Franzi Nothofer:
Hello everyone. Good morning. Good afternoon. Thank you for joining us today for the webinar three Global Election Threats for 2024, hosted by Everstream Analytics. All attendee lines are currently on mute and please add any of your questions during the webinar in the q and a box and we will get to as many as we can before the conclusion of today’s session. This webinar is also being recorded and we’ll send you a copy afterwards. My name is Francis Kafer and today I’m joined by our three presenters, Daniella Baron, Josiah Rai, and Olivia Saunders from our intelligence solutions team here at Everstream who will walk you through the content. And now let’s have a look at today’s agenda. Josiah will start off covering increased border tensions around the globe. Olivia will then dive deeper into how elections could affect commodity supplies, and Daniella will provide the latest insights on increased cybersecurity challenges in 2024. After that, we’ll get to the q and a part of the webinar to answer your questions. And with that, I’ll turn it now over to Josiah.
Josiah Ponnudurai:
Thanks Franca, and a very good morning or afternoon to everyone listening in. So to start us off today, I just wanted to situate our presentation a little bit by giving us this timeline to have a major, to have an idea of the major elections that will or have taken place over the past year or so. A couple major elections. Of note in this slide include Taiwan, which has elected another president from the Independence leaning Democratic people’s Party, much to the disappointment of mainland China, as well as India, which is currently in the midst of its six week long parliamentary election with Prime Minister Narendra Modi widely expected to secure a third term in office. And finally, of course, if you look a little bit down the line this year we have the US presidential elections where both President Biden and former President Trump looks at for another fraught to rematch. So now with all of these elections taking place this year, it can be quite difficult to gauge how the geopolitical risks that emerge from these elections can actually impact supply chains. So what we’ve done here at Everstream is basically distill all of these developments into three key risks that your organization should be taking note of for the rest of the year. And so I’ll kick us off by talking about our first key risk, which is trade and board attentions. Could I have the next slide please?
So now in terms of election related border and trade tensions, we here at Everstream think that the bulk of the risk is going to come from elections in Taiwan, Mexico, and the United States. So now firstly, looking at Taiwan, we know that William live from the independence leading Democratic people’s party is set to be inaugurated as Taiwan’s new president on May 20th following the islands elections this past January. Now it’s well documented that mainland China is suspicious of William Lai due to his pro independence leanings. And as such, China has adopted a carrot and stick approach to Taiwan in the runup to his inauguration later this month. And if we think about the extent to which trade and border tensions will now rise in the Taiwan Strait, once William Light becomes president, we think that the extent to which tensions will be affected will depend mainly on one determinant.
And that is whether or not William Lai accepts or refuses to accept the one China principle. Now, the one China principle is basically this idea that there is only one China, even if both Taiwan and China disagree about what that means. And this idea of there being only one China is actually a prerequisite is seen as a prerequisite by Beijing for all negotiations with the mainland. And it’s very likely that China will ramp up military drills and trade restrictions on Taiwan if lie explicitly refuses to accept the one China principle, which is what has happened for the last eight years with its predecessor sighting one. Now it’s difficult to determine if China would launch large scale military drills like the ones they conducted following the visit of former US House speaker Nancy Pelosi. But any explicit rejection of the one China principle by William Lei could prompt Beijing to increase its military activity.
Now looking at it in terms of trade, Beijing will likely continue placing pressure on Taiwan by threatening to eliminate tariff exemptions for around 540 Taiwanese goods that are covered under a trade agreement called the economic cooperation Framework. Now, for example, China just recently implemented anti-dumping duties on Taiwanese exports or polycarbonate, which was actually a chemical that was covered under the ECFA. China’s polycarbonate anti-dumping tariffs have been set at anywhere between nine to 22.4% for different Taiwanese companies. And the tariffs are expected to negatively impact chemical makers in Taiwan like Taiwan, chemical fiber, Iamsu and Chie as the mainland Chinese market accounts for around 78% of Taiwan’s total polycarbonate exports. Could we go to the next slide light Now moving away from Taiwan and focusing in on the United States, we hear at Everstream C that the US elections are already having a big impact on the country’s trade relationship, especially with China, but it could also impact its trade relationship with Mexico.
So focusing on China first, we have obviously heard both Donald Trump and Joe Biden recently proposed several trade restrictions aimed at addressing anti-competition and security concerns. So for example, president Biden has recently proposed raising a tariff on certain Chinese steel and aluminum exports from zero or seven, five from zero or 7.5% to 25%. While his administration has also agreed to take up a union complaint to look into unfair competition allegations that have been leveled against China’s ship building industry. Trump on the other hand, has proposed a 60% tariff on all Chinese exports to the United States, a move that is very restrictive and would likely take China’s shares of US imports to basically 0% by the end of the decade. And we think that the trade restrictions or the trade risks in terms of both Biden and Trump proposing restrictions against China is likely to rise over the course of the election season as both Republicans and Democrats have grown increasingly wary of trade with China due to anti-competition security and forced labor concerns.
Now shifting quickly over to Mexico, we also see that the upcoming US election bears several implications for both countries trade relations with one another. Firstly, a lot of US lawmakers have grown increasingly concerned that Chinese companies have been circumventing existing US tariffs by shipping semi-finished components to the US via Mexico. And so to combat this, both Biden and Trump have actually sort of targeted China’s electric vehicle sector and they’re both concerned that EV makers like BYD could actually end up circumventing US tariffs on Chinese EVs by setting up factories in Mexico. Now this has led both presidents to consider increasing tariffs on Chinese EVs in order to protect US automakers with Trump proposing up to a hundred percent tariff on any Chinese EVs that might be assembled in Mexico. And Mexico is actually aware that US lawmakers aren’t too happy about the way China has been using the country in order to circumvent tariffs.
And so there’s a risk that manufacturers in Mexico could actually with supply chain links to China, could also see their production costs rise as the Mexican government has proposed tariffs of between five to 50% on a range of products including aluminum, textiles, and plastics from countries that it currently does not have any trade agreement with, which includes China. These tariffs are actually aimed at ending the dumping of below cost Chinese products in Mexico and also at stopping Chinese manufactured or semi-finished goods from entering the United States via the country. Lastly, another potential election issue that also involves the US’ rising trade deficit with Mexico, which reached a staggering 152.4 billion US dollars just last year. Now, this trade deficit, this rising trade deficit could be an issue should President Trump win the upcoming November election, especially with his campaign stress on cutting back on trade deficits and with the review of the US Mexico Canada agreement coming up just next year. And with that, I’ll pass it over to Olivia to talk about commodity risks.
Olivia Saunders:
Thanks Josiah. So I’m going to address a few of the policies that have been proposed and a few elections around the world and addressing some of the key policy changes that have been proposed. So across the world, we’ve seen candidates turning towards protectionism towards commodities in a variety of industries affecting both metal commodities and agricultural commodities. And these policies have been proposed and that an environment of rising inflation, global economic uncertainty. And so we’ve seen candidates proposing policies that would support domestic industry building often at the expense of commodity exports or investments. So if we could move on to the next slide please. So one of the key elections related to commodities is occurring in Mexico this year. And one of the reasons that this election is so key is that Mexico’s current presidential fund runner Claudia Scheinbaum, has promised to push forward a proposal to ban open fit mining in Mexico.
Under this proposal, we would see new concessions being banned as well as potentially current exploration and mining activities being halted. And if this production were to be affected, we would see pretty immediate impacts to global metals markets as many of Mexico’s largest mines are currently open mines and many mining industry companies in Mexico have said that they would foresee very drastic impacts on their operations as many of the mines are not easily convertible into underground mines. And Mexico is a top 10 global producer of a number of key commodities including copper, zinc, led gold and silver. So looking forward to the election, not only is the presidential result important, but the legislative result will also be very key for this election as the ruling party has to have a two third super majority to pass the policy. And currently the main opposition party does not support the ban on open mining.
However, we do think that any act to limit the mining of these key commodity exports could sort of have a cooling impact on the mining industry in Mexico. We’ve already seen a lot of major mining companies question their investments in Mexico amid increased pushback to the mining industry there. And any impact even to just ban the new concessions for open pit mining could encourage companies to maybe diversify their facilities elsewhere. Moving on to the election in Indonesia, over the past few years in Indonesia, we’ve seen a fairly protectionist policy towards metal exports. And under the current administration of the president-elect Pro Subianto, we do anticipate that that protectionist metal policy will continue. So over the past few years, we’ve seen export bans on Mikkel or vite on copper products coming from the current administration. And Subianto has stated that he would be likely to continue these policies once in office, which remain fairly popular in Indonesia. And in addition, he would also move forward with a proposed ban on the export of a number of tin products. And Indonesia is the world’s second largest producer of tin. So we would anticipate particularly negative impacts for 10 markets. It’s possible that given the popularity of these policies, that we could also see additional metals impacted. But so far we haven’t heard anything confirmed from the Subianto camp If we could move on to the next slide.
And so in India, we’ve also seen a similar bent towards protectionism, specifically as it relates to sugar. So the current at Modi administration has implemented export controls on sugar over the past year and a half in a move to support domestic food prices in amid an environment of inflation. And as Josiah mentioned, Modi is up for reelection in June, widely expected to lead the race, and he has promised to continue these export controls on sugar through at least the election. But we do think that if inflation and food prices continue to worsen in India, and at this point so far this year, they haven’t let up at all, prices have continued to rise. So if these prices do continue to go up, we think that the sugar export control could remain in place indefinitely, almost certainly could be extended past the election, which means unfortunate news for the global sugar supply.
We do anticipate that the sugar supply from India will continue to be constrained until price stability is more achieved there. And to briefly touch on one of the major threats to US agricultural export on commodities is as just I mentioned, the former president Trump’s proposed increase on Chinese imports with a 60% tariff increase. Having been proposed, these tariff increases could lead to an escalation of the trade war that leads to countermeasures from China. And we saw this during Trump’s first series of tariffs during his first term where American agricultural exports were among the key goods that the Chinese administration targeted for countermeasures. If Trump is elected and moves forward with these import tariffs, retaliatory measures could again focus on agricultural exports as sort of the key American export to China. And some of the commodities that could be impacted include soy, corn and meat.
And moving on to our final election in Argentina, thankfully this election has been a bit of an exception to the rule for protectionism. Argentina is currently undergoing a very chaotic economic environment, I believe has just entered a formal recession in the past few months, as well as increasing inflation and a foreign currency crisis. So from agricultural exporters in Argentina, we’ve seen that the main priority has been shoring up economic stability, achieving currency stability for those stable export prices. And overall we’ve seen support from the government to this end. So immediately after taking office in December, president Javier Malay devalued the peso by over 50%. This move has been widely popular with agricultural export industries in Argentina, given that it effectively lowered the price of their exports on international markets. We’ve also seen a proposal from the administration to eventually lower export taxes on agricultural goods.
However, the administration actually did the opposite upon taking office and has increased them temporarily as a measure to sort of increase governmental austerity. But we do foresee that if the Malay administration is able to achieve some more economic stability, some more currency stability, once that is achieved, I think we could see more export friendly policies coming down the line. Right now, the main drive has just been to deal with the immediate economic issues at hand, but President Mole has been fairly consistent in his support for agricultural exports and some of the key exports from Argentina include soy, corn, and wheat. So I’ll go ahead and pass it over to Daniela to discuss cyber risks.
Daniela Baron:
Thanks Olivia. So the last key issue I want to touch on briefly today are cyber related risks. As we pointed out in one of our reports a few weeks ago, cyber criminals and state sponsored actors are increasingly targeting national elections to wield influence and to disrupt everyday life as well as commercial activities in societies that they would consider hostile. The number of successful high profile attacks such as the attack on the port of naria in Japan about a year ago is still quite small, but even a spike in attempted attacks in the run up to an election could cause knock on effects on the target country’s business as well as its transportation sectors. Next slide please.
So data tracked by Everstream analytics shows that the general manufacturing, the electronics and the automotive sector are already among the most targeted industries worldwide. So if the number of cyber incidents jumps during national elections like we already saw in Taiwan where cyber attacks more than doubled right before the election in January, companies in these sectors are also very likely to see even more attacks on their IT infrastructure or on their production processes this year. And obviously the more attacks are attempted, the more likely it is for one of them to make it past the company’s cyber defenses.
Just to give some context on the impact of disruptions in these sectors. So globally, the manufacturing sector contributes around 17% to GDP. And then in the United States where one of this year’s most high profile elections will take place in November, all of the countries manufacturing sectors combined added more than $2 trillion to the economy in 2022. And then meanwhile, in India, for example, where the voting is already underway, the manufacturing sector adds around 17% to the country’s GDP each year. It may actually grow to contribute more than 20% in the next couple of years. So consequently, countries holding elections this year will be at risk of serious economic consequences, especially if domestic manufacturers become the target of even more cyber attacks than usual during national elections.
And then similarly, our data also shows that transportation related companies and facilities have also been a major target for cyber attacks in the last one and a half years. As mentioned, the number of successful high impact attacks remains limited to a few high profile cases. However, the fear of cyber related disruptions, particularly to critical infrastructure such as seaports airports or national power grids, for example, is a growing concern in some of the countries holding elections this year. Most notably US President Joe Biden announced an executive border in February that aims to shield the country’s ports from cyber related interference attempts in the future. And around the same time, the US Coast Guard cyber command also want that around 80% of the ship to shore that are used in the US are currently either made in China or use Chinese software, which would make them particularly vulnerable to cyber attacks linked to China.
The president’s executive order also follows a somewhat more general warning by the United States Maritime Administration, which pointed out last year that just the high number of stakeholders that are involved in keeping port operations running, make ports relatively easy targets for cyber attacks regardless of where the equipment comes from. For example. And just to give one example of how exposed key transportation hubs already are to cyber incidents, the port of Los Angeles, the biggest seaport in the US claims to have stopped around 750 million cyber related intrusion attempts just last year. According to the port, that’s the highest number on record.
So essentially while critical infrastructures in the us, in the UK, or in other countries holding elections this year usually have security measures in place to shield them from attacks, the risk of a successful attack will only grow if the number of cyber incidents increases in the run up to an election this year. And then consequently give them the essential role that many of these facilities, including ports, airports, and the power grid play in keeping local, regional, but also global supply chains running the impact of a successful cyber attack could have far reaching consequences even beyond a specific target country. And on this note, I’ll hand it back over to Francisca for questions.
Franzi Nothofer:
Great, thanks Daniella. And thank you to our analyst for the insightful presentation Today we have some questions that just came in from our attendees, and the first question is around cyber risks. So what country is most at risk of cyber related attacks this year? Daniella, this looks like one that you could answer.
Daniela Baron:
Yes, I can take that one. So obviously there’s always going to be a degree of unpredictability to cyber attacks because they’re not limited to say a specific country or a specific region because they don’t work along the lines of borders. However, the data we looked at in preparation for this webinar very clearly indicates that the majority of the companies and facilities that were targeted in the last one and a half years we’re located in the United States. And just given the high profile nature of the US election later this year, there’s also a very likely chance that this trend will continue as far as cyber risk go. One additional point that only came up a couple of days ago for another country holding elections later this year. So in the United Kingdom, the National Cybersecurity Center won just at the beginning of May about the growing risk of cyber attacks on the country’s critical infrastructures that might be linked to Russia. So there’s definitely a concern in the UK as well about the growing risk of cyber. Again, most of the attacks we’ve seen so far were targeted at the US and that’ll probably likely continue as well in the run up to this year’s election.
Franzi Nothofer:
Perfect, thank you. Okay, let’s dive into the next question. How does Everstream monitor these election risks forward? Who would like to take this one?
Josiah Ponnudurai:
I guess I can take it. So yeah, thanks for the question. I think basically one of the main ways our intelligence solutions team does cover, I think major trade related developments related to the elections will be through the reveal solution. And so if a country proposes sanctions or trade restrictions or for example, passes a new post labor law, then you will likely be able to get that notification in our reveal solution. Another way that the intelligence solutions team often covers election related issues is we do have a monthly EA watch series that is going to come out now every month from May until November or December, covering developments in the US elections. So in that EA watch, we’ve covered the most recent proposals given by Biden and Trump related to China, and we also have a monthly EA watch series on US China trade related issues and so on there we cover any developments related to the Taiwan Strait and as well as any developments related to sort of the U-F-L-P-A and forced labor as well as semiconductor related restrictions. So those are, I think, the two main ways that the intelligence solutions team can help your organization keep track of elections this upcoming year.
Franzi Nothofer:
Great, thanks Josiah. We might have time for one more question before we close off the session. So this question is around different sectors looking at the different types of risks covered, what industries are most impacted by election risks.
Daniela Baron:
Maybe I can just touch on the cyber issue again and then if Josiah or Olivia have anything to add from there is we can go from there. Can we go back to the slide that showed the number of cyber attacks by industry by any chance? That should already give us a, there we go. So as mentioned in the presentation, we’ve recorded the vast majority of industry specific attacks in the general manufacturing sector, but then obviously we’ve also seen a recent rise in the electronics and automotive sectors. So those are also two particularly exposed sectors across the globe. So do keep in mind the data you can see on the screen isn’t tied to a specific country that’s across the globe. And just given, I guess the clear difference between manufacturing and then all the other factors, that’s probably also going to be the most exposed one to cyber attacks going forward across all countries. But obviously there’s always a chance cyber criminals or state sponsored actors may decide to target a different one. But then again, I think the general trend of the manufacturing sector being particularly exposed will probably continue.
Franzi Nothofer:
Perfect. Thank you Daniella. Alright, we’re now coming to the end of today’s webinar. If you have any additional questions coming up or would like to get in touch with our team directly, please reach out to [email protected]. Our team is happy to help and dive deeper into any questions we couldn’t get to today. And you will also receive the session recording via email. Thank you to all our attendees who joined today. Thank you to our analysts. Have a great day. And with that, we will close the session.