Industrial policy reshapes sectors

Government-backed industrial policy is steering capital into autos, pharmaceuticals and innovation. Authorities highlighted R$190 billion of automotive investments through 2033 and R$71.5 billion in approved innovation financing since 2023, creating localized supply opportunities but also stronger policy-driven competition.

Logistics Hub Expansion Accelerates

Saudi Arabia is rapidly strengthening multimodal logistics capacity through new rail corridors, shipping services, and overland trade links. New maritime routes added 63,594 TEUs, container trains exceed 2,500 TEUs daily, and a 1,700 km freight corridor cuts shipping times roughly in half.

USMCA Review and Tariff Risk

Mexico’s top business issue is the 2026 USMCA review, covering $1.6 trillion in annual trade. Uncertainty over tariffs on autos, steel, aluminum and copper, plus possible bilateralization, could materially affect export planning, capital allocation and cross-border supply chains.

LNG volatility affects regional operations

Cyclone-related outages at Western Australian facilities and Middle East disruptions have tightened LNG markets, with affected assets representing up to 8% of global supply. Higher prices improve exporter margins but raise procurement, energy, and continuity risks for Asia-Pacific manufacturers and utilities.

China-Linked FDI Rules Recalibrated

India has eased Press Note 3 restrictions, allowing up to 10% non-controlling land-border-linked ownership under the automatic route and 60-day approvals in selected sectors. The change could unlock stalled capital, technology partnerships, and upstream component capacity, while preserving regulatory safeguards.

Middle East Shock Transmission

Escalating Middle East tensions are feeding directly into Korea’s industrial base through higher oil prices and tighter gas-related inputs. With 64.7% of Korea’s helium imports sourced from Qatar in 2025, prolonged disruption would raise semiconductor production costs materially.

Monetary Easing Amid Fuel Shock

Brazil cut the Selic rate to 14.75% from 15%, but inflation expectations rose to 4.1% for 2026 as oil topped US$100. Elevated borrowing costs, cautious easing, and diesel-price volatility continue to affect financing, demand, freight costs, and investment timing.

Skilled Labour Shortages Deepen

Demographic ageing is tightening labour availability across construction, logistics, healthcare, energy and manufacturing. Germany needs roughly 400,000 foreign skilled workers annually, but visa delays, administrative bottlenecks and retention challenges raise operating costs and constrain expansion plans for employers.

Reform Needs for Competitiveness

Investors still see Turkey as a strategic manufacturing and transit base, but rising cost-based competitiveness concerns are growing. Business sentiment has improved after FATF gray-list removal, yet foreign investors continue to call for structural reforms to sustain confidence, productivity, and longer-term capital commitments.

USMCA And Allied Trade Strains

New US trade probes targeting partners including Canada, Mexico, the EU, Japan, and South Korea risk disrupting allied commercial ties and upcoming USMCA talks. Businesses should expect tougher market access negotiations, localized retaliation risk, and uncertainty around North American supply-chain exemptions.

Macroeconomic Volatility and Currency Pressure

Regional conflict, inflation and capital outflows are straining Egypt’s macro stability. The pound weakened beyond EGP 54 per dollar, inflation reached 13.4%, and policy rates remain at 19%-20%, raising hedging, financing and import-cost risks for foreign businesses.

Trade Barriers Raise Operating Costs

German firms report a broad deterioration in external operating conditions as geopolitical tensions and protectionism increase freight, compliance and customs costs. In a DIHK survey, 69% said new trade barriers were hurting international business, the highest share since 2005.

Tourism Weakness and Service Spillovers

Tourism remains a critical demand engine, yet Thailand could lose up to 3 million visitors and 150 billion baht if Middle East disruption persists. Softer arrivals, especially from Europe and China, are weighing on hotels, aviation, retail and regional service supply chains.

Sanctions Volatility And Oil Flows

Iran’s oil exports have remained resilient despite sanctions and strikes, estimated around 1.6 million barrels per day in March, while temporary US licensing added further policy uncertainty. Businesses face abrupt compliance, pricing and contract risks as enforcement and exemptions shift unpredictably.

Danantara Governance Investment Risk

The sovereign fund Danantara is expanding rapidly but faces scrutiny over governance, political interference and capital allocation. It has deployed $1.4 billion into Garuda, $295 million to Krakatau Steel, and targets $14 billion this year, affecting investor confidence and state-partner opportunities.

Agriculture Access Still Constrained

While the EU pact expands quotas for beef, sheep meat, sugar, dairy and other farm exports, producers remain dissatisfied. Beef access rises to 30,600 tonnes over ten years, but quotas remain restrictive, limiting upside for agribusiness exporters and related cold-chain logistics providers.

Gas Output Decline Hurts Industry

Declining domestic gas production since its 2021 peak, combined with limited Israeli supplies and costlier LNG, is tightening energy availability. Energy-intensive sectors such as fertilizers, steel, and cement face rising input costs, rationing risk, and possible summer production disruptions.

US Trade Pressure Escalates

Relations with Washington have become a material trade risk. A Section 301 investigation and prior 30% US tariffs on steel, aluminium and autos threaten AGOA-linked sectors, especially vehicles, agriculture and wine, increasing market-access uncertainty and export diversification pressure.

Shadow Trade And Payment Networks

Iran’s external trade increasingly relies on shadow fleets, ship-to-ship transfers, shell companies and parallel banking channels, often routed through China and Hong Kong. This raises sanctions-screening, counterparty, AML and reputational risks for firms exposed to regional shipping, commodities or finance.

Logistics Bottlenecks Raise Trade Costs

Persistent weakness at ports and rail is the most immediate business constraint. Durban, Cape Town and Ngqura rank 391st, 398th and 404th of 405 ports globally, while Transnet failures raise lead times, freight costs, inventory risk and export unreliability.

Nuclear Power Competitive Advantage

France’s strong nuclear fleet is cushioning electricity costs versus peers, with 2027 power futures near €50/MWh versus above €100 in Germany. This supports energy-intensive manufacturing, data centers, and export competitiveness, even as gas-linked volatility still affects parts of industry.

Labor action threatens chip output

Samsung’s largest union is weighing an 18-day strike from May 21, with union leadership warning it could affect roughly half of output at the Pyeongtaek semiconductor complex. Any disruption would hit global electronics supply chains, delivery schedules, and customer confidence.

Energy Shock Lifts Costs

Middle East conflict has pushed oil near $108 per barrel and U.S. gasoline roughly 25% higher since late February, raising transport, petrochemical, and manufacturing costs. Elevated energy prices risk renewed inflation, margin compression, and broader supply-chain cost pass-through across industries.

China Competition In Advanced Tech

Chinese chipmakers are advancing during the memory upcycle, while Huawei-led substitution is gaining ground under US controls. For Korean exporters, this threatens long-term market share, technology standards alignment and pricing power across semiconductors, batteries and adjacent advanced-manufacturing sectors.

China Exposure Drives Supply Diversification

Weaker exports to China and broader geopolitical friction are reinforcing Japanese efforts to diversify production, sourcing and end-markets. Companies with concentrated China exposure face higher resilience spending, while alternative Asian and European corridors become more strategically important.

Political Stability, Policy Continuity

Anutin Charnvirakul’s new coalition offers stronger parliamentary control, but Thailand still carries elevated judicial and governance risk after repeated court interventions. Investors are watching whether promised competitiveness reforms, debt measures and regulatory continuity materialize before committing fresh capital or expanding operations.

Trade Barriers and Compliance Frictions

India’s high tariffs, frequent duty changes, import licensing, and expanding Quality Control Orders continue to complicate market access. USTR says duties still reach 45% on vegetable oils and 150% on alcohol, raising compliance costs and supply-chain uncertainty for foreign firms.

Middle East Shock to Logistics

Conflict-linked disruption around the Strait of Hormuz is raising fuel, freight and war-risk insurance costs, with some container rates reportedly doubling from $3,500 to $7,000. Thai exporters face rerouting, shipment delays and margin pressure across Europe and Gulf-bound supply chains.

US Trade Frictions Escalate

Washington has flagged South Africa in a Section 301 probe and already imposed 30% tariffs on steel, aluminium and automotive exports. The fluid dispute raises market-access risk, complicates export planning, and may alter investment decisions for manufacturers serving the US.

Vision 2030 Regulatory Deepening

Saudi Arabia continues broad legal and investment reforms under Vision 2030, updating Companies, Investment and Bankruptcy laws. With non-oil sectors at 56% of GDP and total investment at SAR 1.44 trillion in 2024, market entry conditions are improving for foreign firms.

High rates, inflation persistence

The Central Bank lifted its 2026 inflation forecast to 3.9%, while market expectations rose to 4.31%, near the 4.5% ceiling. With Selic still at 14.75%, financing remains expensive, pressuring consumption, capex, working capital and credit-sensitive sectors.

Slower Growth and Investment Caution

Banks are revising Turkey’s macro outlook lower as tight financing and softer external demand bite. Deutsche Bank cut its 2026 growth forecast to 3.2% from 4.2% and raised inflation expectations, reinforcing caution around new investment timing and consumer-facing sectors.

Structural Inflation in Inputs

Inflation pressures are increasingly tied to food, services, and administered prices rather than only currency weakness. The central bank cited drought, frost, rents, education, natural gas, tobacco, and water tariffs, creating unpredictable input costs for consumer, industrial, and retail operators.

NATO Integration Raises Security Priority

Finland’s deeper NATO integration and large Arctic exercises involving 25,000-32,000 personnel strengthen deterrence and infrastructure relevance, but also elevate security sensitivity for operators. Defense spending, procurement, cybersecurity and critical asset protection are becoming more central to business continuity and investment planning.

China Content Rules Tightening

Washington is pressing Mexico to curb Chinese inputs and transshipment, with stricter rules of origin potentially rising toward 80% in autos. Firms reliant on Asian components face compliance redesign, supplier reshoring, higher costs and elevated scrutiny over investment structures and customs exposure.

Semiconductor Push Gains Scale

Vietnam is accelerating its semiconductor ambitions with over 50 chip design firms, around 7,000 engineers, US$14.2 billion in FDI across 241 projects, and its first fabrication plant underway. The opportunity is substantial, but talent shortages, weak R&D, and infrastructure gaps remain critical constraints.