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:
Monetary Policy and Economic Stability
The South African Reserve Bank adopts a cautious monetary policy amid global uncertainties, maintaining interest rates to balance inflation control and economic growth. Persistent external risks, including US tariffs and fragile investor sentiment, influence policy decisions. Stable monetary policy is crucial for preserving rand strength, attracting investment, and supporting recovery in a challenging global trade environment.
Geopolitical Tensions Impacting Trade
Rising geopolitical conflicts, including Middle East instability and allegations of foreign interference in Canada (notably involving India), complicate diplomatic relations and trade partnerships. These tensions affect Canada's international reputation, create risks for foreign investment, and influence decisions on summit invitations and bilateral trade agreements, thereby impacting Canada's global business environment.
Political Tensions Affecting Trade Relations
Diplomatic strains, notably between South Africa and the US under Trump’s administration, have centered on contentious issues like alleged 'white genocide' and land reform. These tensions overshadow trade discussions, complicate bilateral investment prospects, and risk undermining cooperation frameworks such as AGOA, thereby affecting investor confidence and trade policy stability.
Made in Mexico Domestic Content Boost
Over 20 major Mexican businesses signed a voluntary agreement with the Economy Ministry to increase domestic content in their products from 2025 to 2028. This initiative aims to raise domestic product availability in retail and online, potentially creating 400,000 manufacturing jobs and integrating SMEs into supply chains, strengthening Mexico's manufacturing sector and export capacity.
Energy Sector Modernization and Investment
Significant investments, including a $41.6 million EBRD loan to Ukrgasvydobuvannya for modern drilling equipment, highlight efforts to boost domestic energy production and resilience. Upgrading Ukraine’s energy infrastructure is critical for economic stability, reducing import dependence, and attracting further foreign investment in the energy sector.
Political Instability and Authoritarianism
Turkey faces increasing political instability marked by authoritarian governance under President Erdoğan. The consolidation of power includes suppression of opposition, legal manipulation, and control over local governments, notably opposition-held municipalities. This environment risks undermining democratic institutions, increasing political risk for investors, complicating governance, and potentially triggering social unrest that could disrupt business operations and foreign investment.
Domestic Energy Strategy and Investment
Calls for prioritising homegrown energy production highlight the potential for a £200 billion investment boost, supporting UK industrial growth, job creation, and energy security. Emphasising offshore wind, oil, gas, and carbon capture aligns with climate goals while reducing reliance on imports, impacting energy supply chains, costs, and the broader economic resilience of the UK.
Tourism Sector Challenges and Decline
Thailand’s tourism industry faces setbacks from a strong baht, declining Chinese visitor numbers (down over 30%), and political instability. Protests and border tensions with Cambodia exacerbate negative sentiment, reducing arrivals and revenue. Disruptions at key hubs like Suvarnabhumi Airport due to taxi protests threaten further damage to this vital economic sector.
Iran-Israel Conflict Impact
The escalating Iran-Israel conflict has triggered a surge in global oil prices, directly affecting Indonesia's economy through increased commodity costs, exchange rate volatility, and capital flow disruptions. Indonesia's reliance on energy imports exacerbates fiscal pressures, with oil prices rising above budget assumptions, threatening state budget stability and inflation, while also impacting global trade routes and investor confidence.
Sanctions on Israeli Far-Right Ministers
Australia, alongside allies, imposed Magnitsky-style sanctions on Israeli ministers Ben-Gvir and Smotrich for inciting violence against Palestinians. These targeted sanctions signal Australia's commitment to human rights but risk diplomatic tensions, potentially affecting bilateral trade, foreign investment, and Australia's geopolitical positioning in Middle East affairs.
Debt Restructuring and Sovereign Default Risks
Ukraine’s missed payments on GDP-linked warrants and Variable Rate Instruments (VRIs) highlight sovereign debt restructuring challenges. The moratorium on payments and stalled negotiations with creditors increase uncertainty around Ukraine’s fiscal sustainability. While Eurobonds remain unaffected, the default on VRIs affects investor sentiment, complicates access to capital markets, and influences international financial support and credit risk assessments.
China's EV Industry and IPO Growth
China's electric vehicle sector is rapidly expanding, with numerous companies seeking growth capital through Hong Kong IPOs. This influx of investment supports advancements in battery technology, autonomous driving, and global market expansion. The sector's growth enhances China's position in global automotive supply chains and attracts international investor interest despite geopolitical tensions.
Indonesia-EU CEPA Finalization
After nine years of negotiations, Indonesia and the European Union are nearing completion of the Comprehensive Economic Partnership Agreement (CEPA). This agreement aims to eliminate tariffs on 80% of Indonesian exports to the EU, enhance market access, and strengthen global supply chains. The EU is Indonesia's fifth-largest trading partner, with trade valued at US$30.1 billion in 2024, positively impacting investment and trade flows.
Global Supply Chain Resilience
Supply chains remain fragile amid ongoing geopolitical, cyber, and environmental risks. The 2025 WTW survey highlights shifting priorities towards reputational risk, inflation, and geopolitical challenges. Businesses are adopting dual-sourcing, enhanced collaboration, and strategic planning to mitigate disruptions, emphasizing long-term trust and adaptability as key to sustaining international trade and operational continuity.
Monetary Policy and Interest Rate Adjustments
The Bank of Russia's recent decision to cut the key interest rate from 21% to 20% reflects cautious optimism about slowing inflation and aims to stimulate investment and economic growth. However, the central bank maintains tight monetary conditions to control inflation risks, influencing borrowing costs, corporate debt servicing, and overall investment climate in Russia.
Security and Violence Impacting Business
Mexico hosts 20 of the world's 50 most violent cities, driven by organized crime and weak law enforcement. Drug trafficking and cartel violence disrupt supply chains, increase operational risks, and deter investment. Government crackdowns, such as Operation Northern Border, have intensified but judicial challenges persist, affecting the overall security environment for businesses.
China’s Military Activities Near Australia
Chinese naval exercises near Australian waters, including live-fire drills without notification, raise security concerns and highlight regional geopolitical tensions. These actions threaten maritime trade routes and supply chain security, prompting calls for increased defense spending and strategic vigilance to safeguard Australia's economic and national security interests.
Climate Crisis and Regional Food Insecurity
Southern Africa’s vulnerability to climate change, with recurrent droughts and extreme weather, exacerbates food insecurity across SADC countries. Low agricultural productivity and infrastructure deficits disrupt supply chains, increase food price volatility, and threaten socio-economic stability, posing risks for regional trade and investment in agribusiness sectors.
Germany's Military Support to Ukraine
Chancellor Friedrich Merz announced lifting range restrictions on weapons supplied to Ukraine, signaling a shift toward more assertive military support. This policy change affects Germany's geopolitical stance, defense industry dynamics, and relations with Russia. The move may escalate regional tensions, influencing supply chains and investment decisions linked to defense and security sectors.
US Trade Policy Uncertainty and Tariff Suspension
The US Court of International Trade’s suspension of Trump-era reciprocal tariffs disrupts transatlantic trade dynamics. This legal ruling creates uncertainty for French exporters and importers, complicating trade negotiations with the US and China. Businesses must monitor evolving US trade policies and potential retaliatory measures, which influence market access and supply chain costs.
Monetary Policy and Bond Tapering
The Bank of Japan (BOJ) is actively managing its monetary policy with a focus on bond-buying tapering and tightening measures. Recent announcements include slowing bond-buying reduction to 200 billion yen per quarter, potential rapid taper risks unsettling markets, and plans to further reduce bond purchases from April 2026. These moves impact liquidity, interest rates, and investor confidence, influencing trade financing and investment strategies.
Oil Sector Taxation and Regulatory Risks
The government’s push to increase revenues from the oil sector through higher taxes and revised royalty rules targets Petrobras and other producers. While potentially adding up to R$40 billion, these measures raise regulatory uncertainty and could reduce cash flows, investor appeal, and future dividends. Legal challenges and contract disputes risk deterring long-term investment in Brazil’s critical energy sector.
U.S.-China Trade Impact on Steel and Machinery
Brazil's steel and machinery industries confront dual pressures from U.S. tariffs and Chinese import surges. Chinese steel now accounts for 70% of imports, undercutting local mills, while U.S. tariffs on Brazilian exports threaten $3.6 billion in machinery sales. These dynamics destabilize domestic production, jeopardize $4.9 billion investments, and expose vulnerabilities in Brazil's industrial competitiveness.
Suppression of Civil Society and Cultural Figures
The detention of cultural figures and activists, such as the case of Fatih Akın’s manager, reflects a restrictive environment for civil society and creative industries. This climate of repression may deter foreign cultural investments, reduce Turkey’s soft power, and signal broader risks to freedom of expression impacting international business reputations.
Illegal Investment Losses and Financial Crime
Indonesia faces significant public losses of Rp142 trillion from illegal investments between 2017 and 2025. The Financial Services Authority (OJK) and Satgas PASTI are intensifying efforts to combat fraud through legal actions and public financial literacy campaigns. This pervasive issue undermines investor confidence, financial market integrity, and consumer protection, posing risks to domestic and foreign investors.
Cybersecurity Risks Among Youth
South Africa's digitally fluent youth are increasingly vulnerable to cybercrime, including phishing, fake job scams, and mobile money fraud. This exposure threatens personal and corporate data security, especially as young workers bring compromised digital habits into workplaces. Addressing this requires national cybersecurity education, secure BYOD policies, and fostering a culture of digital safety to protect business operations.
Western Military and Financial Support
Ongoing Western aid, including military equipment and financial loans, bolsters Ukraine’s defense and reconstruction capacity. Initiatives like joint weapons production and EBRD loans for energy infrastructure modernization enhance resilience. However, dependency on external support introduces geopolitical dependencies and uncertainties affecting long-term investment and trade strategies.
Taiwan Semiconductor Strategic Importance
Taiwan's dominance in advanced semiconductor manufacturing, producing roughly 90% of the world's most sophisticated chips, is a critical economic and security concern. Rising Chinese military provocations heighten risks to global supply chains. U.S. efforts to expand domestic chip production through legislation and partnerships aim to mitigate vulnerabilities, influencing technology investments and international economic stability.
National Branding via Exhibition Diplomacy
Iran employs international exhibitions as strategic platforms to enhance its economic image, promote domestic industries, and attract foreign investment despite sanctions. Events like Iran Expo 2025 and the Iran-Africa Trade Summit facilitate technology transfer, export diversification, and business networking. This approach supports economic resilience and offers alternative channels for international commercial engagement.
Security and Crime Challenges
Mexico hosts 20 of the world’s 50 most violent cities, driven by organized crime and drug trafficking. Ongoing government crackdowns, such as Operation Northern Border, aim to disrupt cartels but judicial inefficiencies and corruption hinder progress. High violence levels pose risks to supply chains, deter foreign investment, and increase operational costs for businesses.
European Union's Strategic Autonomy Efforts
The EU is pursuing greater independence from both China and the US, seeking to reduce dependencies in defense, technology, raw materials, and energy. While aiming to build self-reliant capacities and industries, European businesses face pressure to choose sides amid geopolitical tensions, complicating trade relations and investment flows between Europe, China, and the US.
Bank of Canada Monetary Policy Risks
The Bank of Canada faces a delicate balance in monetary policy amid tariff-induced economic uncertainty. While inflationary pressures persist, signs of economic slowdown and rising unemployment suggest potential interest rate cuts to support growth. This precarious situation impacts investment decisions, consumer spending, and overall economic stability, influencing Canada's attractiveness for international business and trade.
Logistical Disruptions from Military Operations
Ukraine’s Operation Spiderweb and subsequent Russian security measures have caused significant disruptions in Russian truck traffic and logistics. Increased inspections and border controls lead to delays and economic losses, impacting regional supply chains. These dynamics illustrate how military actions reverberate through commercial transport and cross-border trade routes.
High Urban Violence Rates
Mexico hosts 20 of the world's 50 most violent cities, with homicide rates driven by organized crime and weak law enforcement. Cities like Colima and Acapulco rank among the deadliest globally. Persistent violence undermines investor confidence, disrupts supply chains, and increases operational risks for businesses, while prompting travel advisories that affect tourism and foreign direct investment.
Vietnamese Cultural Exports and Creative Industries
The success of domestic cultural products like the animated film 'Dế Mèn' reflects Vietnam's growing creative industry. This sector enhances soft power, creates export opportunities, and diversifies the economy, attracting investment in media, entertainment, and technology sectors.
Iran's Nuclear Program as Strategic Pillar
Iran's leadership reaffirms the right to uranium enrichment as essential for national sovereignty, scientific advancement, and economic independence. The nuclear program underpins multiple industries beyond energy, including medicine and aerospace. Iran rejects US demands to halt enrichment, viewing nuclear capability as a symbol of autonomy and a critical asset in a multipolar global order, impacting geopolitical stability and foreign investment.