State Intervention in Industrial Policy

Australia is shifting toward greater state intervention in strategic sectors, using price floors, tax incentives, and direct support for critical minerals. This marks a departure from market orthodoxy, aiming to crowd in private investment and manage economic risks tied to geopolitical competition.

US-China Trade Decoupling Dynamics

Despite high US tariffs, China’s exports have surged by reallocating supply chains through third-party countries. US efforts to reduce reliance on Chinese goods are being circumvented, impacting sourcing, pricing, and competitive positioning for international businesses.

Sanctions and Export Controls Expand

The US has broadened its use of sanctions and export controls, targeting countries like China, Russia, and Venezuela. These measures affect technology transfers, energy trade, and financial transactions, requiring businesses to enhance compliance and monitor regulatory developments closely.

Expanded secondary sanctions, tariffs

US pressure is escalating from targeted sanctions to broader secondary measures, including proposed blanket tariffs on countries trading with Iran. This raises compliance costs, narrows counterparties, and increases sudden contract disruption risk across shipping, finance, insurance, and procurement.

China Exposure and Supply Chain Risks

German industry’s deep integration with China, especially in automotive and high-tech sectors, creates strategic vulnerabilities. Recent government commissions highlight growing awareness, but slow policy action leaves supply chains and critical infrastructure exposed to geopolitical shocks and Chinese competition.

Supply Chains Strained by Workforce Loss

Widespread displacement, conscription, and casualties have reduced Ukraine’s workforce and damaged logistics infrastructure. These factors contribute to ongoing supply chain disruptions, limiting service coverage and production capacity, with a challenging outlook for 2026.