Export Competitiveness Under Strain

Goods exports fell 14.4% year-on-year in March to $2.264 billion, while July–March exports declined 8% to $22.73 billion. High energy tariffs, expensive credit, delayed refunds and weak diversification are undermining textile-led export sectors central to trade and sourcing strategies.

Europe Faces Refined Products Loophole

EU buyers still received 14 fuel cargoes in March from refineries in Turkey, India and Georgia using Russian crude feedstock. This refining loophole keeps Russian molecules in European supply chains, creating regulatory uncertainty for importers, commodity traders and downstream manufacturers.

CUSMA Review and Tariff Uncertainty

Canada faces elevated trade uncertainty as CUSMA review talks slip past July 1 and U.S. Section 232 tariffs remain on steel, aluminum, autos and lumber. Prolonged negotiations risk delaying investment, disrupting cross-border sourcing, and complicating North American market planning.

China transshipment crackdown pressure

Mexico faces mounting scrutiny over Chinese content, transshipment and tariff circumvention through USMCA channels. Rising enforcement risk could trigger tighter customs checks, new tariff exposure and investment screening, especially in autos, electronics, machinery and EV-related supply chains.

High Rates, Sticky Inflation

The central bank cut Selic to 14.50%, but inflation expectations remain deanchored, with 2026 IPCA projections at 4.8%-4.86%, above the 4.5% ceiling. Elevated borrowing costs will keep credit tight, restrain consumption, and raise capital costs for exporters and investors.

Power Transition and Infrastructure Gaps

India’s energy transition is accelerating, but grid bottlenecks, storage shortages and import dependence remain material business risks. With nearly 90% crude import dependence and renewable transmission constraints, investors in manufacturing, mobility and data centers must plan for power reliability, cost volatility and policy-driven infrastructure expansion.

State-backed battery supply chain

France is accelerating EV industrial policy through lithium mining, cathode materials, and component investments. Imerys targets 34,000 tonnes of lithium hydroxide annually from 2030, while tax credits and fast-tracked permits support battery manufacturing localization and supply security.

Labor Shortages Delay Projects

Construction and infrastructure projects remain constrained by foreign-worker shortages after the loss of Palestinian labor access. The state comptroller highlighted a construction shortfall of about 37,000 workers, contributing to delayed housing delivery, slower transport works, and higher execution risk for investors and contractors.

Inflation Rates Stay Elevated

Regional conflict has pushed inflation back up to 15.2% in March, while economists see average inflation at 13.5% in FY2025/26 and lending rates near 20%. High financing costs and weaker consumer purchasing power weigh on investment returns and demand forecasts.

Energy Security Spurs Infrastructure

Supply risks are accelerating investment in renewables, grid upgrades, and domestic energy production. Egypt targets 45% of electricity from renewables by 2028, plans 2,500 MW of additions plus 920 MW of battery storage in 2026, and is reducing arrears to foreign partners.

Middle East Shock Hits Economy

Thailand cut its 2026 growth forecast to 1.6%, while the central bank sees 1.5% growth and 2.9% inflation as conflict-driven oil prices raise business costs. Import dependence on energy increases exposure for transport, manufacturing, consumer demand and currency stability.

Monetary Tightening, Inflation Persistence

Turkey’s central bank kept rates at 37%, with overnight funding at 40%, as inflation remained 30.9% in March and April pressures rose. High borrowing costs, volatile pricing and weaker credit growth are reshaping financing conditions, consumer demand and investment planning.

Tourism and Services Revenue Pressure

Tourism remains a crucial foreign-exchange earner but is facing softer arrivals, weaker spending, and margin pressure from fuel, electricity, haze, and currency effects. International arrivals reached about 9.7 million by early April, yet weekly flows recently fell 9.6%.

Energy Shock and Freight Costs

The Iran conflict and Strait of Hormuz disruption are lifting U.S. fuel, diesel, and logistics costs. More than 34,000 shipping routes were reportedly diverted, while higher transport and input costs are feeding through supply chains, squeezing margins for trade-dependent sectors.

Customs Modernization Border Frictions

Customs reforms are improving transparency, but border queues, weak crossing infrastructure, and longer clearance times still disrupt supply chains. Customs generated 22% of Q1 budget revenue, while average clearance rose to 6.9 hours and contraband increased to 17%.

Foreign investment boosting currency

Net foreign investment surged to about $39 billion in 2025 from $25 billion in 2024, reinforcing shekel appreciation and local asset demand. Strong inflows support liquidity and valuations, but intensify currency headwinds for export-oriented business models.

Asian Energy Pivot Deepens

Russia is accelerating its export reorientation toward Asia, especially China and India. Indian purchases of Russian oil reportedly jumped to €5.3 billion in March, while a sanctioned LNG cargo is heading to India, broadening Russia’s customer base beyond China and Europe.

Policy Capacity and Governance Strain

Wartime reviews exposed weak contingency planning in aviation, labor administration, and crisis coordination, while protests and political tensions persist. For international firms, this points to execution risk in permits, infrastructure delivery, emergency response, and regulatory consistency during periods of national security stress.

Semiconductor Export Boom Concentration

South Korea’s export surge is being driven overwhelmingly by chips, with semiconductor shipments up 152% in early April and accounting for 34% of exports. This strengthens trade performance but increases exposure to cyclical AI demand, customer concentration, and operational disruption risks.

EV Manufacturing Investment Surge

Thailand is deepening its role as an ASEAN electric-vehicle base as Chery opens a Rayong plant targeting 80,000 units by 2030. Planned trade-in incentives and local-content rules support suppliers, but intensify competition, Chinese exposure and technology-transfer dynamics for investors.

Sanctions Volatility Reshapes War Economics

Shifting U.S. and EU sanctions policy on Russian oil affects Ukraine indirectly by influencing Moscow’s revenues, energy prices, and the wider risk environment. Kyiv says over 110 shadow-fleet tankers carry about 12 million tonnes worth $10 billion, underscoring geopolitical exposure for traders.

Infrastructure Execution Imperative

India’s business case is improving, but logistics efficiency still depends on faster execution of industrial land, transport links and utility support. Large visible projects are viewed as necessary to unlock board-level confidence, scale export manufacturing and reduce friction in national supply chains.

Industrial Energy Relief Expands

The government expanded energy support to about 10,000 energy-intensive firms, up from 7,000, cutting bills by up to 25% or £35-£40/MWh from 2027. The £600 million scheme supports manufacturing resilience but highlights continued dependence on state intervention.

Textile Export Competitiveness Squeeze

Pakistan’s core export sector faces falling margins from higher gas tariffs, expensive credit, tax complexity, and Gulf-linked supply disruption. Textile exports reached $13.545 billion in July-March but slipped 0.5% year-on-year, signaling pressure on trade earnings and supplier reliability.

Trade Agreements and Market Access

EU-Thailand FTA talks have completed 11 of 24 chapters, with both sides targeting conclusion this year. Progress matters because trade diversion from the EU-India deal and Thailand’s limited FTA network could erode export competitiveness in garments, seafood, and other price-sensitive sectors.

Energy shock reshapes competitiveness

Middle East turmoil has lifted fuel and import energy costs, prompting support for transport, farming, and fisheries. Although France’s nuclear-heavy power mix cushions electricity prices, energy volatility is still raising logistics costs, inflation pressure, and planning uncertainty.

Agribusiness Export Resilience

Brazil remains well positioned in global commodities, with strong foreign interest linked to its exporter status and trade surplus support. A firmer real and sustained demand for agricultural and energy exports benefit producers, but can complicate competitiveness for manufacturers.

Energy Shock and Import Exposure

Regional conflict has reinforced Turkey’s vulnerability to imported energy costs. Policymakers estimate a $10 rise in Brent can add $4-5 billion to the current account, while elevated oil and gas prices pressure industrial margins, freight costs, inflation and power-intensive manufacturing competitiveness.

Electricity Tariff Affordability Pressure

Although blackouts have receded, electricity costs remain a major competitiveness problem. Government says double-digit tariff increases should end, yet high power prices are squeezing households, lowering demand, and raising operating expenses for mines, smelters, manufacturers, retailers, and logistics operators.

FDI Surge Into High-Tech

Registered FDI reached about US$15.2 billion in Q1 2026, up 42.9% year on year, while disbursed capital hit US$5.41 billion. Investment is shifting toward semiconductors, AI, data centres and greener manufacturing, reinforcing Vietnam’s role in supply-chain diversification and higher-value production.

Coalition Reform and Fiscal Uncertainty

Germany’s ruling coalition is racing to agree tax, pension, health and debt-brake reforms before the July recess, while budget gaps range from roughly €140 billion to €170 billion through decade-end, creating policy uncertainty for investors, public procurement and regulated sectors.

Persistent Inflation Pass-Through Risk

Tariff refunds are unlikely to lower consumer prices meaningfully, while replacement duties keep pass-through pressures alive. Temporary 10% tariffs expire in late July, but likely follow-on measures mean businesses should plan for sustained price volatility and cautious consumer demand.

Policy Uncertainty and Security Exposure

Regional conflict has increased Pakistan’s vulnerability to freight disruption, insurance premium increases and energy-market volatility, while domestic business groups still cite policy reversals and weak predictability. Investors should factor elevated contingency, logistics and regulatory-change risks into operating plans.

China Supply Chain Balancing

South Korea and China reaffirmed cooperation on rare earths, urea and other critical materials, while broader tensions over Taiwan complicate diplomacy. Businesses benefit from supply-chain dialogue and FTA talks, but should plan for policy friction and geopolitical compliance risks.

Logistics Reform Targets Cost

Indonesia is pushing rail-ferry integration and preparing a National Logistics Strengthening regulation to reduce logistics costs from 14.2% to 12.5% by 2029. Transport still accounts for 62% of logistics costs, while road dependence keeps distribution expensive and vulnerable to seasonal restrictions.

Persistent Tariff Policy Uncertainty

Washington’s tariff regime remains volatile but structurally entrenched, with effective rates around 11.8%, fresh Section 301 actions possible by July, and executives expecting durability. For exporters, importers, and investors, policy unpredictability is now a core operating cost affecting pricing, sourcing, and capital allocation.