Mission Grey Daily Brief - May 31, 2025
Executive summary
The past 24 hours reveal a world balancing on the edge of shifting power dynamics, with global business and political risk at new highs. The ongoing stand-off between the US and China, deepening China-Russia ties, fresh escalation in the technological arms race, and legal whiplash around Trump’s tariff regime are all entwined in an environment that requires heightened vigilance for international businesses. Meanwhile, Russia's strategy in Ukraine, support from North Korea, and a shifting intelligence landscape underscore the risks of engaging in controversial jurisdictions. Business resilience is being tested as trade war uncertainty, European energy insecurity, and accelerating technological disruption continue to shape the global outlook.
Analysis
1. US-China Tensions and the Trade “Supercycle” Reignite Global Risk
The reactivation of sweeping tariffs under President Trump’s administration has thrown global business into disarray. A recent federal appeals court decision temporarily reinstated Trump’s tariffs, which had previously been deemed unconstitutional by a trade court. This legal limbo is contributing to dramatic market swings, raising costs, and causing companies to pause investment decisions. The International Monetary Fund (IMF) last month downgraded global growth by 0.5 percentage points to 2.8%, warning that the bounce—termed a “sugar rush” driven by stockpiling—could be short-lived as trade friction saps momentum later in the year. Japanese companies, for example, remain exposed due to the US representing 21 trillion yen (approximately $146 billion) in exports, with automobiles counting for 28% of the total. Meanwhile, global companies have reported $34 billion in costs directly attributed to the US trade war—costs that could balloon as tariff uncertainty persists [Global economy'...][BREAKING NEWS: ...][Economic Uncert...][Trump accuses C...][NexUZ-7].
Compounding these economic headwinds, President Trump has escalated rhetoric against Beijing, accusing China of "totally violating" the trade deal, and hinting at a doubling of tariffs on key imports. French President Emmanuel Macron, speaking at the Shangri-La Dialogue in Singapore, has underscored the risk these divisions pose to the global order, calling the US-China split "the main risk confronting the world" [Divisions betwe...].
2. China-Russia “No Limits” Friendship: A Unified Front Against the West
As Washington and Beijing butt heads, China and Russia have seized the moment to tighten their bilateral alignment. During high-profile talks in Moscow, Xi Jinping and Vladimir Putin signed documents to “deepen” what they term a “comprehensive strategic partnership for a new era.” Their joint statement, trumpeted by state media, positions their relationship as “the highest level in history,” aiming for even deeper cooperation in energy, technology, trade, and even satellite navigation [Xi and Putin ag...][China, Russia e...]. In many respects, this partnership is strategically designed to challenge the Western-led global order, with Putin boasting that “together, we defend the formation of a more just and democratic multipolar world order” [Xi and Putin ag...].
However, China faces a unique conundrum: while it seeks leverage over Moscow and sees economic gains from cementing Russia’s reliance, Trump’s push for a US-Russia “reverse Nixon”—cutting a deal on Ukraine with Moscow, sidelining Beijing—has left China scrambling to assert relevance. Recent US overtures to Russia have surprised and unsettled Chinese leaders, resulting in more aggressive diplomatic and economic moves to shore up ties with the EU and court international partnerships as insurance against strategic exclusion [What China fear...][China aims to i...].
3. Russia’s Escalating Hybrid Warfare and the Ukraine Front
On the ground, Russia’s war in Ukraine continues unabated, with Moscow suffering close to 1 million casualties and losing vast stores of hardware—an estimated 10,865 tanks and nearly 40,000 drones. Even as peace negotiations receive public lip service, evidence suggests the Kremlin continues to escalate, massing as many as 50,000 troops for new offensives in northeast Ukraine [Vladimir Putin'...]. North Korea’s support has become crucial: up to 11,000 North Korean troops are reportedly deployed in Russia, with millions of North Korean munitions and over 100 ballistic missiles delivered this year—grave violations of existing UN sanctions [‘Stabbed in the...][Russia and Nort...].
Russia’s response to Western efforts is increasingly subversive. Espionage campaigns, sabotage attempts, and cyber-attacks have intensified across Europe in what NATO officials now label the “largest counterintelligence operation since the Cold War.” Over 750 Russian diplomats have been expelled since 2022, and Russian military intelligence (GRU) units like 29155 and 54654 are aggressively ramping up sabotage operations. This comes as Russia adapts sanctions-busting strategies, maintaining a war chest largely thanks to oil revenues from Europe—Russia has outearned Ukraine threefold since the invasion, primarily from continued European gas and oil purchases [A 'reckless cam...][Russia won’t ag...].
4. The Global Technological Arms Race and Business Adaptation
The technological race—particularly in AI—has become a significant component of the geopolitical struggle. US and Chinese tech giants are now pressuring their respective governments for looser copyright and data regulations, citing the imperative to stay ahead of rivals. Meta’s recent launch of its Llama 4 open-source AI model signals a paradigm shift. Policymakers worry that the country dominating AI will accrue overwhelming economic, military, and cultural power. But the AI revolution is not innocent: deepfakes, digital scams, and regulatory gaps expose significant security and ethical risks, especially as authoritarian actors deploy technology for surveillance or disinformation [AI Radar: Geopo...]. As old supply chains reconfigure, US chip export restrictions are projected to cost tech behemoths like Nvidia up to $8 billion in quarterly sales, underscoring the heavy cost of compliance with the new global tech regime [RECENT GEOPOLIT...].
Conclusions
May 2025 stands out as a watershed moment, with the world entering what some strategists see as a “geopolitical risk supercycle.” The unprecedented legal and regulatory volatility, weaponization of trade, deepened authoritarian alignment, and escalation in hybrid conflict put extraordinary demands on international businesses.
For organizations seeking resilience, now is the moment to diversify supply chains, ramp up scenario planning, and re-examine exposure to jurisdictions with high risk of corruption, opaque governance, or flagrant human rights abuses. The risks of doing business in or with China and Russia have never been clearer. For those committed to the values of transparency, fair competition, and respect for human rights, the message is unequivocal: risk management is the cornerstone of sustainable international growth.
Questions remain: Can Europe and the US manage a united response to authoritarian assertiveness without succumbing to economic self-harm? Will global businesses seize the opportunity to shift toward more resilient, ethical, and diversified structures? As the multipolar world takes shape, who will write the rules—those who uphold them, or those who seek to bend them? The answers will determine not just market outcomes, but the fabric of the international system in the years ahead.
Further Reading:
Themes around the World:
Remittance Tax Controversy
The US House passed legislation imposing a 3.5% tax on remittances sent abroad by non-citizens, sparking strong opposition from Mexican officials who argue it violates double taxation treaties. Remittances, totaling US $64.7 billion in 2024 and representing 4.5% of Mexico's GDP, are vital for household incomes and regional economies, making this tax a significant risk to economic stability and cross-border financial flows.
Economic Recovery via Islamic Bonds
Egypt is allocating 174 sq km on the Red Sea coast for Islamic bond issuances (sukuks) to reduce public debt amid economic challenges. This strategy complements a $35 billion UAE investment and aims to attract diverse investors, supporting fiscal stability. However, inflation at 35.7% and declining export orders pose risks to trade balance and investor confidence.
GCC Capital Markets Growth
The Gulf Cooperation Council's capital markets surpassed $4.2 trillion in capitalization by end-2024, with Saudi Arabia's Tadawul index reaching $2.7 trillion. This reflects strong investor confidence, a 20.9% increase in shares traded, and a 28.4% rise in traded value. The growth supports Saudi Vision 2030 economic transformation and attracts international investment, enhancing regional financial integration.
Middle East Geopolitical Tensions
The escalating conflict between Israel and Iran, including Israeli airstrikes on Iranian nuclear sites and Iran's retaliatory drone attacks, significantly impacts global energy markets, supply chains, and regional stability. This raises risks of a broader Middle East conflict, affecting oil prices, transport routes like the Strait of Hormuz, and investor confidence in France and Europe.
Energy Price Volatility and Budget Risks
Rising global oil prices due to Middle East tensions pose a double blow to Indonesia’s economy, increasing import costs and straining the state budget. With Indonesia importing over 800,000 barrels daily, every $1 rise in crude oil price adds significant subsidy burdens. The government is urged to accelerate energy self-sufficiency and strategic reserves to mitigate fiscal vulnerabilities.
Vietnamese Diaspora and International Representation
Vietnamese representatives participating in international events, such as beauty pageants, enhance the country's global image and cultural diplomacy. This fosters international networks and can indirectly support tourism, trade, and foreign relations.
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.
Corruption’s Complex Role in FDI
Despite a low Corruption Perceptions Index score (27/100), Pakistan continues to attract foreign direct investment, often facilitated by corruption as a transactional mechanism to bypass delays. Key sectors like energy face circular debt and mismanagement. Without reforms, foreign investment risks entrenching corrupt systems rather than improving governance, undermining sustainable development and investor confidence.
US-Mexico Border Security Tensions
The US deployment of over 1,000 additional troops and expanded military zones along the Mexico border heightens geopolitical tensions. Mexico rejects US intervention, emphasizing sovereignty concerns. These security measures impact cross-border trade, migration flows, and bilateral relations, creating uncertainty for businesses operating in border regions.
Trade Policy and International Negotiations
Vietnam is navigating complex global trade dynamics amid US-led tariff negotiations and regional trade agreements. Discussions involving major economies like the US, EU, Japan, and India affect Vietnam's export markets and supply chain strategies. Proactive engagement in trade talks and alignment with global standards are vital for maintaining competitive access and investment flows.
Impact of Western Sanctions
Western sanctions targeting Russia's energy, financial sectors, and sovereign wealth fund RDIF significantly disrupt international trade and investment. Sanctions aim to limit Russia's economic modernization and global partnerships, while Russia adapts through import substitution and pivoting to Asian and African markets. These measures increase geopolitical risks and complicate supply chains involving Russian resources.
Corruption and Corporate Governance Challenges
High-profile corruption cases involving bribery, fraudulent documentation, and illegal business practices in sectors like vehicle inspection and real estate highlight governance weaknesses. These undermine investor confidence, increase compliance risks, and may lead to stricter regulatory scrutiny, affecting foreign direct investment and operational stability in Vietnam.
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.
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.
Domestic Food Inflation and Trade Policies
Canada's food inflation, notably higher than the U.S. and other G7 nations, is driven largely by domestic tariffs and protectionist procurement practices disrupting cross-border supply chains. Recent rollback of counter-tariffs aims to ease pressures, but sustained high food prices affect consumer affordability and may prompt policy reevaluation to stabilize markets.
Financial and Digital Inclusion Progress
India's expansive welfare programs have significantly reduced poverty and improved living standards through universal healthcare, housing, rural electrification, and digital inclusion. These social transformations increase consumer demand, formalize employment, and create a more inclusive economy, positively influencing domestic markets and investment attractiveness.
Uncertainty on Chinese Factory Floors Post-Tariff Talks
Despite high-level US-China diplomatic engagements signaling potential trade thaw, Chinese manufacturers remain cautious amid volatile policies and tariff uncertainties. Many delay major investment or relocation decisions pending concrete agreements, reflecting risk-averse business sentiment. This cautious stance affects supply chain planning, foreign direct investment, and operational strategies for companies reliant on China’s manufacturing base.
Labor Unrest and Political Stability
Teacher union protests blocking government access and demanding higher wages reflect broader labor tensions. These disruptions can affect public sector efficiency, social stability, and investor perceptions. The government’s commitment to dialogue is critical to maintaining political stability and a conducive business environment.
Tourism Sector Challenges and Recovery Risks
Thailand’s tourism industry faces multiple headwinds including declining Chinese visitor numbers, political unrest, and potential disruptions like taxi protests at Suvarnabhumi Airport. Reduced arrivals and spending threaten a vital income source, with forecasts indicating lower tourist volumes and revenues. Sustained instability could impair recovery, necessitating government interventions to restore confidence and diversify source markets.
Energy Sector Modernization and Investment
Significant investments, such as the EBRD’s $41.6 million loan to Ukrgasvydobuvannya for modern drilling rigs, signal efforts to enhance Ukraine’s energy resilience and domestic production capacity. Modernizing energy infrastructure supports supply chain stability, reduces import dependency, and attracts foreign investment, critical for economic recovery and operational continuity.
India's Strategic Role in Global Supply Chains
India's position as the world's fifth-largest economy and a central hub in critical global supply chains underscores its importance in international trade dialogues, including G7 discussions. Strengthening supply chain resilience and infrastructure partnerships with countries like Canada and the UK enhances India's integration into global value chains and attracts foreign investment.
Geopolitical Tensions and Oil Supply Risks
Escalating conflicts in the Middle East, particularly between Iran and Israel, have driven crude oil prices sharply higher, impacting India's energy security. With India importing 88% of its crude oil, mainly via the vulnerable Strait of Hormuz, any disruption threatens supply shocks, increased import bills, inflationary pressures, and volatility in financial markets, affecting trade and industrial sectors.
Foreign Investment Dynamics and Market Maturity
India continues to attract strong gross FDI inflows, rising 14% to USD 81 billion in 2024-25, reflecting sustained investor interest. However, net FDI moderated due to increased repatriation and outward investments, signaling a mature market with fluid capital movement. Foreign portfolio investments declined amid profit booking, but India's foreign exchange reserves remain robust, supporting external sector stability despite geopolitical uncertainties.
Indonesia's Expanding Defense Industry Partnerships
Indonesia is strengthening its defense sector through long-term partnerships with foreign firms like Qatar's Barzan Holdings and Turkey's export of 48 KAAN fighter jets. These collaborations enhance Indonesia's military capabilities and domestic defense industry development, reflecting strategic geopolitical positioning and potential for technology transfer, local industry growth, and increased government defense spending.
Fuel Tax Evasion Network
A sophisticated transnational network involving companies and customs agents evades approximately US $5.2 billion annually in fuel taxes through misclassification and smuggling. This 'huachicol fiscal' undermines government revenues, distorts market competition, and signals systemic corruption risks. The unresolved nature of investigations poses challenges for regulatory enforcement and investor trust in Mexico's energy sector.
Social and Political Unrest Impacting Business
Protests and political instability, such as immigration-related demonstrations in Los Angeles and labor referendums in Italy, signal broader social tensions affecting European markets. While not directly in France, these events influence investor sentiment, labor market conditions, and regulatory environments, with potential spillover effects on French business operations and supply chains.
Trade Policy Uncertainty and US Tariffs
Ongoing US trade policy shifts, including tariff impositions and negotiations, create uncertainty impacting Vietnam’s export strategies. The ripple effects of US trade tensions with major partners influence Vietnam’s supply chain decisions, cost structures, and market access, compelling businesses to adapt through diversification and risk mitigation to maintain competitiveness.
India-UK Free Trade Agreement Impact
The recently concluded India-UK Free Trade Agreement and Double Taxation Convention mark a milestone in bilateral relations, expected to significantly boost trade, investment, and supply chain integration. The agreement facilitates infrastructure financing, educational collaboration, and strategic technology cooperation, enhancing India's global economic partnerships and reinforcing its position in international value chains.
Geopolitical Strategy in Greater Eurasia
Russia's foreign policy emphasizes securing its perimeter through the Greater Eurasia concept, focusing on stability without territorial expansion. This strategy leverages multipolarity and regional partnerships with China, India, and Eurasian states, while managing risks from regional tensions and Western interference. It shapes Russia’s diplomatic and economic engagement, influencing regional security and trade frameworks.
Digital Society and Innovation Focus
The re:publica 2025 conference emphasized Germany’s commitment to digital transformation, AI, data privacy, and freedom of information. Engagement from government ministers and industry leaders underscores the importance of digital innovation for economic competitiveness, regulatory frameworks, and the future of work, impacting technology sectors and cross-border digital trade.
Geopolitical Tensions in Middle East
Escalating conflicts between Israel and Iran, including Israeli air strikes and Iran's nuclear ambitions, have heightened global risk sentiment. Australia is alarmed by the violence and has imposed sanctions on far-right Israeli ministers. These tensions impact global energy prices, inflation, and supply chain stability, posing risks to international trade and investment strategies involving Australia.
Unified National Investment Strategy
Egypt’s comprehensive national investment strategy aims to boost economic competitiveness and foreign direct investment through streamlined procedures, fiscal incentives, and structural reforms. Emphasizing transparent policies, energy reliability, and public-private partnerships, the strategy targets industrial growth and export diversification, positioning Egypt as a regional investment hub and enhancing its integration into global supply chains.
Information Warfare and Cyber Operations
Iran’s intelligence operations, including cyber and field activities, have successfully penetrated Israeli security apparatuses, acquiring strategic data. This intensifies asymmetric warfare capabilities and regional power projection, increasing geopolitical risks that may disrupt regional trade flows, foreign investments, and multinational corporate operations.
Automotive Market and Energy Transition
Despite being a major car manufacturer, Mexico faces high vehicle prices due to supply chain disruptions, taxes, and expensive fuel. Gasoline prices have tripled over 15 years, impacting operating costs. The government promotes electric vehicles, with imports from China and domestic EV development, signaling a strategic shift toward sustainable transport and new industrial opportunities.
Japan’s Energy Innovation Initiatives
Japan’s development of uranium-based batteries to reuse radioactive waste represents a strategic push toward innovative energy solutions. This advancement could reduce energy costs, enhance sustainability, and create new industrial opportunities, influencing investment in clean energy technologies and supply chain realignments in energy-dependent sectors.
Corporate Governance and Security Risks
Incidents involving violent disputes over resource control, such as the Pha Le sand mine conflict in Quang Nam, reveal challenges in corporate governance and security. The use of criminal elements to influence business operations poses risks to investor confidence, supply chain stability, and the overall business environment in Vietnam.