US Sanctions and Escalating Tariffs

The US has intensified sanctions, imposing a 25% tariff on countries trading with Iran, directly impacting global supply chains and trade flows. These measures raise costs, deter investment, and complicate international partnerships, especially for India, China, and the UAE.

Sanctions Pressure and Russian Retaliation

Intensified Western sanctions on Russia target key sectors, reducing Russian revenues and impacting regional supply chains. Russia retaliates with threats and attacks on infrastructure, increasing geopolitical risks for businesses operating in Ukraine and neighboring markets.

Inflation and Monetary Policy Uncertainty

US inflation remains above the Federal Reserve’s 2% target, with annual CPI at 2.7%. Political interference and delayed data due to government shutdowns complicate monetary policy, increasing uncertainty for investment, borrowing costs, and currency stability.

Strategic Public-Private Infrastructure Pipeline

The government has unveiled a Rs 17 lakh crore PPP project pipeline, offering early visibility for investors and accelerating infrastructure growth. This initiative strengthens long-term economic prospects and positions India as a major destination for global infrastructure capital.

Suez Canal Disruptions and Security

Geopolitical tensions and attacks in the Red Sea have led to a sharp decline in Suez Canal traffic, with tonnage operating at 70% below 2023 averages. This has increased shipping costs, rerouted global supply chains, and significantly reduced Egypt’s canal revenues.

Agribusiness Drives Export Growth

Agribusiness accounted for 22% of Brazil’s exports in 2025, with coffee, soy, corn, and meat leading. The sector grew 7.1%, but faces volatility from global commodity prices, sanitary barriers, and sustainability demands, especially in EU and Asian markets.

Record Foreign Direct Investment Inflows

FDI pledges to South Korea surpassed $36 billion in 2025, driven by eased political uncertainty and global investor confidence. Major greenfield investments in AI, semiconductors, and biohealth signal robust international interest, especially from the US and EU, strengthening Korea’s advanced industry ecosystem.

Geopolitical Risk: U.S.-China Rivalry and Canadian Autonomy

Canada’s efforts to balance relations with both the U.S. and China expose businesses to geopolitical risks, including retaliatory tariffs, regulatory shifts, and political pressure. The evolving stance on ‘strategic autonomy’ will shape future trade, investment, and supply chain resilience.

Canada-China Trade Normalization and Tariff Reset

Canada and China have reached a landmark agreement to reduce tariffs on electric vehicles and canola, unlocking nearly $3 billion in Canadian exports. This deal signals a thaw in bilateral relations, but risks U.S. retaliation and supply chain realignment, especially in autos and agriculture.

Conditional Progress Toward EU Integration

Ukraine’s EU accession talks are advancing, with Cyprus prioritizing the process during its EU Council presidency. Progress depends on sustained reforms, anti-corruption measures, and political stability. EU membership remains a strategic goal, shaping regulatory alignment and long-term market access for international business.

Cartel Violence and Organized Crime Risks

Persistent cartel violence, compounded by potential influxes of Venezuelan criminal groups, continues to threaten security, logistics, and investor confidence. Mexico’s border states remain especially vulnerable, requiring robust risk mitigation for supply chains and personnel.

US-China Technology Competition and Export Controls

US policy reversals on AI chip export controls have allowed Nvidia to resume sales to China, raising concerns about US technological leadership and intellectual property risks. This shift could boost China’s AI capabilities, alter global tech supply chains, and intensify the race for technological standards and market access.

Nationwide Protests and Regime Crisis

Iran faces its largest anti-government protests in years, with over 2,400 deaths and 18,000 arrests reported. The unrest, sparked by economic collapse and currency devaluation, now challenges the regime’s legitimacy, creating severe operational risks for international businesses.

Infrastructure Investment and Public Finance

Vietnam is launching a new wave of infrastructure projects, targeting $5.5 billion in foreign loans for 2026 and up to $38 billion by 2030. While these investments aim to support growth and connectivity, persistent disbursement delays, land clearance issues, and public debt management remain key operational risks.

Market Volatility and Recession Fears

Global markets have reacted with volatility to the tariff threats, with safe-haven assets like gold surging and defense stocks rising. Analysts warn the UK could be dragged into recession, with particular risk to key sectors such as manufacturing, whisky, and automotive exports.

Sector-Specific Tariff and Regulatory Changes

The new US-Taiwan framework includes sectoral tariff caps and exemptions, notably for semiconductors, auto parts, and pharmaceuticals. These changes alter cost structures, market access, and compliance requirements for multinational firms operating in and with Taiwan.

Private Sector Empowerment and State Oversight

Recent reforms elevate the private sector as a key economic driver while maintaining strong state guidance in strategic sectors. This dual approach encourages innovation and FDI but may create friction over market access and regulatory clarity for international businesses.

Domestic Consumption and Innovation Push

China is prioritizing domestic demand and innovation-led growth, launching initiatives to boost consumption and foster high-tech sectors. This shift aims to reduce reliance on exports, presenting new opportunities for global firms in consumer goods, services, and advanced manufacturing.

Export Diversification and Market Shifts

Korean authorities are intensifying efforts to diversify exports beyond semiconductors and autos, targeting new markets in Latin America, Africa, and advanced industries. This aims to mitigate risks from overreliance on a few sectors and address declining competitiveness in steel and machinery.

Aggressive US Tariffs And Sanctions Expansion

The US is implementing sweeping tariffs, including proposed 500% rates on countries importing Russian oil, and expanding secondary sanctions. These measures reshape global trade flows, pressure strategic partners, and create uncertainty for supply chains and cross-border investments.

US-Saudi Relations and Security Realignment

Saudi Arabia is recalibrating its security partnerships, balancing US ties with new regional alliances and arms deals with Pakistan. Diverging interests with Washington and assertive regional diplomacy reflect a more independent Saudi foreign policy, affecting the risk calculus for Western businesses.

Gold Reserves Offset Sanctions Impact

Russia’s gold holdings, now 43% of reserves, have surged in value by $216 billion since 2022, offsetting losses from frozen Western assets. This financial buffer supports Russia’s war effort and complicates the effectiveness of sanctions, influencing global reserve management strategies.

Labor Market Shifts in High-Tech Sectors

The semiconductor boom is transforming Korea’s labor market, with rising demand for high-skill roles in design, engineering, and logistics. However, automation and advanced manufacturing may reduce jobs in legacy production lines, requiring workforce reskilling and adaptation for sustained competitiveness.

Escalating Geopolitical Trade Risks

Rising tensions over Taiwan and regional security have triggered punitive Chinese trade actions against Japan. These measures, including anti-dumping probes and export bans, create uncertainty for international investors and complicate cross-border operations and supply chain planning.

Shifting Geopolitical Alliances

Israel’s aggressive regional posture has led to increased isolation and shifting alliances, with Gulf states and Turkey recalibrating relations. This dynamic affects trade corridors, investment flows, and the predictability of Israel’s external business environment.

Supply Chain and Logistics Disruptions

Attacks on Russian infrastructure, longer maritime routes, and increased transshipment operations are causing delays, higher costs, and unpredictability in supply chains. These disruptions affect energy, metals, and agricultural exports, complicating global sourcing strategies.

Evolving Foreign Investment Climate

China’s M&A market is rebounding, with deal value projected to rise 13% in 2026. Regulatory reforms and improved market conditions are attracting strategic and financial investors, though persistent geopolitical and legal risks require careful due diligence for foreign entrants.

Australia-China Trade Tensions Escalate

Rising trade tensions have prompted Australia to consider tariffs and quotas on Chinese steel imports, risking retaliation. While relations stabilized post-2022, ongoing disputes over critical minerals, security, and market access create persistent uncertainty for exporters, investors, and supply chain planners.

US-Korea Tariff and Investment Deal

South Korea’s $350 billion investment pledge in the US, in exchange for reduced tariffs, faces delays due to currency volatility and regulatory hurdles. The deal’s implementation and legal uncertainties around US tariffs significantly affect Korean capital flows and global supply chains.

Disrupted Energy Supply Chains

Sanctions and Ukrainian drone attacks have slashed Russian crude output to 9.3 million barrels per day, the lowest in 18 months. Export bottlenecks and refinery disruptions are creating volatility in global energy supply and logistics.

Chronic Energy Crisis and High Tariffs

Pakistan’s power sector faces a Rs2.95 trillion cost burden in 2026, with industrial tariffs at 12.9 cents/kWh—over double China’s rates. High energy costs and unreliable supply undermine export competitiveness, disrupt supply chains, and deter foreign direct investment in manufacturing and services.

Legal Uncertainty Deters Investment

Despite wartime resilience, investors cite unpredictable legal and regulatory frameworks as a greater deterrent than conflict itself. Prolonged legal proceedings and lack of transparency undermine trust, limiting foreign direct investment and complicating contract enforcement.

Disrupted Grain Export Corridors

Russian attacks on Ukrainian ports have caused a 47% drop in agricultural exports year-on-year, severely impacting global supply chains. The Black Sea corridor remains vital but operates under constant threat, affecting food security and trade flows worldwide.

Resilience Amid US Tariff Pressures

Despite 50% tariffs imposed by the US in 2024, Brazil’s exports reached a record US$348.7 billion in 2025. Diversification toward China, Argentina, and new markets offset US losses, but ongoing negotiations and potential tariff reimpositions remain a risk for exporters.

Return of Global Capital Flows

December 2025 saw renewed global fund inflows into Thai equities, driven by attractive valuations and diversification needs. Political risks remain, but normalized foreign investment levels could bring up to US$20 billion in new capital, boosting market liquidity and growth.

Aggressive US Industrial Policy Shift

The 2025 US National Security Strategy prioritizes economic, technological, and energy dominance through reindustrialization, energy independence, and strategic subsidies. This shift challenges multilateral norms, risks marginalizing allies, and increases regulatory complexity for international investors and supply chain planners.