PESTLE & MORTAR 10 July 2025

#1

Tariffs Return as a Global Business Hazard

The White House’s trade agenda has re-emerged as a structural risk factor for corporate planning. President Trump has announced new tariffs targeting countries perceived as aligned with BRICS, while Treasury Secretary Scott Bessent has indicated partial extensions of existing reprieves remain under consideration. Proposed measures include a 31% duty on South African citrus, a 50% tariff on copper, and potential 200% levies on pharmaceuticals. Copper futures have risen on these signals, and agricultural exporters and manufacturers are accelerating supply chain adjustments to reduce exposure to US market access constraints.

On Wednesday, Trump issued letters detailing higher rates effective August 1, with particular emphasis on Southeast Asian exporters. The Financial Times characterised this approach as a “tariff wall,” triggering frustration among Washington’s partners and renewed interest in intraregional trade alternatives. Brazil has been threatened with 50% duties in connection with what the administration describes as a “witch hunt” against former President Jair Bolsonaro. According to the New York Times, Trump increasingly frames tariff escalation as a tool to rebalance global influence rather than solely an economic lever. For businesses, this environment sustains high volatility in input costs and procurement timelines. Companies with significant US exposure should prioritise scenario analysis, assess the viability of alternate sourcing, and prepare contingency frameworks ahead of the August deadline.

#2

China–EU Trade Retaliation Highlights Deepening Frictions

China has imposed new procurement restrictions on European medical devices and applied anti-dumping duties on European brandy, escalating trade tensions ahead of a planned summit marking 50 years of diplomatic relations. The measures apply to contracts exceeding 45 million yuan but exempt European firms with production facilities inside China. While limited in direct economic impact, the restrictions demonstrate the increasing use of regulatory tools to exert pressure on strategic industries.

The retaliation follows EU measures targeting Chinese electric vehicle exports and Brussels’ push for deeper climate commitments from Beijing. Ongoing friction over China’s support for Russia, European dependence on Chinese rare earths, and broader industrial competition continues to erode the predictability of the trade environment. Policymakers on both sides now face mounting difficulty balancing economic interdependence against geopolitical rivalry. Companies in regulated sectors such as medical technology, automotive supply, and critical minerals should expect higher exposure to politically driven procurement barriers.

#3

OPEC Raises Output Despite Price Risks

OPEC and allied producers have agreed to expand oil production by nearly 550,000 barrels per day, exceeding market expectations despite multiyear low crude prices. Official statements cite confidence in recovering demand linked to seasonal travel. However, analysts assess the move as a strategic effort to pressure US shale producers and reinforce internal quota compliance. The decision follows repeated calls from President Trump to curb energy costs.

Current benchmark prices near $65 per barrel remain broadly in line with Gulf producers’ fiscal break-even levels, although Saudi Arabia faces higher sensitivity to price declines. The kingdom has already raised sovereign borrowing and is reportedly exploring a $4 billion sale of Aramco power generation assets to offset revenue constraints (Reuters). Industry experts warn that a sustained output ramp could trigger surplus conditions by winter. For businesses, the decision increases the probability of renewed volatility in energy-linked input costs and freight rates in late 2025. Firms with exposure to Gulf economies should closely monitor inventory data and adapt hedging strategies accordingly.

#4

Global Food Prices Edge Higher After Months of Decline

The UN Food and Agriculture Organization’s (FAO) Food Price Index rose 1.1% in June, marking the third consecutive monthly increase after a period of decline. Although still about 2% below levels recorded one year ago, the index highlights renewed pressure on key agricultural commodities. Sugar posted the sharpest rise, up 5.9%, driven by drought impacts in Brazil and India. Vegetable oils also strengthened on higher demand, while cereal prices remained relatively stable due to positive harvest forecasts offsetting localised disruption. The FAO cautioned that food markets remain highly sensitive to climate volatility, trade restrictions, and broader geopolitical dynamics (FAO Food Price Index Summary). For businesses, this pattern underscores the importance of early warning systems and procurement diversification to mitigate exposure to renewed price spikes. Firms in food processing, retail, and logistics should evaluate contingency plans and monitor policy developments affecting commodity flows.

#5

Houthi Strikes Sink Vessel in Red Sea

Houthi forces have conducted one of their most destructive attacks to date on commercial shipping, sinking the bulk carrier MV Tutor in the Red Sea and damaging another vessel days later. Most recently, the cargo ship MV Eternity C, registered under a Liberian flag and operated by a Greek company, sank after what maritime officials described as a likely Houthi attack involving an explosive drone. According to The Guardian and Al Jazeera, the Eternity C caught fire and was abandoned before going down. Five crew members were rescued, while others were reported missing. The escalation underscores the Houthis’ sustained ability to damage vessels in strategic shipping corridors despite months of US and allied airstrikes targeting launch sites. Analysts note that the attack represents a significant operational milestone, demonstrating persistent capability to inflict catastrophic losses on commercial traffic. Maritime agencies have issued renewed advisories warning of heightened risk across the Red Sea approaches to Bab al-Mandab.

#6

U.S. Resumes Weapons Shipments as Russia Escalates Drone Strikes

The United States has reversed its suspension of Patriot and other critical munitions shipments to Ukraine following diplomatic pressure from Kyiv and European allies. Hours after the resumption was announced, Russia launched a record 728 drone attacks, highlighting Ukraine’s acute air defense requirements. At the same time, President Trump publicly criticised Vladimir Putin, describing Kremlin messaging as disinformation. The Wall Street Journal characterised the comments as among the clearest indications of deteriorating relations. In parallel, Russian authorities have reportedly seized $50 billion in domestic assets under the “Fortress Russia” strategy to fortify the economy against sanctions. 

#7

Orbital Refueling Raises Security Questions in Space

China has conducted what analysts assess as the first geostationary satellite refueling operation, extending its capacity to maintain and potentially manipulate orbital assets. Beijing described the mission as advancing “satellite fuel replenishment and life extension” technologies. However, Western security officials have warned that the same docking systems can be adapted to approach, latch onto, and deliberately disable or capture satellites belonging to other nations. These capabilities could be used to interfere with communications, reconnaissance, or navigation systems under the guise of routine servicing. The development follows US accusations in 2024 that Russia deployed an “inspector satellite” suspected of carrying anti-satellite payloads. Together, these advances illustrate that space infrastructure is increasingly a contested domain where dual-use technologies blur the line between civilian operations and military capability.

#8

China’s AI and Media Drive Expands as Trust Migrates

China is broadening its influence campaigns through a mix of conventional propaganda and advanced AI adoption. State-owned enterprises have launched new communication centres to shape international narratives, including the International Communication Center to promote China’s energy sector abroad. Local authorities have also accelerated content production targeting foreign audiences. This effort coincides with shifts in information trust. Research in Foreign Affairs highlights that Gen Z audiences increasingly rely on crowdsourced commentary and AI-generated summaries over traditional news media. Chinese AI models, rapidly gaining global market share, further amplify Beijing’s capacity to embed narratives in everyday digital tools. For businesses, these trends underline the need for due diligence in selecting AI platforms and heightened awareness of reputational and operational risks tied to narrative shaping. As our report The Geopolitics of AI Use highlighted, control over advanced language models is emerging as a strategic lever in global competition, with regulatory crackdowns, security concerns, and market fragmentation likely to intensify. International AI providers now carry geopolitical risk exposure that can quickly translate into operational disruption, legal scrutiny, and reputational damage.

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