Navigating geopolitical uncertainty and managing business risk.
Executive Summary
The past week highlights a shift toward a more fragmented and contested global operating environment, with pressure building across digital, maritime, and regional security domains.
At the systemic level, the failure to extend the WTO moratorium on digital trade marks a move away from a unified, rules-based framework toward competing national and bloc-based approaches. This introduces greater uncertainty into the digital marketplace as countries pursue divergent regulatory and economic models.
In the South China Sea, the resumption of land reclamation at Antelope Reef signals a potential shift from sustained gray-zone pressure to physical consolidation. The key question is whether this represents a localized development or the beginning of broader expansion across contested features, increasing the risk of persistent regional friction.
In the Horn of Africa, rising tensions between Ethiopia and Eritrea are being driven in part by competition for Red Sea access, with the potential to intersect with the ongoing conflict in Sudan. External actors, including Gulf states, are shaping outcomes across the region, reinforcing a more interconnected and volatile security environment.
Taken together, these developments point to a system in which rules are fragmenting, pressure is becoming more distributed, and regional conflicts are increasingly linked, raising the baseline level of geopolitical risk for businesses operating across markets.
Key Developments
1) WTO failure reshapes the digital marketplace.
The global digital economy has largely operated under the assumption of frictionless cross-border exchange. Since 1998, a World Trade Organization moratorium has prevented countries from imposing tariffs on electronic transmissions, allowing digital goods and services to move across borders without customs duties.
That free market model is now under pressure. Talks at the World Trade Organization failed to extend the moratorium on March 30th, allowing it to lapse and giving countries the legal ability to impose tariffs on digital trade.
At the same time, a subset of twenty countries, including the United States and several major trading partners, are moving to preserve tariff-free digital trade among themselves, creating parallel frameworks outside the WTO system.
The breakdown is being driven in part by countries such as India, Indonesia, and South Africa, which are pushing for greater flexibility to tax digital imports and shape domestic markets. For these countries, the issue is not just trade policy, but revenue generation, digital sovereignty, and industrial development. This reflects a growing divide between economies seeking to preserve frictionless digital trade and those prioritizing control over data and domestic technology ecosystems.
Why it matters:
The failure to extend the moratorium highlights the limits of consensus-based rulemaking at the WTO, reinforcing a broader shift toward plurilateral and regional frameworks as the primary venues for setting trade rules.
2) China resumes land reclamation in Vietnam’s Exclusive Economic Zone.
Image courtesy of the Asia Maritime Transparency Initiative.
China has resumed large-scale land reclamation at Antelope Reef, marking the first significant expansion of its artificial island network in several years. Satellite imagery indicates active dredging and rapid enlargement of the reef, suggesting a renewed effort to build out permanent infrastructure.
This activity follows a period in which China relied primarily on gray-zone tactics to assert control across contested areas. The return to reclamation represents a shift back toward physical consolidation, creating new terrain that can support future military and logistical infrastructure.
The timing is notable. Expansion has accelerated while global attention has been focused on the conflict in the Middle East, reinforcing a pattern of advancing territorial objectives during periods of reduced scrutiny.
Why it matters:
The key question is whether activity at Antelope Reef represents a localized development or the beginning of a broader shift in how China approaches contested features in the South China Sea.
The PRC may increase pressure on contested features such as Scarborough and Sabina Shoals in the Philippines, or Luconia Shoals in Malaysia, particularly while global attention remains focused on the Red Sea and the Strait of Hormuz.
3) Tensions in the Horn of Africa are resurfacing
Ethiopia, the world’s most populous landlocked country, is pursuing direct access to the Red Sea to support economic growth and reduce reliance on Djibouti, which currently handles 95% of its trade. Limited maritime access imposes significant costs on imports and exports, constraining development and increasing vulnerability to market disruptions. It may also provide the context for war with neighboring Eritrea.
Eritrea gained independence from Ethiopia in 1993, effectively leaving Ethiopia landlocked. That settlement reduced open conflict but did not resolve underlying tensions. Ethiopia and Eritrea fought a border war from 1998 to 2000 and remained in a prolonged standoff until a 2018 peace agreement.
Relations have deteriorated again following recent counterinsurgency operations in the Tigray region of northern Ethiopia, which borders Eritrea. The conflict drew in Eritrean forces and has left both sides with troops positioned in close proximity along the border, with each accusing the other of supporting hostile actors.
Recent statements from Prime Minister Abiy Ahmed demanding access to the Red Sea have further inflamed tensions. He has framed sea access as a strategic requirement, with Ethiopia exploring options including Assab in Eritrea and Berbera in Somaliland. These efforts have heightened regional tensions, particularly with Eritrea, which views Ethiopian ambitions as a potential threat to its sovereignty.
There are also credible reports that Ethiopia may be aiding the Rapid Support Forces (RSF) in Sudan’s civil war. A recent study from Yale alleges that Ethiopia has been harboring and training RSF militia groups.
These dynamics are increasingly tied to competition over access to and control of the Red Sea corridor, where regional actors, including the UAE (who supports the RSF) and Saudi Arabia (who supports the Sudanese government), are jockeying to influence the outcome of the civil war.
4) Hungary’s leadership shift strengthens EU cohesion
Hungary’s long-serving Prime Minister Viktor Orbán has been voted out of power after more than a decade in office, marking a significant political shift within the European Union. His government had frequently challenged EU consensus on issues including sanctions, rule-of-law enforcement, and support for Ukraine.
The incoming leadership is expected to take a more cooperative approach with Brussels, potentially reducing friction within the bloc and enabling greater alignment on key policy issues.
Why it matters:
Hungary has been a consistent source of internal resistance within the EU, particularly on security and economic policy. A shift in leadership removes a key obstacle to consensus.
Greater alignment could accelerate decision-making on sanctions, defense coordination, and economic policy, particularly in relation to Russia and Ukraine.
The broader implication is structural. The removal of a long-standing outlier suggests the EU may operate with greater cohesion, reducing internal fragmentation at a time of increased external pressure.
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