Mission Grey Daily Brief - May 28, 2025
Executive Summary
In the past 24 hours, global politics and business have been rocked by escalations on multiple fronts: record Russian drone strikes on Ukraine have increased geopolitical risk and prompted renewed calls for sanctions; the US-China trade war pauses (with a 90-day tariff truce) but leaves uncertainty reverberating through world supply chains; and financial markets reflect a growing shift in confidence away from traditional US-dollar-centered safe havens in response to turmoil in the Middle East. Meanwhile, businesses are responding to increasingly fragmented and politicized global trade with rapid scenario planning and reassessment of risk strategies. Underlying all these developments is a new era of transactional diplomacy and escalating complexity for international businesses, particularly those with exposure to China, Russia, or contested supply chains.
Analysis
Russian Escalation in Ukraine: Largest Drone Attacks, Fraying Patience with Moscow
The last 48 hours have seen Russia unleash the largest drone barrage since the start of its invasion, with “355 Shahed-type” drones and cruise missiles raining down on Ukrainian cities. This escalation comes amid stalled peace talks, growing US frustration with Moscow, and mounting calls from both sides of the Atlantic for intensified sanctions. While US President Trump publicly rebuked Putin as having “gone crazy,” European leaders have been quick to press for harsher action; in fact, bipartisan proposals in the US Senate aim to push “bone-crushing” new secondary sanctions that would target not just Russia but also any country facilitating Moscow’s war economy (with a proposed 500% tariff on Russian oil buyers)[Sanctions Updat...][Ukraine Says Hi...][Russia targets ...].
Notably, Europe is stepping up its own deterrence: Germany has deployed combat troops to Lithuania in a historic show of force, and the EU and UK have just expanded sanctions to blacklist more than 200 vessels of Russia’s shadow oil fleet and a slew of financial players involved in sanctions evasion[EU, UK Unveil F...][Russia sanction...]. This represents a significant tightening of the economic noose, increasing reputational and legal risks for companies with even indirect exposure to Russian supply chains or energy markets.
Meanwhile, the humanitarian consequences are devastating—as new US-backed aid distribution in Gaza struggles to keep up with needs, and UN agencies warn of disaster scenarios in Sudan and Myanmar[Ukraine Says Hi...][Latest News | 1...]. Together, these events are compounding global risk premia and demand a re-examination of exposure to autocratic states and conflict zones.
The US-China Tariff “Pause”: Relief or Temporary Respite?
Markets reacted with relief as the US and China agreed to a 90-day truce, suspending a portion of the tit-for-tat tariffs that reached as high as 145% on Chinese goods and 125% on US goods. These tariffs—enacted just weeks ago in an attempt to pressure Beijing on trade imbalances, intellectual property, and supply chain security—had sent shockwaves through global manufacturing and consumer goods sectors. The temporary agreement, which lowers tariffs to 30% for now and rolls back certain non-tariff retaliatory measures, offers much-needed breathing space to battered supply chains and importers. However, analysts caution that this is only a tactical retreat rather than a strategic resolution. Fundamental issues—forced tech transfer, state subsidies, and persistent IP violations—remain unaddressed, and this truce could collapse as quickly as it began if either party feels slighted[Joint Statement...][Trump has lost ...][Momentary relie...].
Nowhere is this fragile peace felt more keenly than in the consulting and supply chain services sector, where demand for scenario planning and risk mitigation has surged as American and multinational firms scramble to adapt to shifting tariff regimes and the risk of renewed escalation[Trump's tariffs...]. The resulting uncertainty has forced companies (especially in tech, electronics, consumer goods, and automotive) to seek alternatives, diversity suppliers, and consider new investments outside China—a trend that could have lasting structural impacts on the global trading system.
Middle East Volatility and the Flight from the Dollar
Geopolitical tensions in the Middle East ticked higher as rumors of an imminent Israeli strike on Iran’s nuclear sites sent safe-haven assets like gold, the Swiss franc, and Japanese yen soaring, while the US dollar failed to attract flows as it has in past crises. Brent crude oil jumped to a weekly high, reflecting market fears of a wider conflict. Analysts see these moves as evidence of declining confidence in the US’s role as global reserve currency—a direct consequence, in part, of recent aggressive US protectionist policies and erratic diplomatic maneuvers[Market’s red fl...].
Concurrently, President Trump’s Middle East tour resulted in massive business deals with Gulf states but has, in the eyes of many allies, sidelined traditional geopolitical priorities (notably support for Israel and human rights concerns) in favor of pure transactionalism[Indranil Banerj...]. The abandonment of prior US positions on regional conflicts, the sudden lifting of Syria sanctions, and overt support for autocratic “stability” have left many international investors uneasy—not just about ethics, but about long-term policy predictability.
Business Risks: Supply Chain and Regulatory Fragmentation
The era of dependable global supply chains and predictable consensus-based regulation is ending. Trade wars, regulatory divergence (especially in digital, environmental, and AI governance), and sanctions are creating new fault lines. The sheer number of global trade interventions—over 3,400 in 2024—exemplifies how risk management is now a core strategic function, not a back-office afterthought[Beyond the trad...]. Countries like India are emerging as important players in the new, fragmented order, offering diversified supply and digital talent, but also demanding more sophistication from multinational boards and CFOs in risk management and compliance.
Companies with exposure to autocratic regimes or sectors vulnerable to sanctions (energy, finance, technology) should expect further scrutiny, expanded due diligence requirements, and rising reputational risks. The ongoing expansion of EU, UK, and US measures against Russian assets, growing secondary sanctions, and the extraterritorial reach of many regimes mean that global businesses must review their counterparties carefully and avoid entanglements with corrupt, anti-democratic networks.
Conclusions
May 2025 finds the global business environment entering a phase of heightened instability and fragmentation. Major powers are doubling down on sanctions and tariffs as political tools. US-China trade relations remain a seesaw of confrontation and tactical truces, beset by unresolved structural tensions. Russia is escalating its destructive campaign in Ukraine even as international patience for engagement wears thin, with a new wave of transatlantic sanctions and actual military deployments to NATO’s eastern flank. Markets are signaling their loss of faith in the old safe havens, and transactionalism is undermining long-standing alliances and ethical frameworks.
For international businesses, the “new normal” means perpetual scenario planning, deepened due diligence, and a willingness to make hard choices about where to invest and who to trust as values-driven partners.
What further shifts could disrupt the fragile global order? Will tactical diplomatic deals mature into real progress, or will they only mask deeper fractures? And as the world slides into increased transactionalism, which countries or companies will manage to preserve both their competitive edge and their reputation for principled leadership?
Deep resilience—and a values-based approach—are more critical than ever for navigating the storm ahead, and Mission Grey will continue to equip you with the intelligence you need to succeed.
Further Reading:
Themes around the World:
Foreign Investment and Economic Partnerships
Pakistan aims to attract substantial investments from key allies including the UAE, Kuwait, Saudi Arabia, Qatar, and Azerbaijan, focusing on energy, agriculture, and infrastructure sectors. Enhanced cooperation with China and the US in critical minerals and financial sectors reflects a pragmatic diversification of economic partnerships to bolster growth and reduce dependency on single sources.
Economic Slowdown and Recession Risks
Russia's economy is showing signs of stagnation and potential recession in 2025, with GDP growth slowing to around 1.1% in the first seven months and industrial output declining in non-military sectors. High inflation, tight monetary policy, and reduced investment activity are key factors, impacting business confidence and international trade dynamics.
Currency Fluctuations and Eurozone Monetary Policy
The euro has experienced volatility amid France's political crisis, with downward pressure linked to fiscal uncertainty. The European Central Bank's upcoming policy decisions are closely watched, as political instability in a core Eurozone economy complicates monetary policy effectiveness and risks undermining the euro's stability in global markets.
Vietnam's Banking Sector Resilience
S&P upgraded credit ratings for major Vietnamese banks, reflecting improved asset quality and financial system resilience. The banking sector benefits from strong domestic deposits and accommodative monetary policy, with non-performing loans declining. However, high private sector credit-to-GDP ratios and regulatory gaps pose risks. Ongoing reforms and government support are critical to sustaining stability amid external uncertainties.
Currency Appreciation Impact on Exporters
The Taiwan dollar's sharp appreciation, rising about 12% in 2025, has pressured exporters by eroding revenues and margins, notably affecting giants like TSMC and Foxconn. Smaller manufacturers face heightened risks due to limited hedging. The central bank's cautious interventions aim to stabilize markets amid trade tensions and speculative inflows, with significant implications for Taiwan's export-driven economy.
Domestic Political Climate and Institutional Challenges
Mexico's political environment is marked by high presidential approval ratings for Claudia Sheinbaum, yet persistent concerns over security, corruption, and economic issues remain. Political confrontations, including physical altercations in the Senate and opposition criticism, reflect institutional tensions that may influence policy stability and investor confidence.
South Korea’s Monetary Policy Signals Rate Cuts
The Bank of Korea held its benchmark rate at 2.5% but signaled potential rate cuts in the near term to support below-potential economic growth. Policymakers remain cautious about household debt and housing market risks, balancing stimulus needs with financial stability. The outlook reflects challenges from US tariffs, domestic political uncertainties, and structural economic pressures.
Canada-U.S. Trade Tensions and Tariff Impacts
Despite tariff escalations by the U.S., over 90% of Canadian exports enter the U.S. tariff-free due to CUSMA exemptions. However, tariff uncertainty continues to depress exporter confidence, with 36% facing cash flow issues and 35% grappling with rising costs. This environment complicates supply chain planning and market diversification efforts.
Political Unrest and Market Volatility
Indonesia's recent political protests, sparked by economic grievances and a fatal police incident, have led to significant market volatility. The Jakarta Composite Index fell sharply, and the rupiah weakened, reflecting investor nervousness. This unrest raises concerns about short-term economic stability and investor confidence, potentially disrupting trade and investment flows.
Economic Growth and Investment Challenges
South Africa's GDP growth has modestly improved to around 0.8%-1.2% in 2025, driven by manufacturing, trade, and mining. However, fixed investment remains weak, constraining sustainable growth. Structural reforms and increased private-sector participation are critical to unlocking investment, improving economic resilience, and addressing high unemployment and poverty levels.
Monetary Policy and Debt Risks
The Bank of Korea has maintained interest rates at 2.5% amid concerns over rising household debt and a volatile housing market. While growth forecasts were slightly upgraded, the central bank signals potential rate cuts in late 2025 to support the sputtering economy, balancing inflation control with financial stability risks.
Political Instability Disrupts Supply Chains
Political instability and government changes, including in the U.S., have become persistent risks disrupting global supply chains. Sudden policy reversals, tariffs, export controls, and regulatory volatility create uncertainty in sourcing, production, and compliance, forcing businesses to adopt proactive strategies to build resilience amid unpredictable geopolitical and legal environments.
Nuclear Program Controversies
Iran's uranium enrichment near weapons-grade levels and restricted IAEA inspections fuel international concerns, prompting sanctions and diplomatic standoffs. This nuclear ambiguity increases geopolitical risk, undermines investor confidence, and threatens to isolate Iran economically and politically on the global stage.
UN Sanctions Snapback Impact
The reactivation of UN sanctions via the 'snapback' mechanism threatens to severely destabilize Iran's economy. It could freeze assets, restrict arms deals, and limit ballistic missile development, exacerbating inflation, currency devaluation, and unemployment. This escalation increases geopolitical risk, disrupts supply chains, and deters foreign investment, complicating Iran's international trade and economic recovery prospects.
Federal Reserve Independence Under Threat
U.S. President Trump's attempts to influence Federal Reserve decisions, including firing governors and pressuring rate cuts, threaten the Fed's autonomy. This politicization risks undermining monetary policy credibility, increasing market volatility, inflation, and borrowing costs, with potential destabilizing effects on U.S. and global financial markets.
Brazil-China Trade and Employment Linkages
Imports from China support over 5 million Brazilian jobs, more than double those tied to exports to China, underscoring deep economic integration. While exports to China are concentrated in a few commodities, imports impact a broader range of industries and communities. This asymmetry highlights both the benefits and vulnerabilities of Brazil's reliance on China for trade and employment.
Manufacturing Sector Contraction and Economic Risks
China's manufacturing PMI remains below 50, indicating contraction for five consecutive months, despite modest service sector gains. This contraction, coupled with rising unemployment and wage pressures, threatens Beijing's GDP growth targets and consumption-driven economic transition, necessitating targeted stimulus and structural reforms to sustain industrial output and domestic demand.
Political Instability and Market Volatility
Indonesia faces significant political unrest marked by protests against lawmakers' housing allowances and rising living costs, leading to violent clashes and leadership upheavals. This unrest has triggered sharp declines in equity markets and currency depreciation, increasing the equity risk premium and investor caution, thereby impacting foreign investment inflows and overall market stability.
Economic Growth and Investment Challenges
South Africa's GDP growth has modestly improved to around 0.8%-1.2%, driven by manufacturing, trade, and mining. However, fixed investment continues to contract, limiting sustainable growth. Structural reforms and increased private-sector participation are critical to unlocking investment and achieving meaningful economic expansion necessary to reduce poverty and inequality.
U.S. Tariff Policies and Trade Compliance Challenges
U.S. tariff measures, including a 20% duty on Vietnamese exports, influence trade dynamics and supply chain strategies. The U.S. pressures ASEAN countries to curb transshipment of Chinese goods through Vietnam, tightening rules on origin certification and labeling. These developments compel Vietnam to strengthen compliance and governance, impacting export operations and investor confidence.
Construction Sector’s Global Expansion
Turkey's construction industry is increasingly prominent globally, with 45 firms ranked among ENR's Top 250 International Contractors. Turkish contractors undertook projects worth $20.8 billion last year across 137 countries, enhancing Turkey's export profile and international business footprint. This sector's growth supports trade diversification but is sensitive to geopolitical and economic uncertainties.
Climate Change and Flood Impact
Recent catastrophic floods have devastated key agricultural regions, destroying up to 60% of rice crops and 35% of cotton production. This has disrupted supply chains, increased inflation, and damaged infrastructure critical for trade and logistics. The economic loss is estimated at USD 1.4 billion, threatening food security, export earnings, and necessitating significant reconstruction and climate-resilient investments.
Commodity Price Fluctuations
Commodity prices, particularly iron ore and gold, remain critical to Australia’s trade balance and economic health. Iron ore prices have softened, impacting export revenues, while gold prices surged to record levels amid global uncertainty. These fluctuations affect mining sector profitability, export earnings, and currency valuation, influencing investment and trade flows.
Declining Business Confidence
South African business confidence has slipped further in 2025, with surveys indicating a drop to 39 points, well below the long-term average of 42. This decline is driven by tariff pressures, high electricity costs, administrative burdens, and political uncertainties, which collectively undermine investment prospects and economic growth.
Energy Sector Challenges and Opportunities
Mexico's energy sector faces structural challenges, including heavy reliance on US natural gas imports and limited foreign investment in oil fields. Government policies prioritize energy sovereignty but risk underinvestment. Renewable energy projects and geothermal concessions signal diversification efforts, affecting long-term energy supply stability and investment attractiveness.
Fiscal Pressures and Reconstruction Costs
The budget deficit is projected to widen to 3.6% of GDP, driven by substantial government spending on earthquake reconstruction and new taxes on households and businesses. These fiscal pressures may constrain public finances and affect business profitability, influencing investment decisions and economic resilience.
Turkish Port Ban Disrupting Trade Logistics
Turkey's reported ban on Israeli-linked vessels threatens to disrupt short-sea container shipping between the two countries, affecting at least 76 container ships and causing delays at key Israeli ports. This logistical disruption could increase costs, complicate supply chains, and impact Israel’s trade flows with Europe and the Mediterranean region.
Fiscal Sustainability and Sovereign Credit Risks
Rising public debt and weakening tax revenues raise concerns over Thailand's sovereign credit rating. Although current debt-to-GDP ratios remain manageable, slower growth and increased spending on aging and infrastructure strain fiscal space. Potential credit downgrades could increase borrowing costs, limit government investment capacity, and negatively impact financial markets and business confidence.
Political Instability and Economic Impact
Recent political crises, including a failed martial law attempt and presidential impeachment, have undermined investor confidence and economic momentum. This instability exacerbates structural challenges and complicates policy implementation, affecting both domestic economic performance and international business relations.
Energy Infrastructure Investments
Mexico is investing $800 million in constructing two new thermosolar power plants with a combined capacity of 200 megawatts. This initiative reflects the government's commitment to expanding renewable energy infrastructure, which could enhance energy security, reduce carbon emissions, and attract green investments, positively influencing Mexico's long-term economic sustainability.
China-Australia Trade Recovery
Following the lifting of Chinese trade bans on Australian exports, business ties are gradually normalizing. While two-way trade reached nearly $312 billion in 2024, exports have declined due to falling iron ore prices. Australian companies cautiously re-engage with China’s vast market, balancing growth opportunities against geopolitical risks and past disruptions, impacting investment and supply chain strategies.
Cost-of-Living Crisis Impacting Consumer Spending
A significant majority of Canadians report financial strain due to rising prices outpacing wage growth, with essentials like food and housing becoming less affordable. This cost-of-living crisis may dampen domestic consumption, affecting retail sectors and overall economic growth, thereby influencing market demand and investment outlooks.
Economic Resilience and Recovery
Egypt's economy demonstrates resilience with rising foreign reserves, stable currency, and improved financial indicators. The Central Bank reports increased net foreign assets and international reserves, bolstered by surging remittances, tourism, and Suez Canal revenues. This recovery enhances investor confidence, stabilizes exchange rates, and provides a buffer against external shocks, crucial for sustained economic growth and trade stability.
Geopolitical Vulnerabilities and US Relations
Taiwan's heavy reliance on the US market, with a third of exports directed there, exposes it to geopolitical risks amid fluctuating US trade policies and tariffs. Recent US tariff impositions, higher than those on regional competitors, and diplomatic tensions underscore Taiwan's precarious position, necessitating strategic navigation of US-China dynamics to safeguard economic and political interests.
Quantum Technology Leadership and Investment
Canada is positioned as a global leader in quantum technology, with significant breakthroughs and capital inflows in 2025. The sector's growth offers opportunities for innovation-driven investment and economic diversification. However, the need for updated federal strategies and increased funding is critical to maintain competitiveness amid global advancements.
European Defense Sector Volatility
European defense stocks have experienced declines amid renewed diplomatic efforts toward peace in Ukraine, reflecting investor anticipation of reduced military spending. However, sustained geopolitical tensions and increased defense budgets in neighboring countries indicate ongoing demand for defense capabilities, creating a complex investment environment for the sector.