Regulatory Modernization and Governance Reforms

Recent legal and regulatory reforms, including GST rationalization and the repeal of obsolete statutes, have improved ease of doing business. Streamlined compliance, dispute resolution, and investment protections are enhancing India’s business climate, supporting both domestic and international investors.

German Investment Pivot to China

German direct investment in China surged 55% in 2025, reaching over €7 billion. Firms are localizing supply chains in China to hedge against US trade volatility, deepening economic ties with Beijing and complicating EU efforts to reduce China dependence.

Shifting Energy Trade Flows to Asia

India and Turkey have reduced Russian fossil fuel imports due to sanctions, while China has increased purchases, benefiting from steep discounts. These shifts are altering global supply chains, with China now accounting for nearly half of Russia’s fossil fuel export revenues, impacting trade patterns and pricing.

Security Risks and US-Mexico Tensions

Escalating cartel violence and threats of US military intervention heighten operational and reputational risks. Security remains a top concern for international businesses, with border volatility, supply chain disruptions, and diplomatic tensions affecting investment confidence and cross-border logistics.

Regulatory and Trade Policy Uncertainty

Frequent policy shifts in trade, energy, and foreign investment—driven by geopolitical tensions and domestic priorities—create a volatile regulatory environment. Businesses face challenges in long-term planning, compliance, and risk management, particularly in sectors exposed to global supply chains and export markets.

Central Bank Independence Under Scrutiny

Concerns over Bank Indonesia’s independence have intensified following the nomination of President Prabowo’s nephew as deputy governor. Market perceptions of political influence are impacting the rupiah and investor confidence, making institutional integrity a critical factor for macroeconomic stability.

Technology Sector and Digital Transformation

India’s electronics exports reached Rs 4 lakh crore in 2025, with mobile phone and semiconductor manufacturing surging. Major global tech firms are increasing hiring and offshoring to India, driven by US visa restrictions and cost advantages, signaling a structural shift in global supply chains.

Infrastructure and Housing Investment Surge

The federal government is investing billions in housing, transit, and green infrastructure, particularly in Quebec and major urban centers. These investments aim to address supply shortages, stimulate economic growth, and enhance Canada’s competitiveness as a destination for international capital.

Legal Uncertainty and Corruption Risks

Persistent legal unpredictability, high-profile corruption scandals, and slow reforms deter foreign direct investment. Recent parliamentary bribery cases and anti-corruption investigations highlight systemic governance challenges, which international investors view as a greater risk than the ongoing war itself.

Reshoring and Supply Chain Realignment

US policy emphasizes domestic manufacturing and supply chain security, particularly in semiconductors and advanced industries. Major incentives and trade agreements are accelerating reshoring, prompting global companies to reconsider production footprints and invest in US-based operations.

State Intervention in Critical Infrastructure

The German government’s acquisition of a 25.1% stake in Tennet Germany signals increased state involvement in securing and financing critical electricity infrastructure. This move aims to support grid modernization and climate goals, but raises questions about market dynamics and public-private risk sharing.

Belt and Road Initiative Expansion

China signed a record $213 billion in new Belt and Road deals in 2025, focusing on energy, mining, and infrastructure in Africa and Central Asia. This expansion strengthens China’s global economic footprint but raises debt and dependency concerns in partner countries.

Resilience and Adaptation in Economic Policy

Despite external shocks, Germany and the eurozone have shown resilience, with 1.4% growth in 2025. A major stimulus plan, investment in digital and green infrastructure, and labor market reforms are redefining Germany’s economic role and supporting competitiveness amid global uncertainty.

Foreign Investment Decline and Decoupling

Foreign direct investment in China fell 9.5% in 2025, with many investors shifting to emerging markets due to geopolitical tensions, economic slowdown, and concerns over regulatory unpredictability. This trend challenges China’s long-term growth and integration with global capital markets.

Energy Security and Infrastructure Deals

A new 15-year gas agreement with Azerbaijan and major investments in natural gas and renewables are central to Turkey’s drive for energy security and reduced import dependency. These moves enhance industrial competitiveness and supply chain resilience.

Critical Minerals Strategy Targets Europe

Russia invests $9 billion to expand rare earth mineral production, aiming to control 10% of global supply by 2030. This strategy leverages Europe’s dependence on Chinese minerals, offering Russia new geopolitical influence but facing technological and sanctions barriers for foreign investors.

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.

Visa Reforms to Attract Global Talent

The UK is overhauling its visa system to attract highly skilled migrants, especially in AI and deep tech, with faster processing and fee reimbursements. This policy seeks to offset US visa restrictions and support the UK’s ambition to be a global innovation hub.

Selective Human Rights Stance and Policy Risk

South Africa’s foreign policy inconsistencies—especially its selective approach to human rights and alliances with authoritarian regimes—raise reputational and policy risks. This undermines diplomatic credibility and could impact international partnerships, sanctions exposure, and investor confidence.

Semiconductor Supply Chain Resilience

Japan is accelerating investment in domestic and allied semiconductor capacity, with TSMC's Kumamoto expansion and TOPPAN's new lines. The sector is driven by AI demand, strategic 'de-China' moves, and advanced process upgrades, reshaping global supply chains and investment flows.

Compliance Costs and ESG Barriers in EU Trade

While the EU FTA offers tariff-free access, Indian exporters face high compliance costs from the EU’s carbon border tax and ESG standards. These non-tariff barriers could offset gains, especially for steel, aluminum, and emission-intensive sectors, requiring strategic adaptation by businesses.

Trade Diversification Amid US Tariffs

Facing 50% US tariffs, India has accelerated trade agreements with the EU, UK, Oman, and New Zealand. This strategic pivot reduces dependence on the US, hedges against protectionism, and opens new markets for labor-intensive and technology-driven exports.

Critical Minerals And Semiconductor Supply Chains

Vietnam is deepening partnerships with the EU and other global actors to develop its rare earths, tungsten, and semiconductor sectors. These efforts aim to diversify supply chains, reduce dependence on China, and position Vietnam as a key node in global technology manufacturing.

Energy Sector Reform and Pemex Strategy

Mexico is investing $323 billion in energy and infrastructure through 2030, with Pemex targeting 1.8 million barrels daily and expanding natural gas. Reforms focus on debt reduction, domestic refining, and attracting private capital, but Pemex’s financial health remains a concern.

Political Instability and Policy Uncertainty

Persistent political instability and inconsistent government policies have slowed economic growth and undermined investor confidence. These uncertainties impact long-term investment decisions and complicate integration into global supply chains, particularly for SMEs and foreign investors.

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.

Labor Localization Tightens Expat Employment

Saudi Arabia has restricted key senior roles to nationals and imposed high Saudization quotas in sales, marketing, and procurement. These changes require international companies to adapt staffing strategies, prioritize local talent, and navigate evolving labor compliance risks.

Deteriorating Investment Climate and Human Rights Concerns

Widespread repression, mass casualties, and international condemnation have further eroded Iran’s investment climate. Heightened scrutiny over human rights abuses and governance failures increases reputational and regulatory risks for foreign investors and partners.

Rising Role in Regional Energy Supply

Indonesia is expanding its LNG and gas infrastructure, securing supply for power generation and industry. Projects like the FSRU Jawa Barat and new gas processing facilities support energy security, industrial growth, and regional supply chain resilience.

Nearshoring Drives Industrial Expansion

Mexico’s nearshoring boom is doubling industrial space demand, with vacancy rates near 1% and rents rising 16%. US firms increasingly shift supply chains to Mexico for cost, proximity, and resilience, fueling investment in manufacturing, logistics, and workforce upskilling.

Geopolitical Risks and Regional Diplomacy

Egypt’s proximity to regional conflicts, especially Gaza and Sudan, creates persistent geopolitical risks. Diplomatic efforts focus on regional stability, but disruptions can impact trade, investment sentiment, and supply chains, especially via the Suez Canal and border regions.

Centralized Leadership and Policy Continuity

Vietnam’s Communist Party, under To Lam’s likely continued leadership, is consolidating power and driving ambitious reforms. This centralization ensures policy stability for investors but raises concerns about checks and balances, impacting governance and business predictability.

Canada’s Strategic Pivot Toward China

Canada’s landmark trade deal with China lowers tariffs on Chinese EVs and Canadian agricultural exports, signaling a diversification away from US reliance. This recalibration aims to unlock $3 billion in exports but risks US retaliation and complicates future North American trade negotiations.

Robust Public Investment and Infrastructure

The 2026 Investment Program allocates 1.92 trillion TRY to nearly 14,000 projects, prioritizing transport, energy, health, and earthquake resilience. Major railway, logistics, and energy infrastructure upgrades will shape Turkey’s competitiveness and regional supply chain integration.

Persistent Foreign Exchange Pressures Remain

Egypt continues to face significant foreign exchange challenges, with external debt rising to $161.2 billion and a debt-to-GDP ratio of 44.2%. These pressures impact import costs, repatriation of profits, and overall business confidence, affecting international investment strategies.

Rapid Digital and Green Transformation

Thailand is prioritizing digital infrastructure, data centers, and green industries to support its economic transformation. Major investments in technology and sustainability are designed to position the country as a regional innovation hub, but require significant upgrades in talent and regulatory frameworks.