Mission Grey Daily Brief - June 22, 2024
Summary of the Global Situation for Businesses and Investors
As of June 22, 2024, the global situation for businesses and investors is characterized by several key developments. Firstly, the ongoing conflict in Ukraine continues to escalate, with Russia intensifying attacks on civilians and critical infrastructure. This has prompted Romania to donate a Patriot missile defense system to Ukraine, highlighting the growing regional security concerns. Meanwhile, Russia's isolation is increasing as evidenced by President Putin's recent visits to North Korea and Vietnam, which appear aimed at bolstering international legitimacy. In other news, the G7 nations have taken a firm stance against Iran's nuclear program and human rights violations, while Australia has pledged additional aid to Papua New Guinea for landslide recovery and to counter Chinese influence. Lastly, there are reports of a bomb threat from Russia disrupting a Pride event in the US, and aid groups are seeking more funding for refugees in Sudan, Somalia, and the Sahel region.
Russia's Growing Isolation and Aggression
Russia's invasion of Ukraine has led to increasing isolation, as evidenced by President Vladimir Putin's recent visits to North Korea and Vietnam. While the trip to North Korea focused on military matters, the visit to Vietnam aimed to boost ties in areas like trade and energy. These visits come amidst Russia's growing isolation in the West due to its aggression in Ukraine. Putin's trip to Vietnam, in particular, was an attempt to gain a veneer of international legitimacy by showcasing unity with a country that has historically been a key military partner. However, Vietnam's growing closeness with the US puts this relationship at risk.
G7 Takes Firm Stance on Iran
The leaders of the G7 nations have united to address multiple concerns regarding Iran, including its nuclear program, regional destabilization, human rights violations, and maritime security. The G7 has called on Iran to cease nuclear escalations and engage in serious dialogue with the International Atomic Energy Agency (IAEA). They have also expressed alarm over Iran's potential support for Russia's war efforts in Ukraine, warning of "new and significant measures" if Iran transfers ballistic missiles to Russia. Additionally, the G7 has condemned Iran's seizure of a Portuguese-flagged merchant vessel and its support for non-state actors in the region.
Australia Boosts Aid to Papua New Guinea
Australia has pledged an additional $1.3 million to support reconstruction efforts in Papua New Guinea following last month's deadly landslide. This aid package is part of Australia's bilateral security agreement with Papua New Guinea, aimed at bolstering internal security and advancing law and justice priorities. It includes support for a weapons management program and enhancing the legal framework to combat financial crime. This move is also seen as a strategic move by Australia to counter growing Chinese influence in the region.
Impact on Businesses and Investors
- Risks: The intensification of the conflict in Ukraine and Russia's aggression pose significant risks to businesses and investors. The potential for further escalation and the impact on global energy markets and supply chains are key concerns. Additionally, the G7's stance on Iran and the potential for new sanctions may affect businesses operating in the region.
- Opportunities: Australia's aid package to Papua New Guinea presents opportunities for businesses in the reconstruction and security sectors. The focus on enhancing law and justice, as well as weapons management, opens up possibilities for companies specializing in these areas.
China's Maritime Provocations
China's latest maritime provocation against the Philippines, which included the use of an ax against Filipino sailors, is part of a pattern of "gray-zone" skirmishes in the South China Sea. China aims to exhaust neighboring countries into accepting its claims over contested waters. This incident has raised concerns about a potential confrontation in the region, particularly with the US and its allies. China's actions have been condemned by the Philippines and its allies, including the US, but they are not considered an act of war.
Impact on Businesses and Investors
- Risks: The escalating tensions in the South China Sea pose risks to businesses operating in the region, particularly those with exposure to the Philippines or China. The potential for further provocations or even military conflict cannot be ruled out, which could have significant economic and geopolitical implications.
- Opportunities: While the current situation presents challenges, there may be opportunities for defense and security companies to provide additional support and equipment to countries in the region seeking to bolster their capabilities.
Global Refugee Crisis
As the international community marks World Refugee Day, aid groups report a lack of funding to handle crises in Sudan, Somalia, the Sahel, and other regions. This is further exacerbated by reports of 6,000 Sudanese refugees trapped by local militias in Ethiopia's Amhara region. Meanwhile, in Egypt, a crisis unit has been established to deal with the fallout from the Hajj pilgrimage, where hundreds of Egyptian worshipers perished due to extreme heat.
Impact on Businesses and Investors
- Risks: The ongoing refugee crises in multiple regions highlight the need for businesses and investors to be aware of potential disruptions to supply chains and market access. Additionally, the lack of funding for aid groups may impact the effectiveness of humanitarian responses.
- Opportunities: There may be opportunities for businesses to contribute to relief efforts and support affected communities through partnerships with aid organizations.
Further Reading:
3 Takeaways From Putin's Trip to Vietnam - The New York Times
A Pride event in Grand Marais was disrupted by a bomb threat — from Russia - Star Tribune
Australia boosting aid to Papua New Guinea for landslide recovery and security - ABC News
Breaking News: Romania donates a US Patriot missile defense system to Ukraine - Army Recognition
China ax-wielding clash with Philippines is way to grab territory: expert - Business Insider
Daybreak Africa: Aid groups seek more funding for refugees in Sudan, Somalia, Sahel - VOA Africa
Egypt sets up crisis unit as death toll from Hajj soars during 120 Fahrenheit heatwave - CNN
Friday Briefing: Vladimir Putin Visits Vietnam - The New York Times
Themes around the World:
Energy sourcing and sanctions exposure
Trade diplomacy increasingly intersects with energy decisions, with US tariff relief linked to expectations on reducing Russian oil purchases and boosting US energy imports. Companies should plan for price volatility, sanctions and reputational risk, and potential knock-on effects on shipping insurance and payments.
Energy planning and power constraints
Vietnam is revising national energy planning to support 10%+ growth targets, projecting 120–130 million toe demand by 2030 and rapid renewables expansion. Businesses face execution risk in grids, LNG logistics, and permitting; power reliability remains a key site-selection factor.
UK-Russia sanctions escalation compliance
The UK is tightening Russia measures, including designations and a planned ban on maritime services (transport, insurance) supporting Russian LNG to third countries, alongside a lower oil price cap. This elevates due-diligence needs for shipping, energy, and finance.
IMF program drives policy shocks
Upcoming IMF reviews under the $7bn EFF are shaping budgets, tariffs and tax measures, tightening compliance pressure. Policy reversals, new levies and subsidy cuts can rapidly change input costs, cash-flow planning, and market access conditions for foreign firms.
Chip supply-chain reshoring pressure
Washington is pushing Taiwan to expand US semiconductor capacity, with floated targets up to 40% and threats of sharp tariff hikes if unmet. Taipei says large-scale relocation is “impossible,” implying sustained negotiation risk, capex uncertainty, and bifurcated production footprints for customers.
Tariff volatility and trade blocs
Rapid, deal-linked tariff threats and selective rollbacks are making the U.S. a less predictable market-access environment, encouraging partners to deepen non‑U.S. trade blocs. Firms face higher landed costs, rerouted sourcing, and accelerated contract renegotiations.
US–Taiwan tariff pact reshapes trade
A new reciprocal US–Taiwan deal locks a 15% US tariff on Taiwanese imports while Taiwan removes or cuts about 99% of tariff barriers and tackles non-tariff barriers. It shifts pricing, compliance, and market-access assumptions across autos, food, pharma, and electronics.
Labor shortages and foreign workers policy
Mobilization and restricted Palestinian labor have intensified shortages, especially in construction; courts are also shaping foreign-worker rules. Project timelines, costs, and contractor capacity remain volatile, impacting real estate, infrastructure delivery, and onsite operational planning.
Border logistics and bridge uncertainty
U.S. threats to delay the Gordie Howe Detroit–Windsor bridge—despite its strategic role in a corridor handling about $126B in truck trade value—add operational risk. Firms should plan for border congestion, routing redundancy, and potential policy-linked disruptions at ports of entry.
Export target amid protectionism
Vietnam is targeting US$546–550bn exports in 2026 (+15–16% vs 2025’s record US$475bn), but faces rising protectionism, stricter standards, and dependence on foreign-invested manufacturing and imported inputs—raising compliance, sourcing, and margin risks for exporters.
Monetary policy and FX volatility
Banxico signaled further rate cuts are possible if tax and tariff changes do not trigger second-round inflation. With the policy rate around 7% and inflation near 3.8% early 2026, financing costs may ease, but peso volatility can impact input pricing and hedging needs.
Fiscalización digital y aduanas
El SAT intensifica auditorías basadas en CFDI y cruces automatizados, priorizando “factureras”, subvaluación y comercio exterior. Se reporta enfoque en aduanas (27,1% de ingresos tributarios) y nuevas facultades/visitas rápidas, elevando riesgos de bloqueo operativo, devoluciones y multas.
Tariff volatility reshapes trade flows
Ongoing on‑again, off‑again tariffs and court uncertainty (including possible Supreme Court review of IEEPA-based duties) are driving import pull‑forwards and forecast containerized import declines in early 2026, complicating pricing, customs planning, and supplier diversification decisions.
Forced-labor import enforcement intensifies
CBP enforcement under the Uyghur Forced Labor Prevention Act continues to drive detentions and documentation demands, increasingly affecting complex goods. Companies need deeper tier-n traceability, auditable supplier evidence, and contingency inventory planning to avoid port holds and write-offs.
Coal output controls, export risk
Jakarta is signaling coal production limits for 2026 (proposal: 600m tons vs 790m in 2025), though top miners may be exempt. Annual RKAB approvals create uncertainty, thinning spot liquidity and complicating long-term export contracts for Asia’s import-dependent buyers.
Suez Canal revenues and FX inflows
Canal receipts are recovering: 2026 YTD revenue reached $449m from 1,315 ships, up from $368m a year earlier, with tonnage up sharply. Recovery boosts hard-currency inflows, yet remains exposed to renewed Red Sea escalation and carrier routing decisions.
Sanctions compliance and leakage risks
Investigations show tens of thousands of sanctioned-brand cars reaching Russia via China, including German models, often reclassified as ‘zero-mileage used’. This heightens legal, reputational and enforcement risk across distributors, logistics and financing; controls must tighten.
Fiscal consolidation and tax uncertainty
France’s 2026 budget targets a ~5% of GDP deficit and debt around 118% of GDP, relying on higher levies on large corporates and restrained spending. Political fragmentation and 49.3 use heighten policy volatility for investors, pricing, and hiring.
FDI surge and industrial-park expansion
Vietnam attracted $38.42bn registered FDI in 2025 and $27.62bn realised (multi-year high), with early-2026 approvals exceeding $1bn in key northern provinces. Momentum supports supplier clustering, but strains land, power, logistics capacity and raises labour competition.
US tariffs hit German exports
US baseline 15% EU duty is biting: Germany’s 2025 exports to the United States fell 9.3% to about €147bn; the bilateral surplus dropped to €52.2bn. Automakers, machinery and chemicals face margin pressure, reshoring decisions, and supply-chain reconfiguration.
Defense spending surge and procurement
Defense outlays rise sharply (2026 budget signals +€6.5bn; ~57.2bn total), with broader rearmament discussions. This expands opportunities in aerospace, cyber, and dual-use tech, while tightening export controls, security clearances, and supply-chain requirements.
LNG export expansion and permitting
The administration is accelerating LNG export approvals and permitting, supporting long-term contracts with Europe and Asia and stimulating upstream investment. Cheaper, abundant U.S. gas can lower energy-input costs for U.S. manufacturing while tightening global gas markets and shipping capacity.
Tech export controls enforcement surge
Washington is tightening and actively enforcing semiconductor and AI-related export controls, illustrated by a $252m settlement over alleged post-Entity-List tool exports to China’s SMIC. Multinationals face higher compliance costs, licensing delays, and heightened penalties for third‑party diversion.
Domestic demand pivot and policy easing
Beijing is prioritizing consumption-led growth in the 15th Five-Year Plan (2026–30), targeting final consumption above 90 trillion yuan and ~60% of GDP. The PBOC signals “moderately loose” policy and ample liquidity. Impacts include shifting sector opportunities toward services and consumer subsidies.
Auto trade standards and market access changes
Seoul agreed to abolish the 50,000-unit cap recognizing US FMVSS-equivalent vehicles, and broader auto provisions remain in talks amid tariff threats. Even if volumes are modest, rule changes shift competitive dynamics and compliance planning for OEMs and suppliers.
Critical minerals export leverage
China’s dominance in rare earths and magnet refining (about 70% mining, ~90% processing) increases vulnerability to licensing delays or curbs. US-led “critical minerals bloc” initiatives may accelerate decoupling, raising compliance, sourcing, and price-volatility risks.
US tariff exposure and negotiations
Vietnam’s record US trade surplus (US$133.8bn in 2025, +28%) heightens scrutiny over tariffs, origin rules and transshipment risk, while Hanoi negotiates a reciprocal trade agreement. Exporters face volatility in duty rates, compliance costs, and demand.
Oil and gas law overhaul
Indonesia is revising its Oil and Gas Law, including plans for a Special Business Entity potentially tied to Pertamina and a petroleum fund funded by ~1–2% of upstream revenue. Institutional redesign and fiscal terms could shift PSC governance, approvals, and investment attractiveness.
Agenda ESG e rastreabilidade
A queda de 35,4% do desmatamento na Amazônia (ago–jan) reforça fiscalização e expectativas de “desmatamento zero” até 2030, mas o Pantanal piorou (+45,5%). Para exportadores, cresce exigência de rastreabilidade, due diligence e compliance com regras de desmatamento da UE e clientes.
Rare earth magnets domestic push
A ₹7,280 crore scheme targets indigenous rare-earth permanent magnet manufacturing and “mineral corridors,” addressing heavy import reliance and China-linked supply risk. Beneficiaries include EVs, wind, defence and electronics; investors should watch permitting, feedstock security, and offtake structures.
Tariff activism and reciprocity rates
Tariffs are being used as a standing policy lever—e.g., a reciprocal 18% rate applied to Indian-origin goods under executive authority—raising import costs, increasing pricing volatility, and incentivizing firms to re-route sourcing, renegotiate contracts, and localize production.
Baht strength, FX intervention bias
Foreign inflows after the election are strengthening the baht, while the Bank of Thailand signals willingness to manage excessive volatility and scrutinize gold-linked flows. A stronger currency squeezes exporters’ margins and complicates regional supply-chain cost planning and hedging strategies.
Logistics and customs modernization push
Indonesia continues efforts to streamline trade via the National Logistics Ecosystem and single-window integrations across agencies. Progress can reduce dwell time and compliance burden, but uneven implementation across ports and provinces still creates routing risk, delays, and higher inventory buffers.
High-tech FDI and semiconductors
FDI remains resilient and shifts toward higher-value electronics and semiconductors, with 2025 registered FDI at US$38.42bn and realized US$27.62bn; early-2026 approvals exceed US$1bn in key northern provinces. This supports supply-chain diversification but increases competition for talent and sites.
Internet shutdowns and digital controls
Near-total internet blackouts and tighter censorship have cut businesses off from customers, suppliers, and payments, with reported losses from millions to tens of millions of dollars per day. Expect unreliable connectivity, mandatory use of domestic platforms, and elevated cybersecurity exposure.
Nearshoring con cuellos de energía
El nearshoring sigue fuerte por proximidad a EE.UU., pero la expansión industrial choca con límites de red eléctrica, permisos y capacidad de generación. La incertidumbre regulatoria y costos de conexión retrasan proyectos, elevan CAPEX y favorecen ubicaciones con infraestructura disponible.