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Mission Grey Daily Brief - July 25, 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. This has led to a slowdown in economic growth, particularly in Asia, and businesses are feeling the impact. Europe is facing its own challenges, with the UK's ongoing Brexit negotiations creating uncertainty. Tensions in the Middle East remain high, affecting oil prices and global energy markets. Meanwhile, Russia's aggressive posture towards Ukraine has raised concerns among investors, with potential implications for European security and energy supplies. Businesses and investors are navigating a complex and dynamic landscape, requiring careful strategic planning to mitigate risks and capitalize on emerging opportunities.

US-China Trade War:

The ongoing trade war between the US and China continues to dominate the global economic landscape. Both countries have imposed tariffs on billions of dollars' worth of each other's goods, disrupting supply chains and impacting businesses worldwide. While the US seeks to address its trade deficit and protect intellectual property rights, China is pushing back to maintain its economic growth and technological advancement. This conflict has already led to a slowdown in global trade and a decline in business investment, with no clear resolution in sight. Businesses with exposure to either market are facing tough decisions, and those with supply chains spanning both countries are particularly vulnerable.

Brexit Uncertainty:

The United Kingdom's impending exit from the European Union remains a key source of uncertainty for businesses, especially as the new deadline of October 31st approaches. The nature of the future relationship between the UK and the EU is still unclear, with potential implications for trade, regulation, and labor movement. A no-deal Brexit could result in significant disruption to supply chains and increased costs for businesses trading with or operating in the UK. While a last-minute deal cannot be ruled out, businesses are advised to prepare for potential challenges and consider contingency plans to mitigate risks.

Middle East Tensions:

Rising tensions in the Middle East, particularly between Iran and the US and its allies, are affecting global oil supplies and prices. The Strait of Hormuz, a vital chokepoint for oil exports, has become a flashpoint, with several incidents involving oil tankers and drone shoot-downs. This has contributed to volatility in energy markets and raised concerns about the security of global oil supplies. Businesses, especially in the energy and transportation sectors, should monitor the situation closely and prepare for potential disruptions. The impact could extend beyond the region, affecting global economic growth and investment sentiment.

Russia-Ukraine Conflict:

Russia's recent aggressive posture towards Ukraine has raised concerns among investors and businesses, particularly in Europe. Russia has been accused of providing military support to separatists in Eastern Ukraine and annexing Crimea, leading to international sanctions. The current tensions center around Russia's Nord Stream 2 pipeline project, which could increase Europe's energy dependence on Russia and potentially provide a tool for political leverage. Businesses should be aware of the potential for further sanctions on Russia, which could impact their operations and supply chains. Additionally, any escalation of tensions or conflict could have significant economic and security implications for the region.

Recommendations for Businesses and Investors:

Risks:

  • Supply Chain Disruptions: The US-China trade war and Brexit uncertainty pose significant risks to global supply chains, potentially increasing costs and causing delays.
  • Market Volatility: Volatile energy prices and global economic slowdown could impact revenue streams and investment plans.
  • Geopolitical Tensions: Rising tensions in the Middle East and between Russia and Ukraine create a volatile environment, affecting business operations and investor sentiment.
  • Regulatory Changes: Brexit and US-China trade tensions may lead to sudden regulatory changes, requiring businesses to adapt quickly.

Opportunities:

  • Diversification: Businesses can explore opportunities in other markets to diversify their supply chains and customer bases, reducing reliance on a single region.
  • Alternative Energy Sources: The focus on energy security and sustainability provides opportunities for investment in renewable energy sources and related infrastructure.
  • Regional Trade Agreements: With global trade tensions, regional trade blocs and agreements offer potential benefits for businesses operating within those regions.
  • Digital Transformation: Investing in digital technologies and supply chain management solutions can help businesses mitigate risks and improve efficiency.

Further Reading:

Themes around the World:

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Supply Chain Diversification and Resilience

Brazilian and regional supply chains are undergoing realignment due to geopolitical tensions, climate events, and infrastructure investments. Companies are investing in logistics, digital tools, and nearshoring to mitigate disruption risks and enhance operational reliability across the Americas.

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Geopolitical Alliances and Trade Policy Coordination

US trade and investment policies are increasingly intertwined with geopolitical alliances, as seen in evolving US-South Korea agreements and pressure on Indo-Pacific partners to align with US strategic interests. This affects market access, regulatory frameworks, and supply chain security for international businesses.

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UK Government Pursues Diplomatic Resolution

Prime Minister Starmer has ruled out immediate tariff retaliation, emphasizing dialogue and alliance unity. The UK seeks to avoid escalation, but faces political pressure to defend national interests, balancing economic stability with transatlantic and European alliances.

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ESG and Sustainability Compliance Rising

ESG-linked investment products, green finance, and stricter environmental standards are gaining traction, driven by both government policy and investor demand. Companies face increasing pressure to align with global ESG norms, impacting access to capital and international partnerships.

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Regulatory and Policy Shifts for Business

Japan is implementing regulatory reforms to attract foreign investment and enhance business resilience. Policy changes in economic security, industrial strategy, and trade are designed to support supply chain diversification, technological innovation, and long-term competitiveness for international firms.

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Labor Reforms and Compliance Pressure

Recent labor reforms include a 13% minimum wage hike, stricter workplace inspections, and recognition of app-based couriers as employees. Upcoming changes, such as a proposed 40-hour workweek and enhanced whistleblowing, increase compliance costs and operational complexity for international employers.

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Tariff Policy Drives Supply Chain Shifts

The US maintains an aggressive tariff regime, especially against China, driving sourcing shifts to Southeast Asia and legal challenges to tariff authority. Businesses must adapt to a new baseline of higher costs, regulatory complexity, and supply chain reconfiguration.

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Infrastructure Investment and Bottlenecks

Vietnam plans to secure $5.5 billion in foreign loans for 2026 and up to $38 billion by 2030 to fund major infrastructure projects. Persistent disbursement delays due to land clearance, project approval, and administrative hurdles could impact project timelines and investor confidence.

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Investment Uncertainty and Supply Chain Realignment

Rising trade tensions and unpredictable US policy have slowed German investment flows into the US and prompted companies to reconsider supply chain locations. Prolonged uncertainty could accelerate regionalization, delay capital projects, and weaken Germany’s manufacturing base, with long-term implications for competitiveness and global market access.

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Infrastructure Investment and Digitalization

Record infrastructure investment pledges—reaching 1.88 trillion baht in 2025—are catalyzing growth in transport, energy, and digital connectivity. Projects like the EEC and smart logistics hubs are enhancing Thailand’s role in regional supply chains and supporting high-tech industry expansion.

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Belt and Road Initiative’s Strategic Pivot

In 2025, China signed a record $213.5 billion in new Belt and Road deals, focusing on energy, mining, and infrastructure, especially in Africa and Central Asia. The initiative now emphasizes both renewables and fossil fuels, raising both opportunity and ESG risk for global investors.

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Digital Blackouts and Technology Restrictions

Iran’s government has imposed repeated internet blackouts and tightened technology controls to suppress dissent, disrupting business operations, cross-border communications, and digital commerce. These restrictions have also driven a black market for smuggled technology and hindered foreign investment in Iran’s digital sector.

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Privatization and Public-Private Partnerships

Saudi Arabia’s National Privatization Strategy targets 18 sectors and over 220 contracts by 2030, expanding opportunities for foreign firms in infrastructure, utilities, and services. Increased private sector participation will reshape supply chains and investment strategies.

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Global Supply Chain Diversification Trend

Amid US-led tariff wars, UK businesses are accelerating efforts to diversify suppliers and markets, particularly towards India and Asia-Pacific. This shift aims to mitigate risks from geopolitical shocks and ensure resilience in critical sectors such as automotive and technology.

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Semiconductor Supply Chain Dominance

Taiwan remains the global leader in advanced semiconductor manufacturing, with TSMC and related firms central to AI, electronics, and automotive supply chains. Recent US-Taiwan deals reinforce this role, but also expose the sector to geopolitical pressures and relocation risks.

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Western Sanctions Reshape Trade Flows

Sweeping US and EU sanctions have forced Russia to redirect over 80% of its trade and energy exports to 'friendly' nations, notably China and India. This realignment has disrupted global supply chains, increased market volatility, and complicated compliance for international businesses.

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Aggressive US Industrial and Tariff Policy

Sweeping tariffs, export controls, and industrial subsidies under the Trump administration aim to boost domestic manufacturing and reduce trade deficits. These measures raise input costs, provoke foreign retaliation, and complicate cross-border investment and supply chain management for global firms.

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Currency Depreciation and Financial Stability

The Korean won’s sharp depreciation—over 2% in early 2026—raises concerns for outbound investments and financial stability. Authorities are balancing market liberalization with intervention, as large capital outflows could exacerbate volatility, impacting international investors and trade partners.

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Renewable Energy and Industrial Policy Shift

Taiwan is increasing investment in renewable energy and supporting industrial diversification to reduce dependence on traditional manufacturing and imported fuels. This transition supports sustainability goals but requires substantial capital and may disrupt established supply chains in the medium term.

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‘Made in Europe’ Strategy Debated

France champions the EU’s ‘Made in Europe’ industrial strategy to counter Chinese imports and strengthen supply chains. Internal EU divisions over protectionism versus openness create uncertainty for multinational firms, affecting procurement, investment, and market access decisions.

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Rising Franco-German Defense and Policy Tensions

France is increasingly uneasy about Germany’s €500 billion defense buildup and growing influence in European security and industrial policy. Disputes over joint defense projects and diverging strategic priorities could affect cross-border investments and the future of European industrial cooperation.

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Energy Security and Nuclear Revival

Japan has restarted the Kashiwazaki-Kariwa nuclear plant, boosting energy self-sufficiency and emissions targets. This move, amid regional security tensions, signals a shift toward stable domestic energy sources and reduced reliance on fossil fuel imports, affecting industrial competitiveness.

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Climate Transition and Fossil Fuel Dependence

Despite climate commitments, South Africa is expanding domestic gas and coal projects, risking stranded assets and exposure to carbon border taxes. This tension between energy security and sustainability creates regulatory uncertainty and reputational risks for international partners and investors.

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Energy Transition and Renewables Surge

Saudi Arabia is rapidly expanding renewable energy capacity, with solar and wind projected to deliver nearly 20% of electricity by 2029. The Kingdom’s energy transition, supported by facilities like CATL’s Riyadh hub, is critical for decarbonization, industrial competitiveness, and compliance with global standards such as the EU’s Carbon Border Adjustment Mechanism.

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US Military and Financial Support Remains Critical

The US continues to provide substantial military and financial aid to Israel, underpinning its security and economic resilience. This support shapes Israel’s defense posture, investment climate, and risk environment, but also ties business operations to evolving US-Israel policy dynamics and potential geopolitical backlash.

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Energy Infrastructure Under Relentless Attack

Russian strikes have caused catastrophic damage to Ukraine’s energy grid, triggering rolling blackouts, heating and water outages, and mass evacuations in major cities. The resulting instability severely disrupts industrial operations, logistics, and daily business continuity, heightening operational risks for all sectors.

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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.

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Resilient Political and Regulatory Environment

Vietnam’s political stability, reinforced by recent leadership consolidation, underpins its appeal as a business destination. Ongoing regulatory reforms focus on transparency, anti-corruption, and legal discipline, fostering greater predictability and confidence for international investors.

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Critical Minerals Supply Chain Resilience

Mexico is central to trilateral efforts with the US, EU, and Japan to secure critical mineral supply chains. Coordinated policies, investment, and new trade frameworks aim to mitigate vulnerabilities, diversify sources, and support strategic industries such as EVs and electronics.

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Critical Minerals Strategy Accelerates

Canada is rapidly advancing its critical minerals sector, with new provincial and federal strategies, international partnerships (notably with India), and investment in recycling. This positions Canada as a key supplier for global EV, battery, and tech supply chains, reducing reliance on China.

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Energy Transition and LNG Import Surge

Egypt is rapidly expanding renewable energy projects, signing $1.8 billion in deals with Norway and China. However, domestic gas production decline and regional supply disruptions have turned Egypt into a major LNG importer, raising costs and supply chain complexity.

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Macroeconomic Stabilization and Growth Momentum

Pakistan has shifted from crisis management to strategic repositioning, achieving GDP growth above 3.7%, a fiscal surplus, and declining inflation. These improvements have boosted investor confidence, but sustained policy continuity and private sector participation are critical for long-term business stability and growth.

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Afreximbank and Regional Integration

South Africa’s accession to Afreximbank unlocks up to $11 billion in funding for infrastructure, energy, and industrialization. This supports value-added manufacturing, Black business participation, and deeper integration into the African Continental Free Trade Area, enhancing regional trade prospects.

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Real Estate Liberalization and Mega-Projects

Recent legal reforms allow foreign ownership of land and property, sparking global investor interest. Mega-projects like NEOM and the Red Sea Project, combined with digitalization and AI-driven innovation, are transforming the real estate sector and urban infrastructure landscape.

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Strategic Energy Dependency on US LNG

Germany’s rapid shift from Russian to US LNG has created a new energy dependency, with 96% of LNG imports now sourced from the US. This exposes German industry to US political leverage, price volatility, and long-term risks to energy sovereignty and cost competitiveness.

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Climate Policy and Infrastructure Investment Uncertainty

US climate and infrastructure policy shifts, including reversals of clean energy initiatives, create uncertainty for global investors. Geopolitical competition over infrastructure standards and data systems is intensifying, impacting long-term planning for sustainable business operations.