Mission Grey Daily Brief - July 26, 2024
Summary of the Global Situation for Businesses and Investors:
Global markets are experiencing heightened volatility as the US-China trade war escalates, with new tariffs being imposed and technological restrictions tightening. Tensions in the Middle East continue to rise, impacting oil prices and energy markets. The UK's political crisis deepens as the new Prime Minister takes office, facing a challenging economic outlook and a potential no-deal Brexit. Meanwhile, Russia's assertive foreign policy and increasing influence in Africa are causing concern for Western powers. Businesses and investors are navigating a complex and uncertain geopolitical landscape, requiring careful strategic planning to mitigate risks and capitalize on emerging opportunities.
US-China Trade War: Technological Cold War
The US-China trade war has entered a new phase, with the US imposing additional tariffs on Chinese goods and restricting technology transfers. China has retaliated with tariffs of its own and threatened to restrict rare earth exports to the US. This escalation marks a shift towards a broader technological cold war, with both sides recognizing the strategic importance of technology and seeking to protect their national interests. Businesses dependent on Chinese manufacturing or US technology face significant disruption, and those with supply chains spanning both countries are particularly vulnerable.
Rising Tensions in the Middle East: Impact on Energy Markets
Tensions in the Middle East, particularly between Iran and the US and its allies, continue to escalate. The Strait of Hormuz, a critical chokepoint for global oil supplies, has become a flashpoint, with several incidents involving oil tankers and military assets. These tensions are impacting oil prices and energy markets, creating a volatile environment for businesses and investors. Companies with exposure to the region, particularly in the energy and shipping sectors, face heightened political and operational risks, and should prepare for potential disruptions to oil supplies and price volatility.
Political Crisis in the UK: No-Deal Brexit Looming
The UK is facing a political and economic crisis as the new Prime Minister takes office, inheriting a deeply divided country and a challenging Brexit negotiation process. With the deadline approaching, the risk of a no-deal Brexit is increasing, which could have significant implications for businesses and investors. A no-deal scenario would result in immediate tariffs, regulatory changes, and border disruptions, impacting supply chains and the flow of goods and services. Businesses should prepare for potential customs delays, regulatory changes, and currency volatility, and consider diversifying their supply chains and reviewing contracts to mitigate risks.
Russia's Growing Influence in Africa: A Concern for the West
Russia's assertive foreign policy and increasing influence in Africa are causing concern among Western powers. Russia has been expanding its economic, military, and diplomatic presence across the continent, filling vacuums left by retreating Western influence. This expansion provides Russia with strategic footholds and influence in regions of growing global importance. Western businesses and investors, particularly those in the natural resources sector, face increased competition and potential disruption to their operations. Additionally, Russia's growing influence could lead to a shift in geopolitical alliances, impacting the business environment and long-term investment strategies.
Recommendations for Businesses and Investors:
Risks:
- US-China Trade War: The technological cold war between the US and China could result in supply chain disruptions, increased costs, and restricted access to critical technologies for businesses.
- Middle East Tensions: Rising tensions in the Middle East pose risks of oil supply disruptions and price volatility, impacting energy markets and businesses dependent on stable energy supplies.
- No-Deal Brexit: A no-deal Brexit could lead to immediate tariffs, regulatory changes, and border disruptions, affecting supply chains and the flow of goods and services between the UK and the EU.
- Russia's African Influence: Russia's growing influence in Africa may lead to increased competition and disruption for Western businesses, particularly in the natural resources sector, and potential geopolitical shifts.
Opportunities:
- Diversification: Businesses can diversify their supply chains and sourcing strategies to mitigate risks associated with US-China tensions and Brexit.
- Alternative Markets: Explore alternative markets and investment destinations to reduce exposure to volatile regions, such as the Middle East and Russia.
- Risk Management: Develop robust risk management strategies, including political risk insurance and contingency plans, to prepare for potential disruptions.
- Local Partnerships: Foster local partnerships and collaborations to navigate regulatory changes and gain insights into evolving market dynamics.
- Technology Adaptation: Stay abreast of technological advancements and adaptations to maintain competitiveness and mitigate the impact of technology restrictions.
Further Reading:
Themes around the World:
Immigration Policy and Labor Market Volatility
Australia's high immigration rate—31.5% foreign-born—fuels economic growth but also political debate amid cost-of-living and housing crises. Rising populist rhetoric and calls for policy reform create uncertainty for workforce planning, talent mobility, and social stability, affecting business operations and investment climate.
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.
Persistent Energy Infrastructure Attacks
Russian strikes on Ukraine’s energy grid have caused widespread blackouts and threaten business continuity. Nearly 60% of Kyiv was recently without power, with similar conditions nationwide. Energy insecurity remains a top risk, impacting manufacturing, logistics, and foreign investment confidence.
Demographic Drag and Labor Market Shifts
China’s population declined by 3.39 million in 2025, with a record-low birth rate and 23% of citizens over 60. This demographic shift pressures the labor force, social security, and long-term growth, forcing businesses to adapt to a rapidly aging consumer base.
Strategic Reset With China
Canada and China have entered a new era of economic partnership, marked by reduced tariffs on electric vehicles and canola, and expanded cooperation in energy, finance, and agriculture. This recalibration aims to diversify Canada’s trade and investment flows, reducing overdependence on the US market.
Supply Chain Resilience and Market Access Volatility
Recent tariff disputes and retaliatory measures have highlighted vulnerabilities in Canada’s supply chains, especially in agri-food and automotive sectors. Businesses must adapt to ongoing volatility in market access, regulatory environments, and bilateral relations with both the U.S. and China.
Currency Volatility and Inflation Pressures
The Egyptian pound has experienced depreciation against the US dollar, though foreign reserves reached record highs. Inflation, while declining to 12.3%, remains a concern. Monetary easing is expected in 2026, with interest rates projected to fall, impacting investment and import costs.
German Investment Shift: US to China
German direct investment in the US fell by 45% in 2025, while investment in China surged to over €7 billion. Uncertainty from US trade policy and pressure from Chinese authorities are prompting German firms to localize production and supply chains in China, affecting global business operations.
Canada Pursues Strategic Trade Diversification
Canada is rapidly diversifying trade and investment partnerships, signing 12 new deals across four continents, including with China, the EU, and Qatar. This shift reduces reliance on the US market, but raises exposure to new geopolitical risks and regulatory complexities for international businesses.
US Tariffs Disrupt German Exports
Recent US tariffs have led to a 9.4% drop in German exports to the US, particularly impacting the automotive and machinery sectors. The resulting volatility and unpredictability in transatlantic trade relations are forcing German businesses to seek alternative markets and reconsider investment strategies.
Geopolitical Realignment and US Tensions
South Africa’s closer military and economic ties with China, Russia, and Iran, including recent BRICS naval exercises, have strained US relations. This risks new US tariffs—potentially up to 55%—on key exports, threatening supply chains, trade access, and investment certainty.
Declining Indian Demand for Russian Oil
Indian refiners are reducing Russian oil imports due to sanctions, compliance complexities, and a shift toward Middle Eastern suppliers. This trend impacts Russia’s export revenues and alters global crude trade patterns, while increasing supply chain and regulatory risks for energy sector stakeholders.
Divergent Energy Transition Strategies
The US is prioritizing fossil fuel expansion and rolling back clean energy incentives, while China and the EU accelerate renewables. This divergence risks ceding global clean-tech leadership to China, impacting long-term competitiveness and investment flows.
Energy Sector and Industrial Policy Dynamics
Petrobras-led initiatives are revitalizing Brazil’s naval and energy industries, while the government balances oil exploration with climate commitments. The sector’s performance, regulatory changes, and global commodity trends will influence Brazil’s industrial output, export capacity, and investment climate.
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.
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.
Labor Reform and Wage Increases
Mexico’s 2026 labor reforms include a 13% minimum wage hike, stricter workplace inspections, and a planned reduction of the workweek to 40 hours. These changes improve worker protections but increase compliance costs and operational complexity, especially for export-oriented manufacturers.
Critical Minerals and Geopolitical Competition
Indonesia’s dominance in nickel and tin places it at the center of U.S.-China competition for critical minerals. While new trade frameworks with the U.S. offer market access, there are risks of resource dependency and the need for robust industrial policy to ensure domestic value addition and supply chain security.
Semiconductor Tariffs and Industrial Pressure
The US is leveraging tariffs to coerce Korean chipmakers into expanding US-based manufacturing. Taiwan secured exemptions with $250 billion investment, while Korea faces pressure for similar commitments. These developments threaten Korea’s semiconductor sector, a cornerstone of its export economy.
Digital Economy and AI Transformation
India is rapidly scaling its digital economy, deploying over 38,000 GPUs and attracting $67.5 billion in AI and cloud investments from global leaders. AI adoption is projected to generate $1.7 trillion in value by 2035, transforming manufacturing, services, and supply chains.
Regional Geopolitical Ambitions and Risks
Saudi Arabia is asserting a more independent regional role, recalibrating relations with Iran, Turkey, and the UAE, and engaging in Yemen. While this enhances its influence, ongoing regional instability and shifting alliances present risks to supply chains, investment security, and long-term business planning.
Full Liberalization of Capital Markets
Saudi Arabia’s abolition of the Qualified Foreign Investor regime and opening of its equity market to all foreign investors from February 2026 marks a historic liberalization. This reform is expected to unlock $10 billion in inflows, deepen liquidity, and enhance Saudi Arabia’s integration into global indices, but regulatory clarity and governance standards remain critical for long-term investor confidence.
Tariff Reductions and Trade Diversification
Taiwan secured a reduction of US tariffs to 15%, matching Japan and South Korea, in exchange for massive investments. This levels the playing field for Taiwanese exports, enhances competitiveness, and encourages diversification of trade partners amid shifting global alliances.
Political Risk and 2026 Election Uncertainty
Brazil’s presidential election in October 2026 is a major source of uncertainty for investors. Market sentiment is sensitive to potential shifts in economic policy, fiscal reforms, and institutional stability, with volatility expected in currency and asset prices as the election approaches.
Foreign Investment Flows Amid Volatility
Despite rising market volatility and a slight increase in sovereign risk, Indonesia saw Rp1.44 trillion in foreign capital inflows in early January 2026, mainly into equities and securities. Persistent inflows signal continued international investor interest, though bond and currency risks remain.
Automotive Sector: Market Access and Security Risks
The Canada–China EV deal allows up to 49,000 Chinese electric vehicles annually at reduced tariffs, supporting Canadian net-zero goals but provoking U.S. concerns over North American content rules and cybersecurity. This move may attract Chinese investment in Canadian auto manufacturing, but risks U.S. countermeasures.
Investment Climate Amid Geopolitical Tensions
Geopolitical instability, including US-EU disputes and global conflicts, has led to increased market volatility and cautious investment. French markets have seen declines, and sectors like tech and industry face job cuts, prompting investors to adopt more defensive and selective strategies.
Political Stability Amid Global Tensions
Brazil’s diversified international relations and diplomatic tradition help mitigate risks from external interference, notably from the US. Political stability and global leadership ambitions support a favorable environment for long-term investment and trade strategies.
EU-Mercosur Trade Deal Backlash
The imminent EU-Mercosur trade agreement faces strong opposition from French farmers and political factions, who fear market flooding by cheaper imports and threats to food security. Protests and government support measures highlight deep divisions, affecting agricultural supply chains and broader trade policy.
China Remains Pivotal Trade Partner
Despite global tensions, China continues as South Korea’s largest trading partner, with bilateral trade reaching nearly $299 billion in 2025. Ongoing FTA negotiations on services and investment signal deepening economic integration, but also expose Korean firms to geopolitical risks and regulatory shifts.
Fiscal Policy and Debt Volatility
Japan's snap election and expansionary fiscal policies have triggered sharp volatility in government bonds and the yen, raising global market risks. Debt servicing costs could rise to 20-25% of expenditure, impacting fiscal sustainability and investor confidence.
Chinese Imports Challenge Local Industry
A surge in Chinese vehicle imports has widened South Africa’s trade deficit with China, threatening the competitiveness of the domestic automotive sector—a major employer and exporter. This trend may impact local manufacturing, supply chains, and trade sustainability.
Energy Crisis and Industrial Competitiveness
Pakistan’s energy sector faces high tariffs, under-utilized capacity, and inefficient contracts, which act as a tax on industry and exports. Efforts to privatize distribution and reform generation contracts are ongoing, but structural inefficiencies remain a major constraint on manufacturing and supply chains.
Semiconductor Supply Chain Realignment
Taiwan’s $250 billion investment in US chip manufacturing and supply chain relocation aims to reduce reliance on Asian supply chains, boost US manufacturing, and address security vulnerabilities. This shift will significantly impact global supply chains and technology sector competitiveness.
Supply Chain Diversification and Resilience
Vietnam remains a key beneficiary of global supply chain shifts, especially as firms diversify away from China. Its strategic location, robust manufacturing base, and integration into RCEP and CPTPP enhance resilience, but exposure to global shocks and regulatory risks persists.
Renewable Energy Transition and Grid Challenges
Australia’s accelerated shift toward renewables—now supplying over half of grid demand—has driven down wholesale electricity prices but exposed reliability risks. Delays in infrastructure, policy uncertainty, and the need for coal backup complicate the transition, affecting energy-intensive industries and investment strategies.