Mission Grey Daily Brief - May 24, 2025
Executive Summary
The last 24 hours have seen a series of major developments that reinforce the underlying fragility and complexity of the world’s political and economic environment. Global attention is fixed on growing trade tensions and tariff shocks, escalating instability in key political hotspots, and significant multilateral events that are shaping the future of alliances, trade, and investment flows. G7 nations are wrapping up meetings with more promises to tackle economic imbalances and respond to Russia’s war on Ukraine, as the world economy feels the tangible effects of protectionism and deglobalization. Meanwhile, new alignments among emerging economies are taking root, with India pushing for reform within the expanded BRICS coalition and China deepening ties with ASEAN amidst US tariff threats. Finally, internal crises in countries like Bangladesh and Venezuela highlight the persistent risks of political volatility.
Analysis
1. Intensifying Global Trade Tensions and the Threat of Fragmentation
Trade tensions between the world’s major economies have reached new heights this week. The G7 finance ministers, meeting in Canada, have expressed deep concern over what they label as “excessive imbalances” in the global economy and are considering stepped-up sanctions against Russia. However, the group is visibly split on U.S.-imposed tariffs—especially as President Trump’s administration continues to prioritize unilateral action and is seeking new trade deals, further unsettling long-standing economic partnerships. The G7’s communique highlights a consensus on the need for resilient supply chains and coordinated efforts to prevent distortive non-market practices—a thinly veiled reference to China’s state-subsidized model. While G7 consensus is crucial, internal friction and lack of explicit action on tariffs signal limited progress in stemming the tide of protectionism [G7 considers Ru...][G7 glosses over...][G7 finance mini...].
On the other front, the BRICS bloc—now expanded to ten members with Indonesia’s entry—has made a show of unity at their latest meeting in Brazil. India has called for the dismantling of export controls and reaffirmed its push for a rules-based, inclusive trading system, in sharp contrast to Western protectionist trends. The BRICS joint declaration and new trade governance frameworks aim to shield developing economies and reinforce South-South cooperation [India calls for...].
Amid these power plays, China has sealed a new free-trade deal with ASEAN that updates their 15-year-old agreement, adding highly relevant chapters on digital trade, green economies, and integrated supply chains. Both sides underscored their commitment to open trade in the face of US tariff war threats and indicated further moves to bypass Western-centric global institutions [China, Asean fi...]. Given that ASEAN and China remain each other’s top trading partners—with bilateral trade surging nearly 8% year-on-year and reaching nearly $1 trillion—this alliance is poised to buffer at least part of the shock from Western deglobalization efforts.
The combined impact of these trends is significant: The United Nations’ mid-year forecast now sees global GDP growth stumbling to just 2.4% in 2025, trade growth halving to 1.6%, and financial and investment flows faltering under the weight of uncertainty and mounting barriers. The costs of “decoupling” are particularly acute for developing countries facing debt risks and weak currencies, but even advanced economies in Europe and Asia are showing mounting strain [Press Release |...][Top Geopolitica...].
2. Ukraine, Russia, and G7 Policy Crossroads
The Ukraine conflict remains a central axis of geopolitical maneuvering. G7 finance chiefs have reiterated a united stance against Russia’s war but have adopted more subdued language than in the past, reflecting the shifting positions within the group since the U.S. political change last year. While “further ramping up sanctions” is on the table should ceasefire efforts stall, there is visible Western hesitancy to take steps that would trigger a spike in oil and gas prices, especially as voices in Europe argue that their economies cannot function without Russian raw materials [G7 considers Ru...][G7 glosses over...][Global economy ...].
Notably, Washington has stated it will not support new energy sanctions as long as Moscow appears serious about a negotiated settlement—a signal that realpolitik and economic imperatives are once again softening the West’s posture, much to the concern of those pushing for continued pressure on Moscow [Global economy ...]. Simultaneously, China has condemned new EU sanctions as “double standards,” stressing that most Western countries, in practice, maintain ongoing trade relations with Russia despite the rhetoric [China calls out...].
As direct channels between Russia and Ukraine have recently reopened for the first time since 2022—with Beijing’s support—the outlook remains highly fluid. Europe is recognizing its own limits in supporting the conflict without direct U.S. military and economic backing, and there is increasing debate over just how long coalition governments on the continent can sustain support, given public fatigue and mounting economic strain [Europe unable t...].
3. Shifting Alliances: China, Russia, and the Non-Aligned Bloc
The Xi-Putin summit and the AmurExpo economic forum this week have cemented what Russian and Chinese officials call “the best period in history” for their partnership. Business and governmental exchanges encompass advanced technology, energy, and joint infrastructure initiatives designed to insulate both economies from Western sanctions and diversify strategic dependencies [Chinese leader'...]. This partnership, underpinned by a shared disregard for ethical, human rights, and transparency standards, presents ongoing risks for international investors concerned about the rule of law and the potential for forced technology transfers or sanctions exposure.
Overlaying this, China’s strengthened position in Southeast Asia and overt stance against the West’s “economic coercion” has left U.S. and European policymakers searching for new frameworks to stabilize supply chains and maintain influence in the Indo-Pacific, even as democratic allies become increasingly wary of the growing China-Russia axis [China, Asean fi...][Top 5 Geopoliti...].
4. Flashpoints: Political Volatility and Democratic Backsliding
Institutional and social resilience are being tested in a number of critical emerging markets. In Bangladesh, Nobel laureate Muhammad Yunus, who heads the caretaker government after last year’s anti-corruption protests, has threatened to resign amid street protests and a deepening standoff with opposition leaders. With no election scheduled until June 2026, the risk of further social unrest and economic disruption is elevated [Yunus threatens...][Key Bangladesh ...].
In Venezuela, new elections are proceeding under a shadow of deep economic crisis and near-total opposition disarray, with projections of only 16% voter turnout and most seats expected to be retained by the ruling party. Economic contraction and inflation are rapidly eroding purchasing power and amplifying the real risk of further crisis-induced migration or social collapse [High voter abst...].
Democracy and media freedom are under fresh assault in Hungary, where a new bill threatens to curtail foreign funding for independent media under the guise of sovereignty protection, prompting widespread concern from global press groups and underscoring the trend of democratic backsliding even within the EU [World’s press c...].
Conclusions
The world’s business and geopolitical environment is entering a period of heightened unpredictability and risk. The continuing fracturing of the global economic system—manifested in tariff wars, scrambling for critical supply chain realignments, and the rise of large non-democratic alliances—presents brands and investors with fundamental choices about where and how to operate. While emerging alliances like BRICS and China-ASEAN offer new opportunities, they also carry significant exposure to governance, human rights, and corruption risks. Meanwhile, G7 unity is being strained both by internal disagreements and the economic limits of extending confrontational policies against Russia and China.
In this landscape, businesses would do well to proactively monitor political risk, diversify supply chain dependencies, and assess not just market opportunity but also exposure to autocratic or ethically problematic regimes. Will the ongoing tariff shocks become the “new normal” of global commerce? Are Western economies prepared to face the real economic pain of strategic decoupling, or will accommodation prevail? And with fragile democracies under stress, can free institutions withstand the authoritarian surge in both emerging and some established markets?
Mission Grey will continue to track these evolving themes—and help global businesses navigate the risks and seize the opportunities emerging in this historic moment.
Further Reading:
Themes around the World:
M&A and Investment Opportunities Amid Turmoil
Despite political risks, France remains an attractive destination for mergers and acquisitions, supported by its strategic sectors like luxury goods and energy. Investment activity is expected to accelerate, reflecting confidence in France's long-term economic fundamentals and its role as a European hub, even as companies navigate short-term uncertainties.
China's Strategic Global Pivot and Trade Realignment
Facing US tariffs and slowing exports, China is pivoting towards strengthening trade ties with ASEAN, BRICS nations, and Russia, while reviewing trade laws to support new trade models and digital commerce. This strategic realignment aims to reduce US dependency, diversify export markets, and sustain economic growth, influencing global trade flows and geopolitical alliances.
Monetary Policy Uncertainty and BOJ Rate Hikes
The Bank of Japan's ambiguous signals on interest rate hikes create market uncertainty. While inflation exceeds the BOJ's 2% target, cautious monetary tightening aims to balance growth and inflation risks. This hesitancy weakens the yen, affects capital flows, and complicates Japan's inflation management, with implications for export competitiveness and import costs.
Federal Reserve Independence Under Threat
U.S. President Donald Trump's attempts to influence Federal Reserve decisions, including firing key governors and pressuring for rate cuts, raise concerns about the Fed's autonomy. Politicization of monetary policy risks undermining credibility, increasing market volatility, inflation, and borrowing costs, which could destabilize financial markets and investor confidence globally.
Deepening Brazil-China Economic Partnership
Chinese investments in Brazil doubled in 2024, reaching $4.18 billion across 39 projects, making Brazil the third largest global destination for Chinese capital. This surge spans energy, infrastructure, agriculture, and technology sectors, reflecting a strategic pivot towards China amid US trade tensions, and reshaping Brazil's international economic alignments and supply chain dependencies.
Egyptian Exchange Market Dynamics
The EGX showed mixed performance with profit-taking and cautious investor sentiment amid global uncertainties. Despite short-term dips, foreign inflows remain strong, with market capitalization around EGP 2.45 trillion. New leadership and reforms, including IPO incentives and fintech initiatives, aim to boost liquidity and broaden market participation, supporting capital market development and investment opportunities.
Rising Unemployment and Price Wars
China confronts rising unemployment, especially youth, alongside intense price wars in sectors like electric vehicles. These pressures compress profit margins and challenge domestic consumption growth. The labor market strain and competitive pricing impact economic stability, consumer demand, and corporate profitability, affecting investment climate and policy responses.
Resilience of Ukrainian Private Debt
Despite the severe impact of Russia's 2022 invasion, Ukraine's private debt market, especially in metals, mining, and agribusiness sectors, has shown remarkable resilience. Companies adapted by relocating operations and finding new export routes, maintaining production and debt servicing. This resilience signals potential investment opportunities but also underscores ongoing operational risks amid conflict.
Corporate Financial Resilience and Strategic Shifts
Sasol's financial results illustrate corporate adaptation through cost containment, capital optimization, and strategic realignment despite a challenging macro environment. Improved free cash flow and debt reduction signal resilience, but ongoing impairments and volatile commodity prices highlight sector vulnerabilities.
Banking Sector Resilience and Credit Upgrades
S&P Global Ratings upgraded credit ratings of major Vietnamese banks, reflecting improved asset quality, stable deposit funding, and supportive monetary policy with lowered interest rates. Non-performing loans declined, and regulatory reforms enhance governance. However, credit risks remain elevated due to high private sector credit-to-GDP ratios. The banking sector's resilience is critical for sustaining investment and economic growth.
Financial Innovation and De-dollarization Efforts
Iran promotes financial initiatives within the Shanghai Cooperation Organization to reduce reliance on the US dollar and circumvent sanctions. Proposals include multilateral currency swaps, digital infrastructure, and an SCO development bank. These efforts aim to enhance economic resilience and create alternative financial channels, though their effectiveness depends on broader geopolitical acceptance and implementation challenges.
Labor Market Concerns and Employment Risks
Rising unemployment and job insecurity are increasingly affecting German consumer confidence and spending. The manufacturing sector's struggles, including layoffs and reduced hiring, exacerbate fears of job losses. Structural shifts and demographic challenges further pressure the labor market, potentially slowing economic momentum and increasing social tensions amid political uncertainties.
Rapid Financial Market Growth
Saudi Arabia's financial market has surged to a $2.4 trillion valuation, becoming the fastest-growing globally. This growth is driven by fintech, digital payments rising to 79% of transactions, and AI integration, positioning Riyadh as a burgeoning financial hub. This expansion attracts global investors and diversifies the economy beyond oil, enhancing investment opportunities and financial innovation.
National Investment Strategy Driving Economic Transformation
Launched in 2021, the National Investment Strategy is central to Vision 2030, targeting increased private sector GDP contribution, higher FDI, and expanded non-oil exports. It has facilitated over 800 reforms, attracted regional headquarters of global firms, and set ambitious investment goals to elevate Saudi Arabia into the world’s top 15 economies.
Domestic Economic Resilience and Growth
Despite global uncertainties and tariff shocks, India’s economy grew 7.8% in Q1 FY26, driven by strong domestic demand, government spending, and rural consumption. Robust macroeconomic fundamentals, easing inflation, and fiscal reforms underpin resilience, supporting sustained growth and attracting investment, though export challenges persist amid global trade tensions.
Oil Price Impact on Fiscal and Market Stability
Declining oil prices, trading around $66-$69 per barrel, have pressured Saudi Arabia's fiscal balance, leading to a growing budget deficit and reduced oil export revenues. This has prompted increased sovereign debt issuance, including Islamic dollar-denominated sukuk, to finance government spending and economic diversification efforts, highlighting the Kingdom's vulnerability to oil market fluctuations.
Sovereign Wealth Fund Bond Issuance
Turkey's Sovereign Wealth Fund is actively issuing dollar-denominated bonds without sovereign guarantees, leveraging strong investor demand despite political risks. These issuances, including sukuk and syndicated loans, are critical for financing public enterprises and infrastructure, reflecting efforts to diversify funding sources amid market volatility.
Rising Challenges for US Firms in China
American companies in China report unprecedented pessimism due to geopolitical uncertainties, fierce local competition, and economic slowdown. The decline in optimism, coupled with a 13.4% year-on-year drop in foreign direct investment, signals a broader global investor pullback, affecting bilateral trade dynamics and investment flows.
US Tariffs and Trade Uncertainty
The imposition of 50% US tariffs on Indian exports, especially in textiles, pharmaceuticals, and gems, has created significant trade uncertainty and financial market volatility. While the tariffs pose short-term challenges, India's lower export dependence and robust domestic demand cushion the impact. Ongoing legal challenges and potential renegotiations add complexity to trade relations and investment decisions.
Capital Market Reforms and Incentives
The Egyptian government is incentivizing large stock listings to deepen market liquidity and broaden ownership. Initiatives include tax exemptions on IPO proceeds, introduction of derivatives, and market maker mechanisms. New leadership at the Egyptian Exchange aims to boost retail participation and foreign inflows, supporting economic growth and private sector expansion.
Corporate Sector Inertia
Pakistan's private sector shows significant potential but remains constrained by policy neglect, subsidies, and risk aversion. This inertia limits capital creation, innovation, and foreign direct investment, with FDI at only $1.785 billion through April 2025. The lack of ambition and talent flight hinders competitiveness, impacting international trade and investment attractiveness.
Dependence on China and Supply Chain Risks
Chancellor Merz highlights Germany's strategic vulnerability due to heavy reliance on China for critical raw materials. This dependence exposes Germany to potential trade coercion and supply disruptions, prompting calls for diversification of supply chains and expansion of trade partnerships beyond China to ensure economic and security resilience.
Bank of Canada Monetary Policy Outlook
Market expectations increasingly price in interest rate cuts by the Bank of Canada due to economic softness and inflation remaining in check. Anticipated rate reductions could weaken the Canadian dollar, affect borrowing costs, and influence capital flows, with implications for sectors sensitive to interest rates and currency fluctuations.
Regulatory Framework Against Dumping
Saudi Arabia has strengthened its anti-dumping legal framework, including the 2022 Law of Trade Remedies, to protect local industries from unfair trade practices. This regulatory environment supports Vision 2030 goals by ensuring fair competition, safeguarding domestic manufacturers, and encouraging sustainable industrial growth amid global trade challenges.
US Tariffs and Trade Policy Shifts
The re-imposition and escalation of US tariffs, notably on India and other countries, are reshaping global trade dynamics. These tariffs increase costs for exporters and importers, disrupt supply chains, and prompt strategic realignments in sourcing and market access. Companies face uncertainty due to fluctuating trade policies, affecting long-term investment and operational planning.
Geopolitical Tensions and Market Volatility
Persistent geopolitical conflicts, including the Middle East tensions, Russia-Ukraine war, and US-China frictions, are driving market volatility. These events impact global supply chains, energy prices, and investor sentiment, causing short-term shocks but often leading to rapid market recoveries. Businesses must prepare for unpredictable disruptions and heightened risk premiums in trade and investment decisions.
Rising UK Borrowing Costs and Fiscal Concerns
UK government borrowing costs have surged to their highest levels since 1998, reflecting investor anxiety over fiscal sustainability amid high debt and slow growth. Elevated gilt yields increase debt servicing costs, potentially leading to tax hikes and dampening investment. Political uncertainty and structural economic challenges exacerbate risks to financial markets and economic confidence.
Inflation and Wage Dynamics
Inflation remains above the Bank of Japan's 2% target, with consumer prices rising 3.6% year-on-year. Real wages showed modest growth, supported by summer bonuses, but underlying momentum is weak. Inflationary pressures affect household spending patterns and corporate cost structures, influencing monetary policy timing and economic growth prospects.
Economic Growth and Recovery Outlook
Thailand's GDP growth is projected to moderate around 2.2% in 2025 and slow further in 2026 amid external headwinds and domestic challenges. While early-year export surges and tourism spending provide some support, weakening private consumption and income levels constrain momentum. Sustained growth depends on innovation, fiscal stimulus effectiveness, and political stability to restore investor confidence.
Currency and Foreign Reserves Dynamics
The South African rand showed modest appreciation supported by stronger foreign reserves, which rose to $65.9 billion in August 2025. Currency stability helps ease import cost pressures, benefiting manufacturers and importers. However, rand volatility remains a risk factor for trade and investment decisions amid global economic uncertainties.
Impact of US Tariffs and Trade Policies
US-imposed tariffs have created headwinds for Taiwan's export-driven economy, prompting government measures including an $18 billion resilience fund to support affected industries. While tariff exemptions on key tech products have bolstered exports in 2025, the looming expiration of these exemptions and ongoing trade tensions introduce uncertainty for manufacturing and investment strategies.
China's Strategic Pivot to Southeast Asia
Amid US trade tensions, China is redirecting exports to Southeast Asia and strengthening regional trade corridors with ASEAN. This pivot aims to mitigate US tariff impacts by leveraging lower-cost neighbors as transshipment hubs, reshaping regional supply chains and trade flows. However, it raises geopolitical concerns and may provoke retaliatory measures, affecting global trade stability and investment patterns.
Political Instability in Neighboring France
France's political crisis and high public debt create economic uncertainty impacting German companies with strong exposure to the French market. Rising risk premiums on French bonds and potential government instability pose indirect risks to Germany's economic environment and cross-border trade relations.
Vietnam's Economic Growth and Stability
Vietnam's economy expanded by 7.5% in the first half of 2025, the fastest in the region, driven by exports and manufacturing. The World Bank projects sustained growth despite global uncertainties, supported by low public debt and fiscal space. Continued public investment and structural reforms are recommended to maintain momentum and mitigate external risks.
Robust Foreign Investment Inflows
Egypt ranks 9th globally and 1st in Africa for investment, attracting $46.1bn in FDI during 2023/2024. This influx is driven by Egypt's large labor force, strategic location, competitive tax rates, and trade agreements with 70 countries. The Suez Canal Economic Zone has attracted $10.2bn in investments, enhancing Egypt's position as a regional industrial and logistics hub.
Currency Market Volatility and GBP Weakness
The British pound has experienced significant depreciation due to fiscal concerns and economic struggles, exacerbated by political uncertainty and rising gilt yields. This volatility affects trade competitiveness, foreign investment flows, and corporate earnings, while technical levels suggest further downside risks, influencing forex market strategies and international business operations.