Mission Grey Daily Brief - July 19, 2024
Summary of the Global Situation for Businesses and Investors
The global situation remains fraught with geopolitical tensions and economic challenges. Here is a summary of the key developments:
- US-China Relations: The US is concerned about Russia potentially sharing military insights with China, which could impact the effectiveness of American weapons systems. This highlights the strengthening defence ties between Russia and China, raising concerns in the West.
- Climate Change Negotiations: The upcoming COP29 summit in Azerbaijan aims to finalise financial contributions from wealthy nations to aid developing countries in addressing climate change. However, negotiations have stalled, and developing countries are pushing for more substantial commitments from their wealthier counterparts.
- European Energy Crisis: Belgium has pledged €150 million to rebuild Ukraine's infrastructure, focusing on restoring energy supplies to hospitals and building bomb shelters in schools. This comes as Russia continues its military offensive, targeting energy infrastructure and civilian targets.
- US Politics: Former US President Donald Trump has been accused of waffling over whether the US should defend Taiwan from a potential Chinese takeover. Trump's stance has raised concerns about his commitment to global security and democracy, particularly in light of his recent nomination for the upcoming US presidential elections.
- US-China Relations: Businesses, particularly in the defence and technology sectors, should monitor the situation closely and assess their supply chain vulnerabilities. Diversifying supply chains and reducing reliance on Chinese markets may be prudent strategies to mitigate risks associated with US-China tensions.
- Climate Change Negotiations: Businesses should consider how they can contribute to global efforts to address climate change, such as reducing carbon emissions and transitioning to more sustainable practices. This can help businesses stay ahead of potential regulatory changes and meet the growing consumer demand for environmentally conscious products and services.
- European Energy Crisis: Businesses and investors in the energy and infrastructure sectors may find opportunities to contribute to Ukraine's reconstruction and humanitarian efforts. Providing expertise, technology, and resources to support Ukraine's energy sector and civilian protection can be beneficial endeavours.
- US Politics: Businesses and investors should closely monitor the US political landscape, particularly as the presidential elections draw closer. A potential Trump presidency could impact financial markets, trade policies, and global alliances. It may also affect businesses operating in the Asia-Pacific region, given Trump's stance on Taiwan and his isolationist foreign policy approach.
US-China Relations
The US is concerned that Russia is sharing military insights with China, particularly regarding vulnerabilities in American weapons systems. This concern was raised by a bipartisan US congressional committee, which has requested an assessment from the Biden administration. This development underscores the strengthening defence ties between Russia and China, as they seek to reduce the influence of the US and its Western allies.
This issue has significant implications for businesses and investors, particularly in the defence and technology sectors. It underscores the need for Western countries to protect their technological advancements and intellectual property. It also highlights the importance of supply chain diversification and the potential risks associated with doing business in China, given the country's close alignment with Russia.
Climate Change Negotiations
The upcoming COP29 summit in Azerbaijan aims to finalise a global agreement on financial contributions from wealthy nations to aid developing countries in combating climate change. However, negotiations have stalled, and developing countries are pushing for more substantial commitments.
This impasse has significant implications for businesses and investors, particularly in the energy and environmental sectors. It underscores the need for a swift and comprehensive global response to address climate change. Businesses should consider how they can contribute to reducing carbon emissions and transitioning to more sustainable practices.
European Energy Crisis
Belgium has launched a €150 million programme to rebuild Ukraine's infrastructure, focusing on restoring energy supplies to hospitals and building bomb shelters in schools. This comes as Russia continues its military offensive, targeting energy infrastructure and civilian targets.
The Belgian initiative demonstrates a commitment to supporting Ukraine's resilience and persevere through the war. It also highlights the ongoing need for humanitarian aid and reconstruction efforts in Ukraine, presenting opportunities for businesses and investors to contribute to these endeavours.
US Politics
Former US President Donald Trump has been accused of waffling over whether the US should defend Taiwan from a potential Chinese takeover. In an interview, Trump suggested that the US might not come to Taiwan's defence unless the latter paid the US a substantial amount of money.
Trump's stance has raised concerns about his commitment to global security and democracy, particularly given his recent nomination for the upcoming US presidential elections. His isolationist and pro-Russia sentiments, along with his choice of running mate, have sparked alarm among US allies.
These developments have significant implications for businesses and investors, particularly those with interests in the US and the Asia-Pacific region. It underscores the potential risks associated with a Trump presidency, including the possibility of reduced financial and military aid to Ukraine and a more isolationist foreign policy approach.
Recommendations for Businesses and Investors
Further Reading:
America is worried Russia is sharing Ukraine lessons with China - The Economic Times
Belgium launches €150m programme to rebuild infrastructure in Ukraine - The Brussels Times
Boris Johnson meets Donald Trump and urges him to stand by Ukraine - The Independent
COP29 Host Azerbaijan Urges Rich Nations To Break Stalemate Over Climate Aid - WE News English
In interview, Trump waffles over whether Taiwan is worth defending from China - Washington Examiner
Themes around the World:
Sanctions, export controls, compliance burden
Canada’s expanding sanctions and export-control alignment with allies increases screening requirements for dual-use items, shipping, finance and tech transfers. Multinationals need stronger KYC/UBO checks, third-country routing controls, and contract clauses to manage enforcement and sudden designations.
Industrial Policy and Innovation Incentives
The Nova Indústria Brasil policy allocates R$300 billion in financing to boost industry, innovation, and exports, with a focus on green technologies and automotive efficiency. The government is also responding to industrial competitiveness challenges, especially in chemicals and fertilizers, with new fiscal incentives and regulatory reforms.
Labor Market and Federal Workforce Shifts
US job growth has slowed, with federal employment down 9% and manufacturing jobs declining. Policy uncertainty and tariffs have dampened hiring and investment, affecting consumer sentiment and business expansion plans, especially for international investors.
Robust Public Investment Surge
Turkey’s 2026 Public Investment Program allocates nearly 1.92 trillion TRY across 13,887 projects, prioritizing infrastructure, energy, health, education, and earthquake resilience. This unprecedented scale of investment is set to enhance logistics, energy independence, and social infrastructure, directly impacting supply chains and regional connectivity.
ESG and Sustainability Standards Tighten
Germany’s modular building sector is increasingly shaped by strict ESG and sustainability requirements, including CSRD implementation. Compliance with green building standards and lifecycle emissions reporting is now essential for market access, financing, and supply chain integration.
Syria Policy and Regional Security Risks
Turkey’s evolving Syria strategy, focused on eliminating YPG/PKK influence and supporting Syrian state control, aims to stabilize its southern border. While this may improve regional security and trade, ongoing tensions and humanitarian concerns pose risks for cross-border operations and investor confidence.
Foreign Direct Investment Decline
UK foreign direct investment projects fell by 13% in 2024, reflecting investor caution amid regulatory uncertainty and economic headwinds. This trend affects capital inflows, job creation, and the UK's attractiveness as a business destination.
Security Guarantees as Investment Prerequisite
International investors and financial institutions stress that credible security guarantees are essential for large-scale investment in Ukraine. Ongoing conflict and uncertainty over territorial concessions remain major obstacles, with capital inflows contingent on a stable, enforceable peace framework.
Labor Market and Immigration Policy Uncertainty
US labor market tightness and evolving immigration policies continue to affect talent mobility and operational planning. Businesses face challenges in workforce recruitment, retention, and compliance, with implications for productivity and international assignments.
US-Mexico Security and Border Cooperation
Security concerns—drug trafficking, border management, and cartel violence—remain central in US-Mexico relations. High-level diplomatic engagement is ongoing, with both governments prioritizing cooperation to safeguard cross-border trade and supply chain stability amid persistent risks.
Political Gridlock on Defense and Security
Taiwan’s $40 billion defense budget faces parliamentary opposition, raising concerns about its deterrence capabilities amid rising Chinese military activity. Political divisions could impact defense procurement, foreign confidence, and overall security stability.
VAT and Regulatory Changes in Energy
France will raise VAT on energy subscriptions from 5.5% to 20% in August 2026 to comply with EU rules. This tax hike, alongside evolving energy regulations, will affect operating costs, consumer demand, and investment decisions in the energy and industrial sectors.
Geoeconomic Rivalry and Supply Chain Realignment
US-China strategic competition over technology, critical minerals, and industrial policy is driving global supply chain realignment. Companies are diversifying sourcing, investing in resilience, and reassessing exposure to geopolitical risks, with implications for cost structures and market access.
Environmental Governance and ESG Pressures
Environmental and labor issues, particularly in mining and palm oil, have led to regulatory crackdowns, including permit revocations for violators. International investors face growing ESG expectations, and Indonesia’s ability to enforce standards will shape its reputation and access to sustainable finance.
Political-Military Influence on Policy
Military leadership’s direct involvement in economic negotiations and investment decisions signals institutional fragility. This dynamic introduces unpredictability in regulatory enforcement and business climate, impacting long-term planning and foreign investor confidence.
Currency Volatility and Capital Outflows
The South Korean won has weakened to levels not seen since the global financial crisis, partly due to the looming $350 billion investment outflow. This volatility raises financial risks for international investors and complicates funding for large-scale projects and trade settlements.
Persistent Supply Chain Disruptions
UK supply chains face ongoing disruptions from geopolitical shocks, logistics bottlenecks, and rising shipping costs. These challenges increase operational risks and require businesses to enhance resilience and diversify sourcing strategies.
Transatlantic Trade Deal Uncertainty
The UK-US trade agreement, partially ratified in 2025, faces delays and possible suspension due to tariff disputes. This uncertainty undermines business confidence, complicates market access, and may stall UK export growth, especially in high-value sectors like digital services and agriculture.
Evolving Foreign Investment Regulations
Recent reforms, including new real estate laws and capital market liberalization, make Saudi Arabia more accessible to foreign investors. Enhanced ownership rights and streamlined procedures are expected to boost FDI inflows, but regulatory adaptation remains crucial for entrants.
IMF-Led Economic Reform Momentum
Recent IMF engagement and disbursement of $1.2 billion have driven fiscal discipline, tax reforms, and macroeconomic stabilization. While these measures boost investor confidence, they also entail stringent conditions affecting trade, investment, and operational flexibility for foreign businesses.
Export Controls and Technology Sanctions
US-led export controls on advanced chips and technology, especially targeting China, place Taiwan at the heart of global supply chain tensions. Compliance risks, supply bottlenecks, and retaliatory measures from China complicate operations for multinationals relying on Taiwanese tech.
Downstream Industrialization and Value Addition
Indonesia continues to prioritize downstream processing in mining and energy, leveraging foreign investment—especially from China—to move up the value chain. This strategy increases export value, supports job creation, and enhances industrial competitiveness.
Technology Sector Volatility and AI Investment
Major US tech firms are ramping up AI investments, but market performance is diverging due to supply chain disruptions and tariff uncertainty. Long-term AI adoption promises sectoral transformation, yet near-term volatility affects global tech partnerships and investment strategies.
Industrial Policy and Electricity Pricing
High electricity costs have led to smelter closures and job losses in energy-intensive industries. Recent tariff relief for ferrochrome producers highlights the urgent need for a sustainable, competitive electricity pricing policy to prevent deindustrialization and protect employment.
Centralization of Political Power
General Secretary To Lam is consolidating authority, possibly merging party chief and presidency roles. This centralization may enable swift reforms but raises concerns about institutional checks, policy continuity, and long-term governance risks for international investors.
EU Customs Union Modernization Urgency
Turkey faces mounting pressure to modernize its Customs Union with the EU as new EU trade deals with India and MERCOSUR threaten to erode Turkey's competitive position. Outdated agreements expose Turkish exporters to increased competition and regulatory barriers, impacting trade flows and investment decisions.
Biodiesel policy recalibration to B40
Indonesia delayed moving to B50 and will maintain B40 in 2026 due to funding and technical constraints. This changes palm-oil and diesel demand projections, affecting agribusiness margins, shipping flows, and price volatility across global edible oils and biofuel feedstock markets.
Environmental Licensing and Climate Policy Reform
Brazil’s new General Environmental Licensing Law streamlines approvals for business projects, while COP 30 participation and new climate governance policies signal a commitment to sustainable development. These changes reduce regulatory bottlenecks but also require compliance with stricter environmental and emissions standards.
Water scarcity and treaty pressures
Drought dynamics and cross-border water-delivery politics are resurfacing as an operational constraint for industrial hubs, especially in the north. Water availability now affects site selection, permitting, and ESG risk, pushing investment into recycling, treatment and alternative sourcing.
Infrastructure and Construction Safety Risks
Major infrastructure projects face delays due to safety incidents and regulatory scrutiny, as seen in the recent halting of 14 construction projects after crane accidents. Such disruptions affect supply chains, logistics, and investor confidence in Thailand’s project delivery capacity.
Rules-Based Order Fragments Globally
Canadian leadership now openly acknowledges the collapse of the traditional rules-based international order. This fragmentation increases uncertainty for multinational firms, as trade, finance, and supply chains become tools of geopolitical leverage rather than predictable frameworks.
Resilient Policy Reforms and Governance
Recent reforms include tax simplification, legal modernization, and improved ease of doing business. These measures support startups, MSMEs, and foreign investors, fostering a more transparent, predictable, and growth-oriented business environment that underpins India’s economic ascent.
Defense Build-Up and Asymmetric Deterrence
Taiwan is investing $40 billion in drones, AI-based defense systems, and advanced weaponry to counter China’s military threat. This defense modernization, heavily reliant on US support, is integral to business risk assessments and supply chain continuity planning.
Port and logistics mega-projects
Brazil is accelerating port and access upgrades, exemplified by the Santos–Guarujá immersed tunnel PPP (R$7.8bn capex; 30-year concession). Better access can reduce dwell times, but construction, concession terms and local stakeholder risks affect supply-chain resilience.
North American Trade Frictions and CUSMA Uncertainty
US-Canada relations are strained by tariff threats and disputes over third-party trade deals, notably with China. The US-Mexico-Canada Agreement (CUSMA) faces review and potential renegotiation, raising risks for businesses reliant on North American supply chains and market access.
Infrastructure Expansion and Investment Bottlenecks
Vietnam is launching large-scale infrastructure projects, targeting $5.5 billion in foreign loans for 2026 and up to $38 billion by 2030. However, persistent disbursement delays, land clearance, and regulatory hurdles threaten timely execution, impacting business operations and foreign investment flows.