Asia Navigates Geopolitical Risks and Shifting Trade Conditions
Asia-Pacific economies continue to face a complex trading environment shaped by geopolitical uncertainty and evolving global supply chains. According to Oxford Economics, tensions in the Middle East remain an important source of risk for regional economies, with businesses continuing to monitor the potential impact on trade routes, supply chains and broader economic activity. Although recent developments have reduced some of the disruption experienced earlier in the year, uncertainty remains elevated.
The report also highlights trade policy as an important factor influencing the regional outlook. Upcoming decisions on US trade measures and ongoing international trade negotiations could affect market conditions across Asia, particularly for export-oriented economies that remain deeply integrated into global supply chains.
At the same time, demand linked to the global technology sector continues to support trade activity across the region. Oxford Economics indicates that technology-related supply chains remain an important driver of exports in several Asian economies, helping to offset some of the uncertainty created by geopolitical developments and trade policy risks. The near-term fundamentals of Asia’s tech cycle still look solid, but markets are divided over the medium-term durability of the AI cycle—doubts amplified by financial market swings, and by the growing concentration of the region’s growth in a single tech-driven engine.
China’s Q2 GDP growth is expected to slow to 4.1% y/y, as the divergence between resilient external demand and subdued domestic activity continues. Analysts also expect the Bank of Korea to deliver the first of two 25bps rate hikes in the face of a depreciating won. Moreover, they expect Malaysia’s GDP to grow at 4.6% y/y in Q2 and Singapore’s GDP growth to moderate.
Overall, while recent disruptions have eased, global trade conditions across Asia continue to be shaped by a combination of geopolitical risks, policy uncertainty and developments within key international supply chains.
US and EU Trade Policy Uncertainty Set to Persist in the Second Half of 2026
Trade policy is expected to remain a structural headwind for the global economy in the second half of 2026, despite having faded somewhat from the headlines. Oxford Economics expects new US Section 301 tariffs to replace the expiring Section 122 levies from late July, resulting in marginally higher tariff rates. In a recent report, the firm notes that the US administration is aiming to keep effective tariff rates high enough to generate around US$25-30 billion in monthly customs revenue. The briefing also highlights that tariff uncertainty is likely to persist even once current investigations are concluded, as US authorities can adjust, increase or suspend rates without launching new investigations. In North America, Oxford Economics no longer expects a United States–Mexico–Canada Agreement (USMCA) deal that lowers tariffs, and its baseline assumes current tariffs remain in place indefinitely.
In Europe, trade tensions with China are also intensifying: the European Commission now has more than 50 active trade-defense investigations against Chinese products, up from 17 in 2025. New EU economic security tools are expected by September, raising the risk of Chinese retaliation if Europe adopts a tougher approach similar to parts of the US tariff framework.
Eurozone Sentiment Recovers, but Activity Signals Still Point to a Gradual Rebound
Investor confidence in the eurozone continued to improve at the start of the third quarter, with the Sentix Investor Confidence Index rising for the third consecutive month in July and returning to the levels seen in March at the onset of the US-Iran conflict, according to a recent Oxford Economics report. The recovery has been driven mainly by the expectations component, which moved back into positive territory for the first time since the start of the conflict, suggesting that investors are pricing in a lower risk of a prolonged shock. However, the current situation indicator improved only modestly and remains further below its pre-war level, reflecting that the inflationary and activity effects of the crisis are still lingering at the start of Q3.
Hard data added some support to this cautiously optimistic tone. Eurozone retail sales rose 0.2% m/m in May, only partially reversing April’s 0.4% decline, with rebounds in Germany (+1.1% m/m) and Spain (+0.6% m/m) leading the improvement, while fuel sales continued to drag on the headline amid higher prices. The report notes that consumer spending appears to have been more resilient than confidence surveys implied during Q2, but not strong enough to signal a meaningful acceleration in growth momentum heading into the second half of the year. Overall, the latest indicators point more clearly to an improvement in sentiment than to a decisive rebound in activity, with the assessment of the current situation still relatively weak, particularly in Germany.
Phosphate Fertilizer Supply Faces Further Disruption as Mosaic Reduces Output
US fertilizer producer Mosaic has announced further temporary reductions in phosphate operations at selected facilities in North America and Brazil due to curtailed raw material availability, according to Argus Media. The reduced availability is linked to shipping traffic that remains largely halted through the Strait of Hormuz. The company stated that additional temporary operational measures are being taken as sulfur inventories decline, while fertilizer supply availability and affordability remain constrained.
Mosaic described the actions as a temporary response to extraordinary market conditions and stated that they do not change the company’s long-term strategy or commitment to global agriculture. The report notes that Mosaic will further reduce output at selected facilities in Florida and Louisiana, while additional temporary curtailments and idling of facilities are also underway in Brazil.
The company had already reduced operating rates at some North American facilities earlier in 2026 and had also curtailed phosphate-related activity in Brazil. Mosaic did not provide specific details on the scale of the operational pullback at each plant.
The reduction in phosphate operations is directly linked to limited raw material availability resulting from the ongoing conflict in the Persian Gulf, which has also forced domestic and global phosphate producers to reduce output. The latest curtailments come shortly after the US government announced a temporary pause on countervailing duties on Moroccan phosphate imports.
European Parliament Approves Measures to Help Farmers Face High Fertilizer Prices
The European Parliament has approved a package of temporary measures to help farmers cope with higher fertilizer prices. On July 7, 2026, a plenary session of the Parliament voted in favor of changes to the EU common agricultural policy, as proposed by the Commission, to ensure farmers get aid in time to buy fertilizers for the next growing season. Farmers will be able to receive liquidity support worth up to 80% of the additional fertilizer costs they incur. EU countries will also have the possibility to increase advances on direct payments from 70% to 75% and pay them to affected farmers directly after they apply for them (and not only after October 16 as defined by the current rules). Member States will also have more flexibility to adjust their direct payments budgets for next year. The text must now be formally adopted by Council and published in the Official Journal before it can enter into force the day after.
Fuel Shortage Disrupts Brazil Nut Export Logistics in Bolivia
Bolivia’s northern Amazon export sector has warned that persistent gasoline and diesel shortages are disrupting the logistics chain for Brazil nuts, according to a report by London Stock Exchange Group. The shortage is affecting the transport of raw materials from harvesting communities to processing plants and then to export ports, putting the fulfilment of contracts with international buyers at risk.
Representatives of the Northern Chamber of Exporters (Cadexnor), the Bolivian state-owned oil and gas company YPFB, the National Hydrocarbons Agency, transport groups and local organizations met to request an additional fuel allocation for the region. The sector stated that the fuel shortage follows a period of roadblocks that disrupted the movement of goods and brought exports to a standstill for almost two months.
Cadexnor requested that gasoline and diesel supply be prioritized for Bolivia’s northern Amazon region to support the continuity of production operations and prevent further disruption to foreign trade. According to the exporters’ association, guaranteeing fuel supply is essential to preserving production, maintaining employment and sustaining the foreign exchange generated by the Brazil nut industry.