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Mission Grey Daily Brief - July 17, 2024

Summary of the Global Situation for Businesses and Investors

The world is witnessing a confluence of critical events, from the attempted assassination of former US President Trump to the ongoing war in Ukraine and the political turmoil in Bangladesh. In Cyprus, tensions are escalating between Turkish and Greek Cypriots, while North Korea faces another blow as a senior diplomat defects to South Korea.

US-China Relations

The attempted assassination of former US President Trump has sparked discussions in China about the weaknesses of the US political system. This incident, along with the US-China trade tensions and the Taiwan conflict, has experts worried about a potential US-China cold war turning hot. The US has maintained and strengthened tariffs on Chinese imports, and both political parties are pushing to get tougher on China and its companies. The US must balance its approach to China, leveraging its technological advantage while also utilizing soft power to attract international talent and maintain its influence.

Ukraine-Russia War

The war in Ukraine continues to rage on, with both sides clashing over foreign policy and Russia's invasion. Ukraine is facing a war of attrition, relying heavily on international aid that may decrease over time. To sustain its economy, Ukraine is raising taxes and switching to internal resources. The recovery and reconstruction of Ukraine will be challenging due to population decline and refugee displacement. Sanctions on Russia's energy sector are necessary to stop its war efforts, and a total energy embargo could be effective.

Political Turmoil in Bangladesh

Bangladesh is facing violent political turmoil over the government's job quota system, resulting in the deaths of at least five people and injuries to over a hundred. The protests have disrupted traffic and halted railways and highways across the country. The situation highlights the need for businesses to monitor political risks and assess the stability of the operating environment.

Cyprus Conflict

Tensions are escalating in Cyprus as Turkish Cypriots and Greek Cypriots engage in a series of escalations along the buffer zone, including the deployment of large-caliber weapons and the installation of high-tech cameras. This situation could have broader implications for the region, and the international community must act to prevent open hostilities from breaking out.

North Korean Diplomat Defection

A senior North Korean diplomat based in Cuba, Ri Il Kyu, defected to South Korea with his family in November 2023. This is a significant blow to North Korean leader Kim Jong Un as Ri played a crucial role in representing Pyongyang's interests in Havana and blocking Cuba from opening diplomatic ties with South Korea. The defection underscores the challenges faced by the Kim regime in maintaining control and the potential for further defections.

Recommendations for Businesses and Investors

  • US-China Relations: Businesses with operations or supply chains in the US and China should closely monitor the evolving relationship between the two countries and prepare for potential disruptions due to escalating tensions.
  • Ukraine-Russia War: Companies with investments or operations in Ukraine should be aware of the ongoing war's impact on the country's economy and consider the potential benefits of relocating to Poland or the Czech Republic, which have experienced economic growth due to their EU membership prospects.
  • Political Turmoil in Bangladesh: Businesses operating in Bangladesh should assess the impact of the political turmoil on their operations and consider the potential risks of civil unrest and supply chain disruptions.
  • Cyprus Conflict: Companies with interests in Cyprus should monitor the situation and evaluate the potential impact on their operations. While the conflict is currently localized, there is a risk of escalation that could affect the wider region.
  • North Korean Diplomat Defection: The defection highlights the instability within the North Korean regime and the potential for further elite defections. Businesses should consider the implications of a potential shift in North Korea's political landscape and the impact on their operations or investments in the region.

Further Reading:

3 killed and dozens injured in Bangladesh in violent clashes over government jobs quota system - CHAT News Today

40 Dead, Hundreds Injured After Heavy Rain, Storms In Eastern Afghanistan - Radio Free Europe / Radio Liberty

5 killed and dozens injured in Bangladesh in violent clashes over government jobs quota - Toronto Star

A North Korean diplomat in Cuba defected to South Korea in November, a possible blow to leader Kim - CTV News

A senior N. Korean diplomat defected to S. Korea from Cuba, Chosun Ilbo says - 朝日新聞デジタル

As Press Freedoms Erode in Bangladesh, Political Cartoonists Are Being Targeted by An Increasingly Authoritarian Regime - Nieman Reports

As the US reels from Trump shooting, China sees weakness - Business Insider

At least 5 killed, more than 100 hurt in Bangladesh job quota protests - McDuffie Progress

Canada pleads for political calming in wake of Trump shooting - Maple Ridge News

Canada reflects on its history of political violence in wake of attack on Trump - CBC.ca

Cocked rifles and infrared cameras along Cyprus buffer zone stoke tensions that could spread farther - Hindustan Times

Economist Says Total Energy Embargo Will Make Russia Stop Its War on Ukraine - Kyiv Post

European Parliament re-elects Roberta Metsola of Malta to lead 720 member EU body - UPI News

Experts worry that a U.S.-China cold war could turn hot: ‘Everyone’s waiting for the shoe to drop in Asia’ - Fortune

Themes around the World:

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Investor Confidence and Business Exodus Risks

Prominent UK business leaders warn that Labour government policies, including increased National Insurance contributions and regulatory burdens, are driving capital flight and job losses. Key sectors like oil, gas, chemicals, and life sciences face investment redirection overseas. This erosion of investor confidence threatens the UK's attractiveness as a business hub, potentially weakening economic growth and employment.

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India's Robust GDP Growth Amid Global Uncertainty

India's GDP grew unexpectedly by 7.8% in Q1 FY26, driven by strong private consumption and government spending. Despite global headwinds like US tariffs and fragile capital flows, domestic demand remains resilient. Fitch revised growth forecasts upward to 6.9% for FY26, though a slowdown is expected in the second half, reflecting India's structural economic strength and investment appeal.

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Economic Growth Outlook Downgrades

Leading economic institutes have downgraded Germany’s GDP growth forecasts for 2025 and beyond, citing weak domestic demand, sluggish private investment, and reliance on government spending. The outlook reflects structural challenges and external headwinds, signaling a slow and fragile recovery trajectory.

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Modest Economic Growth and Structural Challenges

South Africa's GDP growth remains sluggish at 0.8% in Q2 2025, insufficient to reduce poverty or inequality. While some sectors show improvement, ongoing issues like logistics bottlenecks, low investment, and tariff pressures limit sustainable growth, affecting business confidence and long-term economic prospects.

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South Korea’s Monetary Policy Signals Rate Cuts

The Bank of Korea held its benchmark rate at 2.5% but signaled potential rate cuts in the near term to support below-potential economic growth. Policymakers remain cautious about household debt and housing market risks, balancing stimulus needs with financial stability. The outlook reflects challenges from US tariffs, domestic political uncertainties, and structural economic pressures.

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Robust Canadian Bank Earnings

Strong quarterly earnings from major Canadian banks, including Royal Bank of Canada and Bank of Montreal, reflect resilience amid tariff-related risks and economic uncertainty. These results bolster investor confidence and support the Toronto Stock Exchange, indicating financial sector strength critical for domestic economic stability and capital markets.

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Strategic Pivot to China and Russia

Iran is deepening ties with China and Russia to counter Western sanctions and economic isolation. High-level meetings and agreements, including energy and infrastructure projects, aim to bolster Iran’s economy and security. However, these partnerships are transactional and limited by Beijing and Moscow's broader geopolitical interests, offering diplomatic cover but uncertain military or economic guarantees.

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Corporate Sector Inertia

Pakistan's private sector shows significant potential but remains constrained by policy neglect, subsidies, and risk aversion. This inertia limits capital creation, innovation, and foreign direct investment, with FDI at only $1.785 billion through April 2025. The lack of ambition and talent flight hinders competitiveness, impacting international trade and investment attractiveness.

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Supply Chain Transparency and Ethical Sourcing

New US laws like the Uyghur Forced Labor Prevention Act impose stringent supply chain transparency and ethical sourcing requirements. These regulations increase compliance burdens and operational risks for companies sourcing globally, compelling businesses to enhance due diligence and adapt supply chain strategies to avoid sanctions and reputational damage.

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Cross-Border Trade Growth and Nearshoring Trends

U.S.-Mexico cross-border trade rose 5% in July 2025, reinforcing Mexico’s position as the U.S.’s top trading partner. The Bajío–Mexico City–Querétaro corridor is emerging as a key economic hub, fueled by nearshoring and retail expansion. New export regulations aim to tighten oversight on sensitive goods, impacting logistics and supply chain management but supporting trade security and compliance.

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Political Instability and Leadership Changes

Thailand's frequent political upheavals, exemplified by the recent dismissal of PM Paetongtarn Shinawatra, create policy uncertainty that undermines investor confidence and disrupts long-term economic planning. This instability hampers structural reforms, deters foreign investment, and slows economic growth, posing significant risks to trade and business operations in Thailand.

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UN Sanctions Snapback Impact

The reinstatement of UN sanctions on Iran, triggered by European nations, threatens to severely destabilize Iran's economy. The snapback mechanism would freeze assets, restrict arms deals, and limit ballistic missile development, potentially causing inflation to soar up to 90%, currency collapse, and contraction in economic growth, severely impacting international trade and investment.

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Rising Cost of Living and Wage Stagnation

A significant majority of Canadians report financial strain due to rising prices for essentials like food and housing, outpacing wage growth. This cost-of-living crisis may dampen consumer spending, impact labor market dynamics, and necessitate policy interventions, affecting overall economic growth and business operating environments.

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Economic Diversification Opportunities Amid Risks

Despite high risks, South Sudan presents opportunities in agriculture and infrastructure development. However, political instability and economic volatility require investors to adopt robust risk management strategies to capitalize on these sectors while mitigating downside exposure.

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Digital Trade Legislation Targets US Tech Firms

South Korea’s proposed digital platform laws are perceived as discriminatory against US technology companies, potentially straining bilateral trade relations. The legislation mirrors EU’s Digital Markets Act and may provoke US retaliatory tariffs or trade actions. This regulatory divergence risks complicating South Korea’s trade diplomacy and access to critical US markets.

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Persistent High Inflation and Monetary Policy

Inflation remains elevated at around 33%, slowing less than expected, complicating monetary policy. The Central Bank of Turkey (CBRT) cautiously cuts interest rates to balance growth and inflation control. Inflationary pressures, especially in food, housing, and education, pose risks to economic stability and investor confidence, necessitating careful policy calibration.

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Foreign Investment and Stock Market Optimism

South Korean retail investors are increasingly bullish on Vietnamese equities, with investments rising 22.1% amid robust GDP growth of 7.5% in H1 2025. Economic stimulus and reduced tariff uncertainties underpin stock market gains, while anticipation of Vietnam's upgrade to emerging market status by FTSE Russell fuels further investor interest, enhancing capital inflows and market liquidity.

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Regional Investment Shifts Amid Turmoil

Political upheaval in Indonesia has triggered significant foreign investor outflows, with $653 million withdrawn from the stock market recently. In contrast, Thailand's improving political climate and fiscal position attract increased investment. This divergence is reshaping Southeast Asia's financial landscape, influencing portfolio allocations and regional economic dynamics.

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Foreign Capital Inflows and Corporate Buybacks

Strong foreign investment, especially from U.S. funds, alongside aggressive corporate share buybacks, propels Japanese equities to near all-time highs. This influx supports liquidity and market valuations, particularly in blue-chip and industrial sectors. The trend signals growing global confidence in Japan's corporate reforms and economic resilience, enhancing attractiveness for international investors and portfolio diversification.

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Foreign Investment and Manufacturing Shift

Chinese companies are increasingly establishing manufacturing operations in Indonesia, driven by policy shifts, supply chain diversification, and Indonesia’s large domestic market. China is the third largest foreign investor, with investments of 121.6 trillion rupiah in 2024, signaling Indonesia’s growing role as a regional production hub.

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Tax and Investment Policy Adaptations

Vietnam is strengthening tax compliance, governance, and enforcement of origin certifications to align with evolving international trade policies. Seminars and collaborations among financial institutions and experts help businesses navigate tariff impacts and supply chain shifts, enhancing investment strategies and regulatory adherence in a complex geopolitical environment.

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China's Expanding Investments

Chinese investments in Brazil surged over 100% in 2024, reaching $4.18 billion across renewables, oil and gas, mining, and manufacturing. China is Brazil's largest trade partner and a key investor in infrastructure and energy, deepening strategic ties. This influx supports Brazil's energy transition and economic diversification, while also increasing dependency risks on Chinese capital and technology.

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Domestic Political Fragmentation and Policy Paralysis

Iran’s leadership exhibits internal divisions and risk aversion post-conflict, with competing factions debating responses to sanctions and war damage. This paralysis hampers coherent foreign and economic policy, increasing uncertainty for investors and complicating international negotiations. The fractured political landscape limits Iran’s ability to adapt swiftly to evolving geopolitical pressures.

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Economic Growth and Investment Challenges

South Africa's GDP growth has modestly improved to around 0.8%-1.2% in 2025, driven by manufacturing, trade, and mining. However, fixed investment remains weak, constraining sustainable growth. Structural reforms and increased private-sector participation are critical to unlocking investment, improving economic resilience, and addressing high unemployment and poverty levels.

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Geopolitical Tensions and Security Risks

Taiwan faces heightened geopolitical insecurity due to strained US relations, domestic political challenges, and persistent threats from China. Increased defense spending and diplomatic efforts aim to bolster resilience, but Taiwan remains vulnerable to US policy shifts and China's military and economic pressure, complicating its strategic positioning in the Indo-Pacific.

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Oil Price Impact on Economy and Markets

Sustained low oil prices, around $66-$69 per barrel, have pressured Saudi Arabia's fiscal balance, leading to growing budget deficits and increased sovereign debt issuance. The decline in oil revenues challenges public spending on diversification projects, necessitating debt market tapping and fiscal adjustments, which influence investor sentiment and economic stability.

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Sterling Strength and Corporate FX Hedging

The British pound's sharp appreciation against the US dollar in 2025 has pressured UK exporters, prompting companies to increase currency hedging to mitigate earnings volatility. Firms like British American Tobacco and Unilever report significant foreign exchange headwinds. Central bank policies remain a key driver of FX risk management amid ongoing geopolitical and trade uncertainties.

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Rising Mexico-China Trade Tensions

Mexico's plan to impose tariffs up to 50% on Chinese imports, especially automobiles, under U.S. pressure, risks escalating trade tensions. China warns of retaliatory measures targeting critical mineral exports, potentially disrupting global supply chains and straining Mexico-China relations. This dynamic complicates Mexico's trade strategy amid geopolitical pressures from the U.S. and China.

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Impact on Euro and Eurozone Stability

France's instability pressures the euro, contributing to currency volatility amid divergent economic conditions in the eurozone. As a core EU member, France's fiscal and political challenges threaten the credibility of EU fiscal rules and the Franco-German axis, potentially destabilizing the eurozone and complicating collective economic governance and trade relations.

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Political Instability and Market Volatility

Judicial actions against opposition parties, including removal of Istanbul's CHP leadership, have triggered significant market sell-offs and bond yield surges. Political tensions undermine investor confidence, exacerbate financial market volatility, and pose risks to economic stability, complicating policy implementation and foreign investment inflows.

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Israel's Resilient Tech Economy

Despite ongoing conflict, Israel's high-tech sector remains robust, employing 11-14% of the workforce and contributing over 20% of GDP and 50% of exports. The country's innovation ecosystem, supported by government incentives and strong R&D investment, continues to attract foreign capital and sustain growth, making it a key driver of Israel's economic resilience and a focal point for global investors.

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Political Instability and Government Turnover

France faces unprecedented political instability with multiple prime ministers falling within a short period, including the recent loss of confidence in Prime Minister François Bayrou. This fragmentation hampers the government's ability to pass critical reforms, creating uncertainty that undermines investor confidence and complicates fiscal policy implementation, affecting economic stability and business operations.

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Government Market Intervention

Chinese authorities actively manage stock market stability through state-backed funds ('national team'), regulatory measures, and potential easing of short-selling restrictions. This intervention aims to sustain a controlled bull market, balancing growth with bubble risk, influencing investor behavior and market dynamics domestically and internationally.

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Rare Earths as Geopolitical Hedge

China's control over rare earth elements, critical for semiconductors and defense, positions these minerals as strategic geopolitical hedges. Export restrictions in 2023 highlighted supply chain vulnerabilities. Investors are increasingly aware of rare earths' role in portfolio resilience amid global trade tensions and technological competition.

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US Tariffs and Trade Uncertainty

US-imposed tariffs on Thai exports, including a 19% levy, disrupt trade flows and compel supply chain recalibrations. These tariffs, alongside uncertainties over transshipment rules, undermine Thailand's export competitiveness, prompting businesses to seek alternative markets or relocate production, thereby affecting foreign direct investment and industrial policy priorities.

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Decline in Metallurgical Industry Output

Russia's metallurgical sector is experiencing its deepest crisis since 2022, with output falling over 10% in July 2025. Major companies report significant sales declines and losses due to sanctions, loss of export markets, reduced domestic demand, and restrictive central bank policies. This slump undermines a historically vital industrial sector, affecting supply chains and export revenues.