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Mission Grey Daily Brief - July 28, 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 cold war emerging. Tensions in the Middle East continue to rise, impacting oil prices and global energy markets. The UK's political crisis deepens as the new Prime Minister takes office, facing a challenging Brexit process. Meanwhile, India's decision to revoke Kashmir's special status sparks regional tensions with Pakistan. Businesses and investors are advised to closely monitor these developments and assess their potential impact on their operations and portfolios. Today's brief explores these key themes, offering critical insights for strategic decision-making.

US-China Trade War: Technological Cold War

The US-China trade war has entered a new phase, with both sides imposing additional tariffs and tech restrictions. The US has announced a 10% tariff on the remaining $300 billion worth of Chinese imports, set to take effect on September 1. In response, China has halted agricultural imports from the US and allowed its currency to weaken beyond the symbolic level of 7 yuan per dollar. Additionally, the US has placed Huawei on an export blacklist, impacting its supply chain, and China has hinted at restricting rare earth exports, critical for technology production. This escalation indicates a prolonged conflict with significant implications for global supply chains and markets.

Rising Tensions in the Middle East: Impact on Energy Markets

Tensions in the Middle East continue to escalate, with the US and its allies accusing Iran of seizing oil tankers and violating nuclear agreements. The Strait of Hormuz, a critical chokepoint for global oil supplies, has become a flashpoint, with several incidents involving oil tankers in recent months. In response, the US has increased its military presence in the region and is forming a maritime coalition to secure the strait, which Iran has condemned as a provocation. This heightened geopolitical risk has already impacted oil prices, with Brent crude rising above $63 per barrel, and energy markets remain on edge as the situation develops.

Brexit Uncertainty: UK Political Crisis

The United Kingdom is facing a political crisis as Boris Johnson takes office, inheriting a challenging Brexit process. Johnson has vowed to take the UK out of the EU by the October 31 deadline, with or without a deal, raising concerns about a potential no-deal Brexit. This has caused turmoil within his Conservative Party, with several high-profile resignations and defections. The opposition parties are seeking to block a no-deal Brexit through a vote of no confidence and potential legislative action. The ongoing uncertainty surrounding Brexit is causing significant economic fallout, with businesses and investors facing challenges in planning and decision-making.

Kashmir Conflict: Regional Tensions and Geopolitical Risks

India's decision to revoke Article 370 of its constitution, which granted special status to the disputed region of Kashmir, has sparked tensions with Pakistan. Pakistan has strongly condemned the move, downgrading diplomatic ties and suspending trade and transport links. India has deployed additional troops to the region and imposed a communications blackout and curfew, leading to concerns about human rights violations. This escalation has the potential to impact regional stability, with both countries conducting air strikes and ground skirmishes along the border in recent months.

Recommendations for Businesses and Investors:

Risks:

  • US-China Trade War: Prolonged conflict could lead to supply chain disruptions and higher costs for businesses, especially in the technology sector.
  • Middle East Tensions: Rising geopolitical risks in the region could impact oil supplies and prices, affecting energy markets and businesses reliant on stable energy costs.
  • Brexit Uncertainty: A no-deal Brexit could cause significant disruptions to trade, regulations, and labor markets, impacting businesses with UK operations or supply chains.
  • Kashmir Conflict: Regional tensions and potential military escalation pose risks to businesses with operations or supply chains in India and Pakistan.

Opportunities:

  • Diversification: Businesses can explore opportunities to diversify their supply chains and markets to reduce reliance on regions impacted by trade wars and geopolitical tensions.
  • Alternative Energy: The focus on energy security and stable prices could drive investment in alternative and renewable energy sources, offering opportunities for businesses in these sectors.
  • Post-Brexit Trade: A potential UK-US trade deal post-Brexit could open new market opportunities for businesses, especially in the financial and professional services sectors.
  • Regional Growth: India's decision on Kashmir is aimed at boosting economic development in the region, offering potential long-term opportunities for investors.

Mission Grey advisors are available to provide further insights and tailored recommendations to help businesses and investors navigate these complex global challenges.


Further Reading:

Themes around the World:

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Allied Coordination on Resource Security

Australia is collaborating with the US, UK, EU, and regional partners to establish price floors and secure supply chains for critical minerals. This coordinated approach aims to counter China’s market dominance, catalyze investment, and ensure stable access for clean energy and defense industries.

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War-risk insurance and finance scaling

Multilaterals are expanding risk-sharing and investment guarantees (e.g., EBRD record financing and MIGA guarantees), improving bankability for projects despite conflict. Better coverage can unlock FDI, contractor mobilization, and longer-tenor trade finance, though premiums remain high.

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LNG permitting accelerates exports

A faster, “regular order” approach to LNG export permits and terminal approvals is boosting long-term contracting (often 15–20 years) with Europe and Asia, shaping global gas pricing, supporting US upstream investment, and offering buyers diversification from geopolitically riskier suppliers.

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Taiwan tensions and operational contingency

Taiwan remains a core flashpoint in U.S.–China relations, elevating tail risks for shipping, semiconductors and insurance. Recent leader-level discussions paired trade asks with warnings on arms sales. Companies should stress‑test logistics, inventory buffers, and contractual force‑majeure exposure for escalation scenarios.

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Crackdown on grey capital

Industry leaders are urging tougher action against scams, money laundering and “grey capital,” warning reputational and compliance risks if Thailand is seen as a laundering hub. Expect tighter KYC/AML enforcement, more scrutiny of cross-border payments, and operational impacts for fintech and trade.

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Critical Minerals Supply Chain Realignment

Australia is advancing a critical minerals strategy, including a $1.2 billion strategic reserve and international partnerships, to reduce dependence on China. This shift is reshaping global supply chains for rare earths, gallium, and antimony, with significant implications for technology and defense sectors.

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Reconstruction-driven infrastructure demand

Three years after the 2023 quakes, authorities report 455,000 housing/commercial units delivered, while multilateral lenders like EBRD invested €2.7bn in 2025, including wastewater and sewage projects. Construction, materials, logistics and engineering opportunities remain, with execution and procurement risks.

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Platform takedowns for illegal promotions

FCA’s High Court action against HTX seeks UK blocking via Apple/Google app stores and social platforms, signalling tougher cross-border enforcement of financial promotions and raising distribution and marketing risk for offshore investing and crypto apps.

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Shift toward LFP/next-gen chemistries

European producers’ reliance on NMC faces pressure as Chinese suppliers scale LFP and sodium-ion, and solid-state projects advance. French plants may need retooling, new equipment, and revised sourcing to stay cost-competitive, affecting procurement, licensing and offtake contracts.

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Reforma tributária em transição

A migração para CBS/IBS e Imposto Seletivo começa em 2026 e vai até 2033, com mudanças de crédito e cobrança no destino. Empresas precisam adaptar ERP, precificação e contratos; risco de litígios e custos temporários de compliance aumenta.

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Logistics and customs modernization push

Indonesia continues efforts to streamline trade via the National Logistics Ecosystem and single-window integrations across agencies. Progress can reduce dwell time and compliance burden, but uneven implementation across ports and provinces still creates routing risk, delays, and higher inventory buffers.

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Macroeconomic strain and FX pressure

Logistics disruptions and energy damage are weighing on growth and export receipts. The central bank cut the policy rate to 15% as inflation eased, but expects renewed price pressure and slower disinflation; port attacks may reduce Q1 export earnings by roughly $1 billion, stressing FX markets.

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FX volatility and yen defense

Yen weakness and intervention signalling (rate checks, possible US coordination) heighten hedging costs and pricing uncertainty for importers/exporters. Policy risk rises around election-driven fiscal expectations, complicating repatriation, procurement contracts, and Japan-based treasury management.

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Critical minerals and rare earth security

Seoul is moving to strengthen rare-earth supply chains by easing public-sector limits on overseas resource development, expanding domestic processing and recycling, and coordinating with partners while managing China export-control risks. This supports EV, wind, defense, and electronics supply continuity and investment pipelines.

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Energy mix permitting and local opposition

While no renewables moratorium is planned, the PPE points to slower onshore wind/solar and prioritizes repowering to reduce local conflicts. Permitting risk and community opposition can delay projects, affecting PPAs, factory decarbonization plans, and ESG delivery timelines.

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USMCA review and exit risk

With a mandatory July 1 review, the White House is reportedly weighing USMCA withdrawal while seeking tougher rules of origin, critical-minerals coordination, and anti-dumping. Heightened uncertainty threatens North American integrated supply chains, automotive planning, and cross-border investment confidence.

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Tariff volatility and legal fights

U.S. tariff policy remains fluid, including renewed baseline/reciprocal tariff concepts and active court challenges over executive authority. Importers face pricing uncertainty, sudden compliance changes, and higher landed-cost risk, especially for China-, Canada-, and Mexico-linked supply chains.

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Political Polarization and Nationalist Sentiment

Rising nationalist sentiment linked to border tensions with Cambodia is shaping electoral outcomes and policy direction. Persistent influence of military and conservative elites creates uncertainty for reform, regulatory stability, and the investment climate, especially during election cycles.

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SME Funding Gap and Investment Selectivity

Despite renewed investor confidence, South Africa’s SME sector faces a R350 billion funding gap due to strict financial controls and governance requirements. Only well-structured businesses attract capital, limiting broad-based economic growth and job creation.

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Global trade remedies against overcapacity

Rising anti-dumping and safeguard actions targeting China-made steel and other industrial goods reflect persistent overcapacity and subsidization concerns. More tariffs, quotas, and investigations increase landed costs, disrupt procurement, and heighten retaliation risk across unrelated sectors, including commodities.

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Manufacturing and Chemicals Structural Weakness

Despite modest GDP growth, Germany’s manufacturing and chemicals sectors face persistent output declines, plant closures, and job losses. Global competition, high energy costs, and regulatory burdens threaten long-term competitiveness, requiring strategic adaptation for international investors.

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Pressão socioambiental na Amazônia

Protestos indígenas bloquearam terminal da Cargill em Santarém contra concessões e dragagem na bacia do Tapajós, alegando falta de consulta. O tema eleva risco de paralisações, due diligence socioambiental e exigências de rastreabilidade em cadeias agrícolas.

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High debt and refinancing sensitivity

Despite improving macro indicators, Egypt’s large public financing needs and high real interest costs keep rollover risk elevated. Any global risk-off shift can widen spreads, pressure the currency, and delay state payments—material for contractors, suppliers, and banks.

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Fiscal volatility and higher taxes

Le budget 2026 est adopté via 49.3, dans un contexte de majorité introuvable. Déficit visé à 5% du PIB, dette projetée à 118,2% et surtaxe sur grandes entreprises (7,3 Md€) augmentent le risque de changements fiscaux rapides.

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US–Taiwan tariff pact reset

The newly signed US–Taiwan reciprocal trade deal lowers US tariffs on Taiwan to 15% and has Taiwan remove or reduce 99% of tariff barriers on US goods. It reshapes sourcing, pricing, compliance, and market-entry strategies across electronics, machinery, autos, and agriculture.

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Infrastructure push and budget timing

Major parties and business groups emphasize infrastructure—rail, airports, grids, water systems and data centers—as the main path to durable growth. However, government formation and budget disbursement timing can delay tenders, impacting EPC pipelines, industrial estate absorption, and logistics upgrades.

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Wider raw-mineral export bans

Government is considering adding more minerals (e.g., tin) to the raw-export ban list after bauxite, extending the downstreaming model used for nickel. This favors in-country smelter investment but increases policy and contract risk for traders reliant on unprocessed feedstock exports.

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Air defence shortages constrain continuity

Interceptor shortages—especially PAC-3 for Patriot—reduce protection of cities, ports and factories, increasing business interruption and asset-damage risk. Ukraine reports near-empty launchers at times; partners are scrambling to deliver missiles from stockpiles. Insurance, project timelines and onsite staffing remain volatile.

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Semiconductor push and critical minerals

Vietnam is scaling its role in packaging/testing while moving toward upstream capabilities, alongside efforts to develop rare earths, tungsten and gallium resources. Growing EU/US/Korea interest supports high-tech FDI, but talent, permitting, and technology-transfer constraints remain.

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Non‑tariff barrier negotiation squeeze

U.S. pressure is expanding from tariffs to Korean rules on online platforms, agriculture/quarantine, IP, and sector certifications. Firms should expect compliance costs, product approval delays, and heightened trade-law scrutiny as Korea–U.S. FTA mechanisms and side talks intensify.

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Foreign investment scrutiny and approvals

National-security sensitivities (e.g., critical infrastructure and strategic assets) keep FIRB review stringent, affecting deal timelines, conditions and ownership structures. Investors should plan for pre-lodgement engagement, mitigation undertakings, and heightened scrutiny of state-linked capital sources.

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Balochistan security and CPEC exposure

Militant attacks in Balochistan underscore elevated security risks around CPEC assets, transport corridors, and Gwadar-linked logistics. Higher security costs, insurance premiums, and project delays weigh on FDI appetite, especially for infrastructure, mining, and energy ventures with long payback periods.

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Tariff volatility and legal risk

Rapidly changing tariffs—autos, aircraft, semiconductors and broad “reciprocal” measures—are being tested in courts, including Supreme Court scrutiny of emergency-authority tariffs. This creates pricing uncertainty, contract disputes, and prompts inventory front‑loading and supply-chain reconfiguration.

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Energy exports and LNG geopolitics

US LNG is central to allies’ energy security, but export policy and domestic political pressure can affect approvals, pricing, and availability. For industry, this shapes energy-intensive manufacturing siting, long-term contracts, and Europe-Asia competition for cargoes, with knock-on logistics and hedging needs.

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Regulatory Reforms and Business Transparency

Reforms led by the Securities and Exchange Commission of Pakistan have enhanced transparency, digitalized company registration, and aligned regulations with international standards. These measures have improved Pakistan’s global business rankings and investor confidence, supporting easier market entry and compliance.

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Russia-linked nuclear fuel exposure

France imports all uranium for its nuclear fleet and still sources about 18% of enriched uranium from Russia (~€1bn annually). Potential EU action on Russian nuclear trade could disrupt fuel logistics, compliance risk, and costs for electricity-intensive industry.