Mission Grey Daily Brief - July 22, 2024
Summary of the Global Situation for Businesses and Investors:
Global markets are experiencing heightened volatility as the US-China trade war escalates, with both sides imposing tariffs and restrictions. Tensions in the South China Sea are rising, with a US Navy vessel conducting a freedom of navigation operation near Chinese-occupied features. Europe is facing an energy crisis as Russia reduces gas supplies, causing prices to soar and raising concerns about winter shortages. Meanwhile, the UK is in a political crisis as the government collapses, triggering a general election with far-reaching implications for the country's future, including its relationship with the EU and the world. Businesses and investors are navigating a complex and uncertain geopolitical landscape, with significant risks and opportunities emerging.
US-China Trade War Escalates:
The US and China's trade war has entered a new phase, with both countries imposing additional tariffs and restrictions on each other's goods and services. The US has accused China of unfair trade practices and intellectual property theft, while China denies the allegations and retaliates with its own measures. This escalation has disrupted global supply chains and impacted businesses reliant on trade between the world's two largest economies. Companies with exposure to US and Chinese markets should diversify their supply chains and consider alternative markets to minimize the impact of tariffs and potential further restrictions.
Tensions Rise in the South China Sea:
Military tensions are rising in the South China Sea as the US challenges China's expansive maritime claims. The US Navy has conducted freedom of navigation operations near Chinese-occupied features, asserting the right of innocent passage. China has responded with aggressive rhetoric and military posturing, highlighting the risk of miscalculation and conflict. Businesses should prepare for potential disruptions to shipping lanes and energy supplies in the region, especially if tensions escalate further. Resiliency planning and supply chain diversification are key to mitigating these risks.
Europe's Energy Crisis:
Russia's reduction in gas supplies to Europe has triggered an energy crisis, with wholesale gas prices soaring and energy-intensive industries facing significant challenges. This development underscores Europe's vulnerability to energy supply manipulation by Russia, which wields energy as a geopolitical weapon. Businesses should advocate for a coordinated European response to diversify energy sources and suppliers, accelerate the transition to renewable energy, and ensure adequate storage capacity to mitigate the impact of future supply disruptions.
Political Upheaval in the UK:
The UK is in a state of political flux as the government has collapsed, triggering a general election. This election will have far-reaching implications for the country's future, including its relationship with the EU and its global trade relationships. Businesses should prepare for potential policy shifts and market volatility. The outcome will shape the UK's economic trajectory and its attractiveness as an investment destination. A key risk for businesses is the potential for a more protectionist and inward-looking UK, which could impact trade and supply chains.
Recommendations for Businesses and Investors:
Risks:
- US-China Trade War: Diversify supply chains and explore alternative markets to minimize tariff impacts.
- South China Sea Tensions: Prepare for potential shipping lane and energy supply disruptions; review contingency plans.
- Europe's Energy Crisis: Advocate for a coordinated European response to reduce vulnerability to Russian energy manipulation.
- UK Political Upheaval: Anticipate policy shifts and market volatility; a more protectionist UK could impact trade and supply chains.
Opportunities:
- Supply Chain Diversification: Explore opportunities in Southeast Asia, Latin America, and Africa to reduce reliance on US and Chinese markets.
- Renewable Energy Transition: Invest in renewable energy projects and technologies to help Europe (and other regions) reduce their dependence on Russian gas.
- UK Market Volatility: Identify potential M&A opportunities arising from the political upheaval and assess the impact of a changing regulatory environment.
- Resiliency and Planning: Enhance business resiliency by developing contingency plans and stress-testing supply chains to identify vulnerabilities and mitigate risks.
Further Reading:
Themes around the World:
Slow Progress on Energy Transition
Despite ambitious targets, France’s decarbonization rate slowed to 1.6% in 2025, far below the 4.6% annual reduction needed for 2030 goals. Dependence on fossil fuels and policy delays increase regulatory and reputational risks for energy-intensive industries.
Retaliatory Trade Measures Expand
China’s anti-dumping probe into Japanese semiconductor chemicals, alongside bans on cultural and seafood imports, signals a willingness to weaponize trade policy. These actions create uncertainty for Japanese exporters and global supply chains, especially in high-tech sectors.
Infrastructure Investment and Industrial Policy
Continued emphasis on infrastructure upgrades and industrial policy supports domestic growth and supply chain localization. However, protectionist measures and vertical integration strategies may raise costs, limit market access, and require strategic adaptation for foreign investors and partners.
Massive Reconstruction and Recovery Plans
Ukraine is negotiating an $800 billion recovery package with the U.S. and EU, aiming to rebuild infrastructure and attract foreign capital postwar. The scale and governance of these funds will define opportunities and risks for international contractors and investors.
Financial Market Upgrades and Capital Flows
FTSE Russell’s upgrade of Vietnam to Secondary Emerging Market status in 2026 is expected to attract $3–8 billion in foreign investment. Stock market reforms, IPO surges, and improved legal frameworks are enhancing capital market depth, supporting business expansion and investor confidence.
Infrastructure and Industrial Policy Accelerate
Major federal investments in infrastructure and industrial clusters are fostering innovation and supply chain security. Policies favor US-made products, boosting domestic manufacturing but challenging foreign suppliers and investors.
Strategic Shift Toward China and India
With Western markets closed, Russia has deepened trade ties with China and India, who together bought over €430 billion of Russian fossil fuels since 2022. However, recent US sanctions and tariffs are beginning to erode these relationships and volumes.
EU and Denmark Strengthen Arctic Security
Denmark, with EU support, is investing billions in Arctic defense—new naval vessels, surveillance drones, and satellite capacity—to counter US and Russian ambitions. This military buildup affects logistics, shipping routes, and risk calculations for businesses operating in the region.
Critical China-Iran Energy Nexus
China purchases over 80% of Iran’s oil, often via independent refiners and shadow fleets to evade sanctions. Any escalation in US pressure or Iranian instability could disrupt this flow, affecting global energy security and bilateral trade dynamics.
Australia-China Trade Relationship Dynamics
Despite ongoing tensions and new Chinese tariffs on beef, the Australia-China trade relationship remains resilient, with China still Australia's largest export market for minerals, agriculture, and services. However, persistent strategic frictions and unpredictability require businesses to manage risks and diversify export destinations.
Monetary Policy Shifts And Interest Rate Uncertainty
The Federal Reserve faces leadership changes and ongoing debates over inflation and interest rates. Uncertainty in monetary policy affects capital costs, currency volatility, and investment strategies for international businesses operating in or exposed to the US market.
Currency and Economic Sensitivity to China
The Australian dollar and broader economic outlook remain highly sensitive to Chinese economic performance, commodity prices, and trade policy. Fluctuations in China’s demand for Australian exports directly affect currency valuation, trade balance, and overall business confidence.
AI Disruption and Labor Market Shifts
Rapid adoption of artificial intelligence is transforming US business operations, driving productivity but also causing job displacement and sluggish hiring. Firms are reassessing workforce strategies, with significant implications for employment, wage growth, and the structure of supply chains.
UK Trade Growth Lagging Global Average
UK trade growth is forecast at 2.3% annually, below the global average of 2.5%, due to slow expansion with the US and China. Deepening ties with the EU and other rule-based economies is seen as crucial for exporters and supply chain resilience.
Labor Market Dynamics and Immigration Policy
The US labor market shows resilience but faces cooling trends, wage pressures, and uneven household financial health. Shifts in immigration policy and demographic changes affect workforce availability, cost structures, and long-term business planning for multinational firms.
Accelerating Trade Surplus and Export Growth
Vietnam’s trade surplus exceeded $20 billion in 2025, with exports reaching $475 billion and targeting 8% growth in 2026. Foreign-invested sectors drive this performance, while the US and China remain key partners. Trade policy reforms and FTAs underpin expansion, but rising global barriers and origin fraud risks require vigilance.
Supply Chain Vulnerabilities and Adaptation
Global supply chain disruptions, especially maritime rerouting and energy shortages, have exposed Egypt’s vulnerabilities but also its strategic importance. Companies are reconfiguring logistics and sourcing, with Egypt emerging as a key gateway in the evolving global supply chain landscape.
Resilience Initiatives and Defense Modernization
Taiwan is accelerating defense modernization, including asymmetric warfare capabilities and joint production of critical munitions with the US. These resilience measures aim to mitigate supply shocks and operational risks, but also signal a more entrenched and costly security environment for global business operations.
Weak Economic Growth and Fiscal Strain
Thailand’s GDP growth is forecast at 1.5–2.0% for 2026, its weakest in three decades. High public and household debt, slow reforms, and political uncertainty threaten credit ratings, investment sentiment, and the government’s ability to stimulate recovery.
China-Japan Trade Tensions Escalate
China’s ban on dual-use exports and rare earths to Japan, triggered by Taiwan-related remarks, threatens key Japanese industries, especially automotive and electronics. The move signals intensifying geopolitical risk and potential supply chain disruptions for international businesses.
UK–EU Trade Realignment Debate
The UK is negotiating closer alignment with the EU, including regulatory and customs changes. This ongoing debate creates uncertainty for exporters, investors, and supply chains, with potential for both reduced friction and political backlash impacting business planning.
Escalating US-China Trade Rivalry
The US-China economic relationship remains the most consequential global business risk, with ongoing tariffs, selective decoupling, and technology export controls. These measures disrupt supply chains, accelerate China’s tech self-sufficiency, and force multinationals to reassess market and sourcing strategies.
Aerospace Sector’s Trade Surplus and Tax Risks
The French aerospace industry, generating €77.7 billion in 2024 and a €30 billion trade surplus, is vital for exports and employment. Industry leaders warn that higher taxation or regulatory burdens could undermine competitiveness, with ripple effects on supply chains and France’s trade position.
Political Instability And Coalition Risks
South Africa faces heightened political uncertainty as local elections approach, with coalition governments struggling for stability. Persistent factionalism and service delivery failures threaten policy continuity, impacting investor confidence and business operations across key urban centers.
Manufacturing Incentives and Domestic Value Addition
India’s 2026 budget and ongoing reforms focus on boosting domestic manufacturing, scaling up PLI schemes, and increasing value addition in sectors like semiconductors, EVs, and renewables. These measures aim to position India as a global manufacturing hub and reduce vulnerability to external shocks.
Resilient Trade Surplus and Diversification
Despite US tariffs and weakening exports to the US, China posted a record $1.19 trillion trade surplus in 2025, driven by surging exports to Africa, Southeast Asia, and Latin America. This diversification mitigates Western pressure but raises new tensions over overcapacity and market access.
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.
Currency Volatility and Baht Strength
The Thai baht appreciated over 8% in 2025, harming export competitiveness and squeezing margins for manufacturers. Persistent currency volatility, driven by capital flows and digital assets, complicates pricing, hedging, and investment planning for international businesses operating in Thailand.
Trade Diversification Amid US Tariffs
Despite increased US tariffs, South Korea has diversified its export markets, expanding shipments to ASEAN, the EU, and India. This strategy reduces vulnerability to US policy shifts and enhances resilience in the face of rising global protectionism, impacting trade flows and investment decisions.
SME Vulnerability and Regulatory Shifts
SMEs, contributing 35% of GDP, face challenges from new trade regulations, sustainability rules, and limited access to technology. Support for digitalization, green finance, and regional integration is essential to strengthen SME resilience and global supply chain participation.
Business Rates And Duty Hikes
Rising business rates and new duties on fuel, alcohol, air travel, and vaping in 2026 will increase operational costs, especially for retail and hospitality. These changes threaten high street viability and may trigger closures, job losses, and supply chain adjustments.
China-Australia Trade Tensions Escalate
China’s imposition of a 55% tariff on Australian beef exports exceeding a 205,000-tonne quota threatens up to AU$1 billion in trade, highlighting persistent vulnerability in Australia’s export-dependent sectors and the need for diversified market strategies.
Inflation Slowdown and Cost Pressures
Inflation in France slowed to 0.8% in December 2025, mainly due to falling energy prices. However, persistent price increases in services and food, combined with budget uncertainty, create mixed pressures for businesses and consumers, affecting investment and consumption.
Trade Policy Uncertainty and EU-Mercosur Tensions
Strong domestic opposition to the EU-Mercosur trade deal, especially from French farmers and parliament, has led to protests and political crises. This uncertainty affects market access, supply chains, and investment strategies for global agribusiness and exporters.
Policy Focus on High-Tech and Green Industries
China’s government is prioritizing policy support and stimulus for high-tech, green development, and services to sustain growth. This includes targeted measures for AI, advanced manufacturing, and clean energy, shaping the competitive landscape for both domestic and foreign businesses in these sectors.
Energy Independence and Transition Initiatives
Indonesia is accelerating its energy transition with new solar projects, waste-to-energy initiatives, and refinery upgrades. The government targets energy independence within five years, which will reduce import reliance and create opportunities for renewable energy and infrastructure investment.