Industrial Competitiveness and Innovation Gaps

France’s export performance lags behind Germany and Italy, with fragmented support for exporters and a need for unified branding and innovation. High-tech sectors show promise, but industrial policy uncertainty and skills shortages hinder international competitiveness.

US-China Trade Realignment Intensifies

US-China trade contracted sharply in 2025, with US imports from China down 28% and exports down 38%. Southeast Asia gained market share, reflecting a global supply chain shift. Ongoing tariffs and legal challenges create uncertainty for international business planning.

Trade Diversification and Market Access

Brazil opened over 200 new markets for agribusiness in 2025, reducing dependence on traditional partners. Expansion into Southeast Asia, India, and Canada is underway, but success depends on regulatory adaptation and competitive positioning.

Energy Transition and Cost Pressures

Germany’s energy transition has led to high electricity and gas prices, reduced supply reliability, and increased vulnerability following the loss of Russian imports. The government is subsidizing new gas plants and industrial power, but energy costs remain a major drag on competitiveness and investment.

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.

US-Taiwan Semiconductor Trade Pact

The landmark 2026 US-Taiwan trade agreement reduces US tariffs on Taiwanese goods to 15% in exchange for at least $250 billion in Taiwanese semiconductor investment in the US, reshaping global supply chains and boosting US-Taiwan economic integration.

Aggressive US Industrial Policy Shift

The 2025 US National Security Strategy prioritizes economic, technological, and energy dominance through reindustrialization, energy independence, and strategic subsidies. This shift challenges multilateral norms, risks marginalizing allies, and increases regulatory complexity for international investors and supply chain planners.

Western Sanctions Reshape Trade Flows

Sweeping US, EU, and UK sanctions have forced Russia to reroute trade toward China, India, and other 'friendly' nations, now accounting for 86% of Russian trade. This realignment disrupts global supply chains, complicates compliance, and increases operational risks for international businesses.

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.

Supply Chain Resilience and Restructuring

Global supply chain uncertainties, especially in semiconductors and advanced manufacturing, are prompting Korean firms to invest in local capacity and diversify sourcing. This trend enhances resilience but requires ongoing adaptation to geopolitical shocks, regulatory changes, and technology competition.

Cautious Fiscal Policy Amid Oil Volatility

Saudi Arabia’s 2026 borrowing plan targets $58 billion in financing, reflecting a 56% rise from 2025. Despite lower oil prices, the government maintains expansionary spending and fiscal discipline, seeking diversified funding sources to support growth while protecting debt sustainability and credit ratings.

Sanctions, Trade Restrictions, and Asset Freezes

Sanctions on Russia and the ongoing debate over unlocking frozen Russian assets for Ukraine’s reconstruction create a complex environment. Trade restrictions, compliance risks, and evolving sanctions regimes directly affect multinational operations and cross-border transactions.

Strategic Partnerships With India Deepen

Germany is strengthening economic and technological ties with India, highlighted by new trade, defense, and green energy agreements. The Indo-German partnership, with bilateral trade exceeding $50 billion in 2024, is positioned to enhance supply chain resilience, innovation, and investment flows, especially as Germany seeks diversification beyond China and the US.

US Tariff Policy Reshapes Trade Flows

The US has intensified tariff measures, notably imposing 25% tariffs on advanced semiconductors and threatening further duties on key trading partners. These policies are fragmenting global trade, redirecting supply chains, and increasing costs for exporters, with significant implications for global inflation, investment, and supply chain resilience.

Japan’s Strategic Rare Earth Mining Push

Japan has launched the world’s first deep-sea rare earth mining trial near Minamitori Island, aiming to reduce dependence on China. Success could transform Japan into a key supplier, but technical, environmental, and cost hurdles remain, with full-scale operations targeted for 2027.

Heightened Geopolitical and Maritime Risks

US-led enforcement actions, such as the seizure of Russian tankers, and retaliatory Russian responses are escalating maritime security risks. These developments threaten shipping insurance, increase costs, and expose supply chains to new vulnerabilities.

Post-Brexit UK-EU Trade Realignment

The UK government seeks closer economic ties with the EU without rejoining the customs union, balancing regulatory alignment and trade benefits. Ongoing negotiations and political volatility create uncertainty for businesses, particularly regarding customs, standards, and future market access.

Geopolitical Risk: U.S.-China Rivalry and Canadian Autonomy

Canada’s efforts to balance relations with both the U.S. and China expose businesses to geopolitical risks, including retaliatory tariffs, regulatory shifts, and political pressure. The evolving stance on ‘strategic autonomy’ will shape future trade, investment, and supply chain resilience.

USMCA Uncertainty and Trade Tensions

The upcoming review of the USMCA agreement injects significant uncertainty into North American trade. Potential renegotiations or expiration could disrupt tariff-free access, supply chains, and investment planning, with heightened risks from ongoing US protectionist rhetoric and tariff threats.

Trade Policy and Shifting Global Partnerships

Germany’s export model faces headwinds from US tariffs, weak Chinese demand, and euro appreciation. The India-EU FTA, advanced during Chancellor Merz’s India visit, aims to diversify trade partners and strengthen ties with India, reflecting a strategic pivot amid global trade tensions.

Geopolitical Tensions Undermine Stability

The Greenland dispute has strained transatlantic alliances, with Finland caught between US demands and EU solidarity. Heightened geopolitical risk undermines the predictability of the business environment and complicates long-term investment strategies.

Geopolitical Tensions and Regional Security Risks

Persistent tensions with the UAE over Yemen, as well as broader regional instability, continue to pose risks to supply chains and investment. Saudi Arabia’s leadership in OPEC+ and its strategic location mean that geopolitical developments can rapidly impact energy markets and cross-border trade flows.

Currency Stability Amid Economic Pressures

The Egyptian pound has shown relative stability, with the dollar trading around 47.3–47.7 EGP. However, a rising current account deficit and reliance on foreign reserves signal underlying vulnerabilities, affecting import costs, profit repatriation, and business risk assessments for international firms.

Privatization and Investment Facilitation Initiatives

The government’s focus on privatizing state assets and the creation of the Special Investment Facilitation Council have attracted over $2 billion in new FDI. However, bureaucratic inefficiencies and inconsistent implementation continue to challenge the business environment.

Regional Geopolitical Risks and Mediation Role

Egypt’s active mediation in the Gaza ceasefire and regional conflicts underscores its strategic diplomatic position. While this enhances stability prospects, ongoing tensions in neighboring countries pose risks to investor confidence, supply chain continuity, and cross-border operations.

Energy Security and Diversification Drive

Egypt is stabilizing its energy sector through increased domestic production, major LNG import deals with Qatar and Israel, and regional infrastructure projects. These efforts enhance supply reliability and position Egypt as a regional energy hub, impacting industrial competitiveness and investment planning.

Strategic Export Controls and Technology Restrictions

China has prioritized export controls on dual-use goods and sensitive technologies, targeting countries like Japan and reviewing foreign acquisitions. These measures, aimed at protecting national security, increase compliance risks and uncertainty for multinational firms operating in or sourcing from China.

Real Estate Market Correction and Recovery

Major Canadian cities have seen steep declines in real estate transactions and prices since 2021, with Toronto and Vancouver at multi-decade lows. While 2026 is forecast as a recovery year, high mortgage renewal rates and affordability issues will continue to influence investment and consumer demand.

Foreign Direct Investment and National Security Scrutiny

Canada is welcoming FDI in strategic sectors but maintains restrictions on foreign ownership in sensitive industries. Enhanced transparency and regulatory oversight reflect a balancing act between attracting capital and safeguarding national interests, especially in technology and critical minerals.

Persistent Inflation and Currency Volatility

Turkey’s inflation remains elevated, with forecasts for 2026 at 16–23%. The Turkish lira continues to depreciate, trading around 43–44 per US dollar, impacting import costs, investment planning, and supply chain pricing for international businesses.

Shifting Global Trade Alliances

Amid US tensions, France and the EU are accelerating diversification of trade partnerships, finalizing deals with Mercosur, Indonesia, and Japan. This realignment aims to reduce reliance on US markets, but introduces new complexities and risks for multinational supply chains and investment strategies.

Global Competition for Critical Minerals

Australia is central to G7-led efforts to diversify global critical minerals supply chains, countering China’s dominance. International collaboration and investment in Australian mining and processing are accelerating, with implications for technology, defense, and clean energy industries worldwide.

US-China Trade and Tariff Policy

The US maintains high tariffs on Chinese goods, with ongoing trade tensions and periodic truce agreements. Recent deals have reduced some tariffs, but policy uncertainty remains high, impacting global supply chains and prompting businesses to diversify sourcing and production.

India Partnership and Market Diversification

Germany is accelerating strategic ties with India, including defense, technology, and critical minerals. Bilateral trade exceeded $50 billion, with India seen as a future growth market and hedge against declining exports to China and US trade tensions.

Outbound Investment and Global Capital Flows

China’s record trade surplus is fueling outbound private investment, with over $1 trillion flowing into global markets. This trend increases China’s influence in international finance but raises risks of sudden capital reversals and global market volatility.

Trade Policy Uncertainty and Legal Risks

US trade policy remains volatile, with the Supreme Court set to rule on the legality of broad tariffs. The outcome could reshape tariff regimes and inject further uncertainty into global trade, affecting investment strategies and long-term business planning.