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Mission Grey Daily Brief - July 02, 2024

Summary of the Global Situation for Businesses and Investors

The world is witnessing a new era of violence and conflict, with escalating global unrest and a rise in state-based conflicts. The war in Ukraine continues to rage on, with China's support for Russia's war efforts fuelling security concerns in Europe and Asia. France's parliamentary elections have resulted in a historic victory for the far-right National Rally, threatening economic stability and causing alarm among other nations. In the UK, the Conservatives are facing a catastrophic defeat in the upcoming July 4 election, with Labour's Keir Starmer poised to take the lead. Meanwhile, China's Belt and Road Initiative continues to expand its influence in Africa, and Azerbaijan is denying Western journalists access to the upcoming UN Climate Summit in Baku later this year.

France's Far-Right Victory

France's parliamentary elections have resulted in a historic victory for Marine Le Pen's far-right National Rally (RN) party, which secured 33.15% of the vote in the first round. This unprecedented outcome has sent shockwaves across France and the world, as the RN has never governed at the national level. The party's success can be attributed to economic issues, with voters trusting the RN more than its competitors when it comes to managing the French economy. However, experts are sceptical about the RN's economic platform, which includes various tax giveaways and costly promises. The second round of elections will take place on July 7, and the outcome remains uncertain. If the RN gains a majority, it could lead to a far-right government for the first time since the Nazi occupation during World War II.

China-Russia Alliance

US Secretary of State Antony Blinken has expressed concerns about China's support for Russia's war efforts in Ukraine. He warned that China is fuelling "the biggest security threat to Europe since the Cold War," a sentiment echoed by China's neighbours in Asia. China's assistance to Russia, including investments in its defence industrial base, has allowed Russia to sustain its aggression and continue the war. This has prompted calls for Europe to present Beijing with a stark choice: curb support for Russia or face consequences. Meanwhile, China continues to deny providing weapons to nations engaged in wars and asserts control over the export of dual-use items.

UK's July 4 Election

The UK's upcoming general election on July 4 is shaping up to be a significant moment for electoral democracy worldwide. The Conservatives, led by Rishi Sunak, are facing a potential catastrophic defeat, with Labour's Keir Starmer emerging as the frontrunner. Sunak's decision to call for an early summer election has backfired, as the Reform UK Party, led by Nigel Farage, gains momentum. The election will have implications for the UK's future, particularly regarding issues such as immigration and identity.

China's Belt and Road Initiative

China's Belt and Road Initiative (BRI) continues to expand its influence in Africa, with Nigeria's Foreign Minister highlighting the positive impact of BRI projects in the country. The BRI has facilitated the construction of roads, bridges, and power generators in Nigeria, as well as created much-needed jobs. The Nigerian Foreign Minister refuted the "debt trap" narrative, calling it an "insult" to African countries. He expressed expectations for deeper ties with China and a desire to expand cooperation in areas such as electric vehicles.

Azerbaijan Denies Access to Journalists

Azerbaijan is denying Western journalists access to the upcoming United Nations Climate Summit (Cop29) in Baku later this year. <co: 4,24,44>At least three journalists from Britain and France</


Further Reading:

An unprecedented victory for a historically antisemitic right-wing party in France, and now the world holds its breath - Forward

Australia urged to provide 'emergency uplift' visa for Palestinians fleeing Gaza war - Arab News

Azerbaijan Denying Western Journalists Access Ahead of Climate Summit, The Guardian Reports - Asbarez Armenian News

BRI helps Africa build infrastructure, create much-needed jobs: Nigerian FM - People's Daily

Belarus threatens nuclear use as Russia blamed for jamming GPS - Ukraine: The Latest, Podcast - Yahoo! Voices

Blinken warns of threat to Europe as China helps Russia ‘sustain Ukraine war’ - South China Morning Post

China sets stage for violent crackdown: ‘Taiwan is a rebel regime’ - Washington Examiner

Conservatives are racing toward a catastrophic defeat in U.K.'s July 4 election - America: The Jesuit Review

France Elections: Economic Issues Drove Far-Right Win in First Round - Foreign Policy

France election 2024: Live updates and latest news - The Associated Press

France elections 2024: Le Pen's far right wins. Now the horse-trading begins - NPR

France’s exceptionally high-stakes election has begun. The far right leads pre-election polls. - NBC News

From Ukraine and Syria to Sudan and Gaza, a new era of violence and conflict unfolds - Arab News

Themes around the World:

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BOJ tightening and funding costs

Hawkish BOJ commentary and markets pricing a high probability of further hikes raise borrowing costs and reprice JGB curves. This shifts project hurdle rates, M&A financing, and real-estate assumptions, while potentially stabilizing the yen over time.

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Volatile tariff regime and litigation

U.S. tariffs are shifting via exemptions, court challenges and congressional maneuvering, complicating pricing and customs planning. Forecast U.S. container imports fall 2% in H1 2026, with March down 12% year-on-year amid uncertainty over tariff legality and scope.

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Manufacturing slowdown and resilience

Subdued UK manufacturing conditions and soft demand, alongside higher financing costs, are pressuring output and supplier health. Companies should stress-test UK tier-2/3 suppliers, diversify sourcing, and anticipate longer payment cycles, while monitoring industrial strategy support for key sectors.

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Post‑Brexit border digitisation setbacks

The government has halted/delayed the Single Trade Window after roughly £110m spent, keeping duplicative customs processes in place. With import declarations estimated to cost up to £4bn annually, firms face higher compliance costs, slower clearance, and planning uncertainty.

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Wasserstoff-Importe und Infrastrukturaufbau

Deutschlands Wasserstoffstrategie und der Aufbau eines „Core Grid“ (geplant 9.040 km, 2025–2032; Invest ~€18,9 Mrd., teils Umwidmung von Gasleitungen) beeinflussen Energie- und Chemie-Cluster. Chancen entstehen für Infrastruktur, Ammoniak/LOHC und Offtake-Verträge; Verzögerungs- und Kostenrisiken bleiben.

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Domestic tax and cost pressures

Business‑rates reforms are creating sharp distributional effects; Treasury indicated nearly 7,000 retail/hospitality/leisure firms may see bills more than double. Combined with employer cost increases, this lifts operating expenses, pressures margins, and can alter location strategy, pricing, and investment payback periods.

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Labour constraints and mobilisation effects

Ongoing mobilisation and wartime displacement tighten labour supply and raise wage and retention pressures, especially in construction, logistics, and manufacturing. Companies should plan for training pipelines, cross-border staffing, and continuity arrangements to manage productivity and safety risks.

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Persistent US sector tariffs

Despite courts limiting emergency-tariff powers, US Section 232 duties on Canadian steel, aluminum, autos and lumber remain central frictions. Tariffs and quota-like effects are reshaping sourcing, forcing margin sharing, accelerating nearshoring, and increasing working-capital needs for Canada-US integrated manufacturers and exporters.

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Investor confidence, market governance risks

Kekhawatiran atas arah kebijakan era Prabowo—termasuk peran Danantara, potensi akuisisi aset, dan isu independensi bank sentral—memicu volatilitas pasar, peringatan MSCI, serta outlook Moody’s negatif. Perusahaan multinasional perlu menilai risiko pembiayaan, valuasi aset, serta perubahan aturan free-float dan transparansi pasar.

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Mortgage stress and domestic demand

CMHC flags rising mortgage stress in Toronto and Vancouver; over 1.5M households have renewed at higher rates and another ~1M face renewal soon. A consumer slowdown could weaken retail, construction, and SME credit demand, while increasing counterparty and portfolio risk.

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Cross-strait coercion and shipping

Rising PRC air–naval activity and ‘quarantine’ style coercion around Taiwan increases shipping and war-risk insurance costs, threatens port throughput, and creates disruption risk for time-sensitive imports (especially LNG) and export logistics, affecting continuity planning and contract clauses.

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National security investment screening

CFIUS scrutiny remains intense while outbound investment screening (focused on sensitive technologies) adds new compliance obligations. Deal timelines can lengthen, mitigation agreements may constrain operations, and joint ventures in semiconductors, AI, quantum, and defense-adjacent sectors face higher rejection risk.

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Regulação de dados e compliance LGPD

A Câmara aprovou MP que transforma a ANPD em agência reguladora, com carreira própria e maior capacidade de fiscalização. Isso tende a elevar enforcement, custos de conformidade e exigências contratuais, especialmente em cadeias com compartilhamento internacional de dados.

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Automotive transition and investment flight

VDA reports 72% of 124 suppliers are delaying, cutting or relocating German investment; employment fell from 833k (2019) to 726k (2025). EV incentives may depress used values and dealer margins, while CO₂-rule uncertainty complicates capex and sourcing decisions.

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Commodity price volatility, capacity stress

Downstream processing economics are challenged by price swings (e.g., lithium refining closures) despite strategic policy support. International partners should structure flexible offtakes, consider tolling/hedging, and evaluate counterparty resilience, as consolidation and state-backed support reshape the sector.

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Sanctions, compliance, crypto enforcement

Ukraine is expanding sanctions against entities and individuals supporting Russia’s defence and financial networks, including crypto payment and mining channels linked to component procurement. This raises counterparty, KYC/AML and re-export control burdens for regional traders and service providers, especially across hubs like UAE and Hong Kong.

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Nickel quotas tighten supply chains

Jakarta is cutting nickel ore production quotas (RKAB), including a steep reduction at Weda Bay Nickel, aiming to lift prices. Smelters may face ore shortages, raising import dependence (notably Philippines) and increasing volatility for EV-battery and stainless-steel supply chains.

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Tech export controls escalation

US licensing for AI chips and enforcement actions (e.g., Applied Materials penalties) signal tighter extraterritorial controls on semiconductor tools and compute. Multinationals face higher compliance costs, end-use monitoring, and planning risk for China-facing R&D and sales.

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Photonics and optics capacity

Finland’s optics and photonics base—supporting high-end XR headsets and sensing—attracts scale-up capital, including semiconductor-laser manufacturing expansion. This improves component availability for simulation devices, yet exposes firms to specialized materials dependencies and export-sensitive dual-use scrutiny.

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Defense build-up boosts industrial demand

Policy aims to lift defense spending toward 2% of GDP and relax arms export constraints, expanding procurement and dual-use manufacturing opportunities. International contractors may see more tenders and JVs, but also higher security-clearance, cyber, and supply-chain assurance requirements.

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Sanctions expansion and enforcement

New US sanctions packages—especially on Iran’s oil “shadow fleet” and crypto-linked channels—tighten financial and shipping compliance for traders, insurers, and banks. Extra-territorial exposure increases for third-country counterparties, with elevated due-diligence and payment-settlement risk.

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Inestabilidad social y riesgo regulatorio

Las protestas recurrentes y respuestas de seguridad elevan el riesgo operativo: cierres de internet, restricciones a apps, mayor vigilancia y cambios normativos rápidos. Esto afecta logística urbana, continuidad de negocios, ciberseguridad y cumplimiento de datos, complicando operaciones de filiales y partners.

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EU trade defense vs China

Europe is escalating anti‑subsidy and trade‑defense actions amid a widening EU–China goods deficit (€359.3bn in 2025, imports +6.3%, exports −6.5%). EV “price undertakings” show managed‑trade outcomes: minimum prices, quotas, and EU investment commitments shaping market access strategy.

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Auto sector reshoring pressures

Canada’s integrated auto supply chain faces U.S. tariff threats on vehicles and parts plus competitiveness challenges versus U.S. incentives and Mexico costs. Companies should reassess North American footprints, content sourcing, and contingency production, especially for EV and battery supply chains.

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Outbound investment screening expansion

U.S. rules restricting outbound investments into sensitive sectors (semiconductors, AI, quantum and related capabilities) are tightening board-level approvals and reporting. Multinationals must redesign China exposure, restructure JV/VC activity, and document controls across affiliates and funds.

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Semiconductor tariffs and controls

A tightening blend of Section 232 chip tariffs, case-by-case export licensing, and enforcement actions (e.g., a $252m Applied Materials settlement) is reshaping cross-border tech trade, raising compliance costs, and accelerating supply-chain diversification away from China.

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Power market reform execution risk

Government is unbundling Eskom and establishing an independent transmission system operator ahead of wholesale market rollout from April 2026, but timelines, market rules, wheeling and tariff design remain contested. Delays raise outage and cost risks for industry and investors.

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Battery storage tariff reform

Circular 62/2025 (effective 26 Jan 2026) introduces a two-part tariff for battery energy storage, paying for availability and delivery. This bankable revenue model can unlock private capital, reduce renewable curtailment, and improve grid stability—benefiting energy-intensive manufacturing and green procurement.

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Social protection and price interventions

Ahead of Ramadan, government cash transfers, early wage payments, and food imports (e.g., frozen chicken) aim to contain cost-of-living pressures. Such measures can reduce social risk and demand volatility, but complicate fiscal consolidation and subsidy reform efforts.

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Border and nationalism-related disruptions

Nationalist politics linked to the Cambodia dispute is influencing border policy, including proposals for walls and checkpoint closures. Any tightening can disrupt cross-border trade, trucking, and regional supply chains, while elevating security, insurance, and compliance requirements for logistics operators.

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External financing rollover dependence

Short-term bilateral rollovers (e.g., UAE’s $2bn deposit extended at 6.5% to April 2026) underscore fragile external buffers. Debt-service needs and refinancing risk can trigger FX volatility, capital controls, delayed profit repatriation, and higher country risk premia.

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Logistics disruption and labor risk

Rail and potential port labor disruptions remain a recurrent risk, with spillovers into U.S.-bound flows. For exporters of bulk commodities and importers of containerized goods, stoppages elevate inventory buffers, demurrage, and rerouting costs, stressing time-sensitive supply chains.

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Cybersecurity mandates for supply chains

CISA directives to replace end-of-life edge devices and tighter contractor cyber rules (e.g., CMMC 2.0 rollout) raise compliance costs and vendor requirements. Noncompliance can block federal contracts and increase breach risk, affecting logistics, OT environments, and cross-border data flows.

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Dual-use export controls expansion

Beijing is widening dual-use controls, including blacklisting foreign defense-linked entities (e.g., Japanese aerospace and heavy industry). International firms must map China-origin inputs and re-export exposure, as licensing delays and end-use verification can disrupt aerospace, electronics and machinery supply chains.

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Steel and aluminum tariff shock

U.S. metals tariffs are pushing domestic premiums to records, tightening supply and lifting input costs for autos, aerospace, construction, and packaging. Companies may face contract repricing, margin squeeze, and a renewed need for hedging, substitution, and re-qualifying non-U.S. suppliers.

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Tax reform rollout and veto risk

Implementation of the new dual VAT regime (CBS/IBS plus Selective Tax) is advancing, but Congress is still voting on key presidential vetoes and governance rules. Transition complexity will hit pricing, invoicing, credits, cross-border services and supply-chain tax efficiency.