USMCA Review and Tariff Risk

Mexico’s July 1 USMCA review is emerging as the main source of trade uncertainty, with pressure on autos, steel, energy and Chinese investment. Given that roughly 80–82% of Mexican exports go to the United States, prolonged negotiations could reshape tariffs, rules of origin and investment timing.

Stronger data enforcement cycle

Brazil’s ANPD is set to expand enforcement in 2026, with more than 200 new staff and a budget expected to exceed double 2025 levels. Multinationals should expect stricter inspections, sanctions and tighter rules around data governance and digital operations.

AI Growth and Data Centres

The government’s AI-led growth agenda is supporting data-centre and digital investment, including proposed AI Growth Zones. However, planning delays, grid access, funding constraints, and clean-energy availability remain key execution risks for technology investors and commercial real-estate operators.

China Dependence Meets Strategic Screening

Berlin is balancing commercial dependence on China with tighter protection of strategic sectors. China was Germany’s largest trading partner again in 2025, yet ministers are pushing stricter foreign investment screening and possible joint-venture requirements, complicating market access, M&A, and technology partnerships.

Oil Shock and Baht Volatility

Thailand’s import dependence leaves it highly exposed to the Middle East oil shock. The baht has fallen more than 5% this month, with volatility near 9%, raising import costs, weakening investor sentiment and increasing hedging, logistics and pricing risks for businesses.

Ports Diversify Beyond Coal

Logistics infrastructure is broadening beyond traditional commodities. Port of Newcastle recorded 11.12 million tonnes of non-coal cargo in 2025, while Melbourne is adding a new port-linked container park, improving freight efficiency, renewable-project logistics, and supply-chain resilience.

Ports and Corridors Expand

Major logistics projects, including Da Nang’s Lien Chieu Port and new regional port-border-airport corridors, are expanding cargo capacity and multimodal connectivity. These upgrades should reduce long-term logistics costs, improve supply-chain resilience, and broaden site-selection options for export-oriented investors.

Semiconductor Controls Tighten Further

Washington’s proposed MATCH Act would expand restrictions on chipmaking tools, servicing, and software for Chinese fabs including SMIC and YMTC. Tighter allied coordination could further disrupt semiconductor supply chains, slow China capacity upgrades, and complicate technology sourcing, production planning, and cross-border partnerships.

Power Constraints Threaten Manufacturing

Electricity demand is rising about 8-10% annually, outpacing supply growth and tightening reserve margins. Dry-season shortages, hydropower variability, fuel import dependence and grid bottlenecks threaten factory continuity, raise energy costs and could deter new investment in industrial zones.

Textile Competitiveness Under Pressure

Pakistan’s largest export sector faces falling shipments, rising wages, tighter credit, and sharply higher energy bills. Textile and apparel exports fell 7% in March, while broader exports dropped 14%, raising risks for sourcing strategies, supplier stability, and trade revenues.

Regional War and Security Risk

Israel’s confrontation with Iran and continued Gaza volatility remain the dominant business risk, disrupting demand, labor supply and planning. The Bank of Israel cut 2026 growth to 3.8% from 5.2%, while reserve call-ups, missile threats and uncertainty raise operating costs.

Manufacturing and FDI Push

Ankara is intensifying efforts to attract global capital with incentives for exporters, high-tech industry and strategic manufacturing. Officials say FDI stock has reached about $290 billion, while new proposals include tax advantages, digital visas and streamlined permits for foreign investors.

Fuel import insecurity prompts state action

Australia’s heavy reliance on imported refined fuels has prompted new government underwriting for fuel and fertiliser cargoes amid Strait of Hormuz disruption. Businesses face elevated shipping, insurance, and input-cost risks, especially in transport, agriculture, mining, and regional distribution networks.

Reserve Erosion and Intervention

The central bank has sold or swapped roughly $45-55 billion in FX and gold reserves since late February, including about 58-60 tons of gold. This supports short-term stability, but increases concerns over reserve adequacy, policy durability and future currency volatility.

Ports Gain From Shipping Diversions

Karachi Port, Port Qasim, and Gwadar are benefiting from rerouted regional shipping, with transshipment volumes surging and Port Qasim handling about 450,000 metric tons of petroleum products in March. This creates short-term logistics opportunities but may prove temporary and disruption-driven.

Security Risks Pressure Logistics

Persistent security threats, especially around Balochistan and strategic corridors, continue to weigh on transport reliability, insurance premiums and project execution. Elevated risk near western routes and energy infrastructure can deter foreign personnel deployment, complicate overland trade and raise supply-chain contingency costs.

Supply Chain Diversification Opportunity

Thailand’s manufacturing base and location position it to capture supply-chain diversification from global tensions, especially in electronics and industrial exports, but success depends on regulatory reform, competitiveness upgrades, and sustained political stability to convert interest into FDI.

Government Market Interventions

Seoul has activated emergency stabilization measures, including restrictions on naphtha and selected fuel exports plus broader supply-management powers. These interventions may protect domestic industry, but they also create regulatory uncertainty, allocation distortions and compliance requirements for energy, chemical and trading firms.

Green Compliance Reshaping Industry

EU carbon and sustainability rules are forcing Vietnamese manufacturers to accelerate emissions reporting, renewable power use, and traceability upgrades. Industrial parks host 35–40% of new FDI and over 500 parks now face growing investor demand for green infrastructure and clean electricity.

China Trade And FTA Expansion

China remains pivotal to Korean trade, with March exports to China rising 64.2% to $16.5 billion. At the same time, Seoul and Beijing are advancing follow-up FTA talks on services and investment, creating opportunities alongside persistent strategic and concentration risks.

Rare Earth Supply Leverage

China’s controls over rare earths and magnets continue to reshape industrial sourcing. January-February exports to the US fell 22.5% year on year to 994 tonnes, while shipments to the EU rose 28.4%, underscoring strategic concentration risks for automotive, electronics and defense-adjacent manufacturers.

Franco-European Defense Integration Deepens

France is accelerating joint European programs including SAMP/T NG air defense with Italy, while reassessing delayed projects such as the Franco-German tank and Eurodrone. For international suppliers, this means opportunities in European consortia but also procurement complexity and localization demands.

Legal Certainty and Judicial Reform

Business groups continue to flag judicial and regulatory uncertainty as a brake on new capital deployment. With investment only 22.9% of GDP in late 2025 versus a 25% official target, firms are delaying projects until rules stabilize.

Raw Material Logistics Vulnerable

German manufacturers remain exposed to imported chemicals, LNG, polymers, and metals facing delays and price surges. Hormuz-related shipping disruption, supplier force majeure in Asia, and low substitution capacity increase procurement risk, especially for Mittelstand firms with limited sourcing flexibility.

Interest Rate and Inflation Volatility

The Bank of Canada held its policy rate at 2.25%, but warns geopolitical shocks could still lift inflation and weaken growth. Economists now see 2026 inflation at 2.4%, unemployment at 6.7% and growth at 1.1%, complicating financing, pricing and capital-allocation decisions.

Logistics Corridors Gaining Depth

New multimodal infrastructure around Navi Mumbai airport, JNPA, and the Western Dedicated Freight Corridor is improving prospects for faster sea-air and rail-port connectivity. Over time, this could reduce logistics costs, ease congestion, and support export-oriented manufacturing, warehousing, and time-sensitive supply chains.

China Exposure and Trade Realignment

Mexico is tightening tariffs on roughly 1,400 non-FTA products while facing U.S. pressure to curb Chinese content in North American supply chains. This elevates compliance scrutiny for manufacturers, especially in autos, steel, electronics and strategic sectors vulnerable to transshipment allegations.

US Tariff Regime Volatility

Washington is rapidly rebuilding tariffs after the Supreme Court struck down IEEPA duties, using Section 232, Section 301 and Section 122. New pharmaceutical tariffs reach 100%, while metal duties remain up to 50%, complicating sourcing, pricing and contract planning.

Energy Tariffs and Circular Debt

IMF-backed energy reforms require timely tariff adjustments, fewer subsidies, and action on chronic circular debt. For manufacturers and foreign investors, higher electricity and fuel costs could pressure margins, while reforms in transmission, generation privatization, and renewables may gradually improve power reliability.

Industrial Localization and Export Push

The government is prioritizing local manufacturing, supply-chain resilience and export growth through investment zones, ready-built factories and support for key sectors. This creates opportunities in import substitution, contract manufacturing and local sourcing, though policy implementation remains crucial.

Data Center Power Constraints

AI-driven electricity demand is straining the US grid, with data centers potentially consuming up to 17% of US power by decade-end. Utilities are imposing flexibility demands, while firms turn to costly off-grid gas generation, affecting operating costs, siting decisions, and ESG exposure.

Critical Minerals Geopolitics Intensifies

Ukraine’s minerals are gaining strategic weight in reconstruction and foreign investment, but occupation risks are rising. Russia is exploiting deposits in seized territories, while Kyiv is channeling investor interest into minerals, gas, and oil projects, increasing competition, political risk, and due-diligence complexity.

Climate and Food Price Shocks

The central bank cited drought and frost as drivers of food inflation, alongside administered price increases in natural gas and municipal services. These shocks raise operating costs for food processors, retailers, and hospitality businesses while complicating wage negotiations and consumer-demand forecasting.

Automotive Supply Chains Under Strain

Japan’s auto sector faces simultaneous pressure from tariffs, weaker China demand and input disruption. Toyota’s global sales fell 2.3% in February, China sales dropped 13.9%, and longer rerouted shipping could stretch delivery times from roughly 50 days to nearly 100.

Revenue-raising tax policy shifts

The government is leaning on targeted tax increases and reduced incentives to shore up revenues, including R$4.4 billion from fintechs, bets, and JCP plus R$16.5 billion from benefit cuts. This signals rising sector-specific tax risk and lower after-tax returns.

AI Industrial Deployment Accelerates

China’s open-source AI ecosystem is expanding rapidly despite chip restrictions, with Chinese models gaining global traction and feeding off industrial deployment data. This strengthens China’s competitiveness in logistics, robotics and manufacturing, increasing both partnership opportunities and technology-transfer, cybersecurity and competitive risks.