As the world is currently witnessing a major global power shift, the long-standing divide between geopolitics and geoeconomics is undergoing a reconfiguration. Geopolitics, which is characterised by military strength, territorial influence, and national sovereignty, has traditionally been the framework through which international relations were interpreted. But currently, the power to shape international affairs does not lie with those who control armies and borders anymore, but with those who command capital flows, trade routes, supply chains, and technological ecosystems. Once seen as subordinate to hard power, geoeconomics is more than ever a strategic tool to pursue political goals through economic means.
Currently, the multipolar world is shaped by interdependencies and the emergence of many asymmetrical threats. Global finance, infrastructures and digital connectivity became key components of daily life. Countries no longer need to send troops to assert dominance once they are able to influence currency flows, restrict access to rare and vital earth minerals or simply weaponize trade. As globalisation and cyber space evolves under the pressure of technological competition, conventional alliances are being tested, and new forms of cooperation and confrontation are paving the way to new interstate interactions.
The aim of this article is to investigate the distinctions, historical developments and current phenomenons of geopolitics and geoeconomics. By tracing the theoretical foundations of both concepts, it describes how their interaction is currently reshaping dynamics all around the world, with a particular focus on the ongoing U.S-China trade war, the war in Ukraine and the position of ASEAN countries within this context. Rather than viewing geoeconomics as replacing geopolitics, it’s more accurate to state that both of them are converging into a hybrid form of statecraft which aims to leverage economic interdependence as a way to gain strategic advantage.
I. Current implications of the growing influence of geoeconomics
The shift in the international dynamics the world is currently experiencing has profound implications for the future. As states and corporations navigate an increasingly fragmented international system, the need to reimagine traditional concepts of sovereignty, risks and resilience is more vital than ever. For those actors, the ability to maintain economic security may soon become as decisive as military capability in determining the hierarchy of global powers. Moreover, the increase in the use of economic instruments to pursue geopolitical goals highlights a deeper transformation: in a world in which resources are getting more constrained, technological disruption, and heightened nationalism, states are more engaged in using market access and investment flows to coerce and persuade their peers. Whether through sanctions, export controls, or state-backed investment funds, commerce became inseparable from political power. This shift is also observable at the corporate level. A survey conducted by the Japan Bank for International Cooperation (JBIC) reveals how companies are increasingly aware of geopolitical risks tied to domestic politics, trade barriers, and sanctions.
The distinction between geopolitics and geoeconomics is not merely theoretical but also practical. Geopolitics manifests itself through displays of military power or territorial disputes, while geoeconomics involves more subtle yet equal methods such as manipulating energy markets, restricting technology transfers, or deploying sanctions with ripple effects. The Russian invasion of Ukraine and the tensions between Beijing and Washington, as well as the competition for rare materials such as cobalt in Africa are proof of the dual pressures impacting modern diplomacy. It is also necessary to mention the shift in general public perception and domestic politics. As citizens around the world struggle with inflation, supply chain disruptions and job insecurity, economic policy imposed itself as a front line of national security.
Given the rising tensions and shifting alliances, can global leaders choose a path of constructive interdependence, or is the world headed toward a new era of strategic rivalry driven by economics ?
II. Conceptual and historical distinctions: from traditional power politics to economic statecraft
The difference between geopolitics and geoeconomics is foundational but deeply wired together. By definition, geopolitics revolves around the territorial imperatives of states: who controls what; land, sea, and resources, and how exactly they assert dominance through military alliances and the use of deterrence. This common idea reflects a world in which state survival is often seen through the lens of hard power, as conceptualized by Joseph Nye. Geoeconomics, by contrast, is instrumentalized more subtly, but its impact can be even more significant: one wielded through tariffs, subsidies and access to global markets. As the economist and historian Edward Luttwak famously declared that “if the players left in the field by the waning importance of military power were purely economic entities—labor-sellers, entrepreneurs, corporations—then only the logic of commerce would govern world affairs,’ and in place of world politics, ‘we would simply have World Business’ and the logic of war would be played in the grammar of commerce.” Yet, it is necessary to mention the limits of this transition. States would not leave their geopolitical instincts behind, as their bureaucracies are motivated to keep their territorial and strategic prerogatives. Geoeconomics therefore appears as some kind of rechanneling of the same competitive drive in new areas.
During the mercantilist era, economic policy and national power were inextricably linked together. Wealth was accumulated, colonies were exploited and trade routes were militarised. In many ways, this era was characterised by geoeconomics long before the term even existed. Later on, the Cold War was also punctuated by strategic economic aid from both belligerent parties such as the Marshall Plan and the Soviet Comecon, economic coercion with sanctions and embargoes, as well as ideological competition in development models. According to David A. Baldwin, theories such as developmentalism and modernization functioned as tools of influence as much as growth.
Nowadays, the post-Cold War unipolar moment allowed the impressive rise of neoliberalist globalization in which markets have the power to transcend politics. However this vision was proven illusory as states found themselves more and more vulnerable to international economic shocks, the 2008 subprimes crisis being a perfect case in point. This vulnerability reached an unprecedented point during the COVID pandemic in 2020, with major supply-chain disruptions. From this moment on, states turned to economic nationalism, techno-protectionism and strategic decoupling. In this way, the resurgence of geoeconomics is not simply seen as a new development but a return to an old truth: that economic instruments have always, and continue to serve political ends. Moreover, geoeconomics today is not confined to state actors. It is obvious that multinational corporations, sovereign wealth funds and other actors are immersed in these dynamics. The stakes revolving around the control of digital platforms, logistical platforms and major infrastructures has become a vital dimension of national power.
III. Trade war and the rise of economic weaponization
The trade war between the United States and China serves as a symbol of geoeconomic rivalry. With punctual tensions around trade imbalances and intellectual property violations, the conflict quickly took on another dimension to become a multifaceted contest over economic and technological supremacy. The Trump administration’s tariffs on Chinese goods, the blacklist of Chinese technological firms as well as the investigations launched into espionage sparked retaliatory actions from Beijing: even more tariffs, currency devaluation and efforts to decrease Chinese dependency on U.S technology. The goal is clear for the Americans: to prevent China from dominating the major aspects of the 21st-century economy such as artificial intelligence, the monopoly of the sector of semiconductors, 5G infrastructures, and green technology. The years before, the Biden administration showed the same motivations, even though this time was characterised by a “softer” approach towards the Chinese.
The trade war also triggered a wider separation between the U.S, its allies, and China. As the West started to depend less on Chinese supply chains for important goods like medical equipment and rare earth minerals, China focused more on its own economy and building up its own technology. As a consequence, companies began restructuring their operations globally to avoid future risks. The growing distrust resulted in a slow fragmentation of the integrated global economy.
The stakes revolving around geoeconomics also extended to third countries. Washington has pressed its European and Asian allies to exclude Chinese companies like Huawei from building 5G networks, citing national security concerns. For instance, in July 2020, the United Kingdom announced a complete ban on Huawei from its 5G networks, mandating the removal of existing equipment by 2027. This policy shift was influenced by sustained U.S pressure, particularly the potential for espionage and the impact on intelligence-sharing agreements. In the meantime, Beijing has expanded its Belt and Road Initiative (BRI) by providing financing for ports, railways and digital infrastructure in the Global South, mainly in exchange for political support. These recent developments constitute a clear globalisation in geoeconomic competition, as countries across Latin America, Africa and Southeast Asia are drawn into distinct competing spheres of influence. Some experts even argue that we are currently in a new type of Cold War. In this context, economist Jeffrey Sachs has described the United States as “a force for trying to create a new cold war with China,” criticizing its role in driving geopolitical polarization.
In the end, this trade war marks a major turning point. Tools like tariffs, subsidies, and export controls aren’t just about managing the economy anymore, they have actually become part of a bigger fight for global power. As economic ties once helped keep the peace through interdependence, they are now seen by some as weaknesses that can be exploited.
IV. Ukraine: a collision of strategic and economic realities
In February 2022, the invasion of Ukraine served as a reminder of Russia’s hard power. Yet the Western’s response was striking not for its military dimension but for its economic character. The U.S and the European Union imposed unprecedented sanctions targeting Russia’s central bank, oligarchs, energy exports, and financial institutions. Another impactful response was the closing of airspace and the divestment of Russian companies, which left no choice for the country but to have an autarkic stance in global affairs.
Theoretically, this response served as an example of the geoeconomic doctrine which consists in using economic pressure to achieve political goals, in this context to deter aggression. But the war also revealed the limitations of those tools. Despite severe sanctions, Russia continued its offensive, adapted to new trade partners, and leveraged its energy exports to exert pressure on Europe. This raises questions about the efficiency of geoeconomics in deterring actors who are actually willing to bear economic pain for strategic objectives.
But even more revealing were the conditionalities tied to Western aid to Ukraine. In exchange for military and economic assistance, the United States secured access to Ukrainian mineral resources and infrastructure contracts, highlighting how strategic aid is increasingly linked with economic interests. For the European Union, the war served as a wake-up call. It exposed the Union’s dangerous dependence on Russian gas, which had impacted German industrial competitiveness for decades. As the war escalated, energy prices soared, inflation spiked forcing European leaders to accelerate the green transition while struggling to secure alternative energy sources.
V. ASEAN and the art of strategic hedging
In Southeast Asia, the tension between geopolitics and geoeconomics plays out in more ambiguous ways. The ten-member Association of Southeast Asian Nations (ASEAN) sits at the junction of great power competition, particularly between the United States and China, yet it continues to carefully balance its relationships with both sides without fully aligning with either. Rather than aligning fully with one power, ASEAN states aim to maximize economic gains while minimizing geopolitical entanglements. China has become ASEAN’s largest trading partner and a key investor in infrastructure through initiatives like the Belt and Road Initiative (BRI) and the Lancang-Mekong Cooperation (LMC).
But at the same time, the U.S and its allies remain important security and technology partners, a relationship once reflected in renewed military cooperation with the Philippines like with the expansion of the U.S. military presence through the Enhanced Defense Cooperation Agreement (EDCA) in 2023, which granted American forces access to additional bases amid rising tensions in the South China Sea. However, this balancing act is becoming harder to maintain. China’s increased militarization in the South China Sea, its economic coercion tactics, and demands for political loyalty on issues like Taiwan challenge ASEAN’s traditional norms of neutrality and consensus, whereas western pressure to decouple from Chinese tech infrastructure particularly 5G and AI ecosystems threatens to disrupt ASEAN’s deeply integrated supply chains. This paradoxical exposure to both opportunities and vulnerabilities positions ASEAN as a pivotal case study in how middle powers navigate a world where geoeconomic interdependence and geopolitical fragmentation now coexist.
VI. The impact of U.S funding cuts on the international system
The dramatic reduction in U.S funding for the United Nations since Donald Trump has been back in office, targeting a cut of up to 87% in support for U.N. programs, recently prompted Secretary-General António Guterres to propose sweeping institutional reforms. The actions considered contain significant staff reductions, the discontinuation of unaffordable initiatives, and the consolidation of agencies with overlapping roles. Humanitarian and migration agencies, heavily reliant on voluntary contributions, were already facing mass layoffs. In parallel, the Task Force 80 recommendations emphasized the need to streamline U.N operations by consolidating peace and development agencies, relocating personnel closer to operational zones, and repositioning certain headquarters such as making Nairobi a hub for development work.
According to Thomas Byrnes in “Breaking: UN80 Signals Major Humanitarian Agency Consolidation”, the UN Secretary-General’s UN80 briefing marks the first clear indication that a merger of key humanitarian agencies is under serious consideration. The agencies identified include the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), the United Nations High Commissioner for Refugees (UNHCR), the International Organization for Migration (IOM), and the World Food Program (WFP). This restructuring is largely a response to a worsening liquidity crisis and it aims to enhance the efficiency of humanitarian action. A newly established high-level “humanitarian cluster” will guide the reform, focusing on reducing overlap, improving coordination, and addressing long-standing systemic inefficiencies. The goal is to integrate essential functions while preserving each agency’s expertise, ensuring continued effectiveness despite shrinking financial resources. Beyond addressing inefficiencies and outdated practices, these measures aim to enhance the U.N’s long-term sustainability and responsiveness in a time of uncertainty. More broadly, the restructuring reflects a shift in the global landscape, where economic instruments such as aid and investment have clearly become tools of geopolitical influence.
Conclusion
The constant interplay between geopolitics and geoeconomics reveals a true transformation in the way power is projected within global affairs. From trade wars to energy dependencies and institutional funding crises, states are turning to economic tools as instruments of strategic influence. As demonstrated through the cases of the U.S-China rivalry, the war in Ukraine, and ASEAN’s strategies, national power today is measured as much by control over supply chains and digital infrastructures as by military power. The recent push to restructure the United Nations’ humanitarian system, in response to funding cuts and inefficiencies, further illustrates how economic constraints are reshaping international relations. The convergence of geopolitical drive and geoeconomic methods suggests that future conflicts and alliances will be defined less by borders and more by control over the world market. In this emerging landscape, adaptability, interdependence, and resilience will be key to navigating uncertainty.
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