactive reallocation of production, careful vigilance around regulatory and political changes, and a readiness to adapt to more protectionist environments on both sides of the Pacific.
3. Global Order: Defense Spending Soars, Economic Policy Shifts
Amid this turmoil, the contours of the global order are redrawing. India, China, and Russia are seeking greater regional autonomy and new alliances in the face of an arguably more transactional U.S. foreign policy[Yalta 2.0? Why ...][The Hindu Huddl...]. Defense budgets are surging globally—projected to hit $2.1 trillion in 2025 and growing at nearly 6% annually—as governments modernize their militaries and invest heavily in advanced technologies, with AI and cybersecurity at the forefront[Surge In Geopol...]. This trend reflects both the direct response to regional conflicts and deepening mistrust among major powers. Meanwhile, monetary authorities are turning toward easing—China cut reserve requirements and interest rates this week to counteract trade and domestic headwinds—while in Europe, the ECB is signaling further stimulus to energize lackluster recovery[China cuts key ...][Global Economic...].
Investment flows are also responding. The U.S. is courting Gulf sovereign wealth, opening up “fast track” investment programs, and deepening ties with the U.K. through an initial trade pact that could presage broader liberalization[New U.S. Trade ...][pe4Dm-8]. In parallel, Chinese and Hong Kong firms are targeting Middle Eastern expansion, highlighting the ongoing diversification of trade and investment relationships—often as a direct consequence of growing regulatory and political uncertainty between the U.S. and China[Delegation from...].
Conclusions
Today’s global landscape is defined by volatility, intense rivalry, and rapidly evolving risks and opportunities. Geopolitical fault lines, from Kashmir to the Taiwan Strait, are increasingly interconnected with economic policy decisions, from tariffs to defense budgets. The business world is adjusting by diversifying supply chains, seeking new markets, and investing in resilience.
Critical questions arise: Will India and Pakistan manage to avoid further escalation, or is a wider South Asian crisis looming? Can global companies adapt quickly enough to compensate for the trade shock and inflation fueled by the U.S.-China confrontation? Are we heading into a decades-long era of fragmented, regionalized economies, or can new trade pacts and alliances sustain global growth without undermining ethical, transparent, and open business standards?
As international companies recalibrate strategies for an unstable multipolar world, agility, ethical due diligence, and geopolitical awareness will be more vital than ever. Which supply chains will prove most resilient, and what new alliances will define the decade ahead? Only time—and careful, informed decision-making—will tell.
Further Reading:
Themes around the World:
Biodiesel policy recalibration to B40
Indonesia delayed moving to B50 and will maintain B40 in 2026 due to funding and technical constraints. This changes palm-oil and diesel demand projections, affecting agribusiness margins, shipping flows, and price volatility across global edible oils and biofuel feedstock markets.
US–Taiwan tariff deal reshapes trade
A pending reciprocal tariff arrangement would reduce US tariffs on many Taiwanese goods (reported 20% to 15%) and grant semiconductors MFN treatment under Section 232. In exchange, large Taiwan investment pledges could shift sourcing and pricing dynamics for exporters.
Infrastructure Delays Challenge Competitiveness
Major infrastructure projects, such as the Fehmarnbelt tunnel, face significant delays and cost overruns. Persistent issues with transport and logistics modernization threaten Germany’s long-term competitiveness and the efficiency of European supply chains, impacting international trade and investment.
Security and Organized Crime Risks
Persistent insecurity, including theft and extortion, remains a top obstacle for business operations. Nearly half of Mexican firms report crime victimization, leading to higher security costs and operational risks, particularly in key industrial regions outside secure zones like Coahuila.
Impact on Real Estate Investment Strategies
The Shelter Act changes the risk-reward calculus for real estate investors, with higher costs and longer project cycles. Institutional investors are expected to focus on finished or near-finished assets, while speculative and early-stage investments become less attractive due to regulatory uncertainty.
US trade access and AGOA uncertainty
AGOA has been extended only short-term amid strained US–South Africa relations and eligibility scrutiny. Exporters in autos, agriculture and apparel face tariff cliff risk, contract repricing and investment hesitation, while firms may need contingency routing, rules-of-origin checks and market diversification.
Critical Minerals Supply Chain Security
France is intensifying international cooperation to diversify and secure critical minerals supply chains for EV batteries, reducing reliance on China. This strategic shift is crucial for trade, investment, and the resilience of EV battery second-life operations.
Fiscal Policy and Debt Volatility
Japan's snap election and expansionary fiscal policies have triggered sharp volatility in government bonds and the yen, raising global market risks. Debt servicing costs could rise to 20-25% of expenditure, impacting fiscal sustainability and investor confidence.
Energy security and LNG procurement
Taiwan’s import-dependent power system and plans to increase LNG purchases, including from the US, heighten focus on fuel-price volatility and shipping risk. Industrial users should expect continued sensitivity to outages, grid upgrades, and policy shifts affecting electricity costs.
Regulatory Changes and Labor Compliance
Recent labor reforms include a 13% minimum wage hike, stricter workplace inspections, and new rules for app-based workers. Businesses must adapt to evolving compliance requirements, increased enforcement, and potential cost pressures in sectors like automotive and technology.
Agricultural Modernization and Trade Shift
Pakistan is rapidly modernizing its agriculture sector through Chinese technology and investment, aiming for export-led growth and higher yields. This transformation presents new opportunities for agribusiness and logistics, but also heightens dependency on Chinese expertise and market access.
Privatisation and SOE restructuring
Government plans broader privatisation after PIA and targets loss-making SOEs to reduce fiscal drain. Transaction structure, governance and regulatory clarity will shape opportunities in aviation, energy distribution and logistics, while policy reversals could elevate political and contract risk.
AI and Tech Export Boom
Taiwan’s exports surged 26% to $743.7 billion in 2025, driven by AI and high-performance computing demand. Major tech firms like TSMC and Foxconn posted record profits, but concerns linger over an AI bubble and overdependence on tech exports.
High rates, easing cycle
The Central Bank kept Selic at 15% and signaled potential cuts from March as inflation expectations ease, but fiscal uncertainty keeps real rates among the world’s highest. Credit costs, consumer demand, and project IRRs remain sensitive to policy communication and politics.
Maritime services ban on crude
Brussels proposes banning EU shipping, insurance, finance and port services for Russian crude at any price, moving beyond the G7 price cap. If adopted, logistics will shift further to higher‑risk shadow channels, raising freight, delays, and legal liability.
Shadow Fleet and Illicit Trade Networks
Russia’s use of a vast shadow fleet to circumvent sanctions enables continued oil exports but exposes international shipping, insurance, and logistics firms to enforcement actions and compliance risks. Recent Western crackdowns are increasing operational uncertainty for global maritime and trade actors.
Mining Sector Pressures and Logistics
Mining output declined 2.7% in late 2025 due to falling coal and iron ore production, rising costs, and logistical constraints. Global trade tensions, especially with the US and China, further threaten export volumes and investor confidence in this critical sector.
Modernization of Trade and Tariff Policy
Recent reforms target the National Tariff Commission and broader trade policy, aiming to enhance trade-remedy tools, liberalize tariffs, and improve export competitiveness. These changes are designed to align with global trade norms and support private sector growth, but implementation remains key.
Industrial tariffs and beneficiation policy
Eskom is proposing interim discounted electricity pricing for ferrochrome (e.g., 87c/kWh) and extensions of take-or-pay relief, as smelters struggle with power costs. Such interventions signal ongoing policy activism around beneficiation, affecting mining-linked investors’ cost curves and offtake planning.
Energy export policy and pricing
US LNG export capacity and permitting decisions influence global gas prices and industrial competitiveness. Any tightening of export approvals or infrastructure constraints can raise volatility for energy-intensive manufacturers abroad, while expanded capacity strengthens US leverage and attracts downstream investment into North America.
Defence exports and geopolitical positioning
Turkey’s defence industry is expanding exports and co-production, exemplified by a reported $350m arms agreement with Egypt and large-scale drone manufacturing capacity growth. This supports industrial upgrading and regional influence, but can elevate sanctions, licensing and reputational due-diligence requirements.
Downstream Industrialization and Value Addition
Indonesia continues to prioritize downstream processing in mining and energy, leveraging foreign investment—especially from China—to move up the value chain. This strategy increases export value, supports job creation, and enhances industrial competitiveness.
Critical Mineral Diversification Strategy
Japanese firms are rapidly diversifying supply chains for minerals like gallium and rare earths, securing new sources in Kazakhstan and Australia. These efforts aim to reduce strategic vulnerabilities, ensure manufacturing continuity, and stabilize high-tech sectors amid global supply shocks.
Gaza spillovers and border operations
Rafah crossing reopening for limited passenger flows underscores persistent Gaza-related security and humanitarian pressures. While not a primary goods corridor, heightened North Sinai sensitivities can affect permitting, workforce mobility, and reputational risk. Companies should strengthen security protocols and compliance screening.
Escalating Cross-Strait Geopolitical Risks
China’s intensifying military drills and threats of reunification by force heighten the risk of conflict, blockades, or supply chain disruption. This persistent tension is a critical risk factor for international investors and global business operations.
Supply Chain and Border Management Uncertainty
The reopening of the Rafah border crossing and ongoing controls highlight persistent uncertainty in supply chain logistics. Restrictions on goods and movement, coupled with complex oversight, continue to challenge humanitarian aid, trade, and operational planning for international businesses.
Green Transition and ESG Imperatives
Vietnam is investing heavily in green infrastructure, renewable energy, and sustainable finance, with Ho Chi Minh City alone planning nearly $40 billion for green transition. Compliance with global ESG standards and carbon border adjustment mechanisms is becoming critical for export competitiveness and investment attraction.
Foreign Direct Investment Rebound
Turkey attracted $12.4 billion in FDI in the first 11 months of 2025, a 28% increase year-on-year. The EU accounts for 75% of inflows, with major investments in trade, ICT, and food manufacturing, signaling renewed international investor confidence.
Export Diversification Amid Tariffs
China’s exports to the US fell by nearly 20% in 2025 due to tariffs, but overall exports grew 3.2% as China rapidly diversified to Southeast Asia, Africa, and Latin America. This shift is reshaping global supply chains and trade flows, challenging US trade leverage.
Infrastructure Investment and Supply Chain Resilience
South Africa is increasing investment in energy, transport, and digital infrastructure to support industrialization and supply chain resilience. However, execution risks, funding gaps, and slow project delivery continue to limit the effectiveness of these initiatives in boosting productivity and attracting foreign capital.
VAT and Regulatory Changes in Energy
France will raise VAT on energy subscriptions from 5.5% to 20% in August 2026 to comply with EU rules. This tax hike, alongside evolving energy regulations, will affect operating costs, consumer demand, and investment decisions in the energy and industrial sectors.
Post-Conflict Regional Supply Chain Shifts
Turkey’s exports to Syria surged 69% in 2025 after regime change, reflecting new regional trade corridors and supply chain integration. This trend supports Turkish industry but may create long-term dependency risks and competitive pressures in neighboring markets.
Semiconductor controls and AI choke points
Tighter export controls, selective approvals, and new tariffs on advanced chips are reshaping global tech supply chains. Firms face compliance burdens, China retaliation risk, and higher hardware costs; U.S.-based capacity and trusted suppliers gain strategic priority.
India-Canada Energy and Minerals Reset
Canada and India are negotiating broad accords on energy, critical minerals, and AI, aiming to double bilateral trade by 2030. This diplomatic reset opens new markets for Canadian resources, supports supply chain diversification, and strengthens Canada’s position in Asian growth markets.
Pharma market access and import controls
US–India framework provisionally shields Indian generic pharma exports (≈$10bn/yr) from reciprocal tariffs, while India pledges to address medical device barriers. Separately, India restricts low-priced penicillin imports via minimum CIF thresholds, influencing API sourcing and pricing.
Chronic Export Underperformance and Structural Barriers
Despite ambitious targets to reach $60 billion in exports, Pakistan’s export-to-GDP ratio has declined to 10.4%. Structural issues—such as weak infrastructure, regulatory uncertainty, and financial system crowding out private credit—continue to hamper export growth and international trade integration.