On Geoeconomics
Geoeconomics is a concept that came about in 1990 thanks to Edward Luttwak. It’s all about how countries use their economic strength—like trade, investments, or money policies—to reach political goals. Instead of using military power, they use their control over trade and finance to influence others. This idea became more important after the Cold War, especially with globalisation and the rise of countries like China using economic power as a strategic tool.
Main Tools and Tactics in Geoeconomics
Countries use several tools to apply geoeconomic pressure:
Trade Rules and Tariffs: Governments use import taxes or trade deals to protect their own industries or punish other countries. A good example is how some countries blocked the export of key tech products like semiconductors for strategic reasons (according to DGAP).
Sanctions: These are financial penalties or trade bans, usually agreed upon by several countries. The goal is to hurt a country’s economy enough to force a change in behaviour—like those imposed on Russia from 2022 to 2025 (UK Parliament report).
Investment and Development Projects: Foreign investments or big infrastructure efforts—like China’s Belt and Road Initiative (BRI)—let a country spread its influence. These investments often create economic ties that make other countries more dependent on the investor (as the Council on Foreign Relations explains).
Currency Power: The US uses the global dominance of the dollar to apply financial pressure. Meanwhile, China is pushing for more global use of its currency, the yuan (RMB), so it’s less reliant on the dollar and can counter US financial power.
How Trade is Turned into a Weapon
The US-China Trade War
The trade war between the US and China started in 2018. Both sides raised tariffs on each other’s goods, with the US charging as much as 124.1% by 2025, and China responding with 125% tariffs. According to CNBC, this led to higher costs for US households—about $1,300 more in taxes per family in 2025 (Tax Foundation). China’s economy also took a hit, with its growth in 2019 dropping to the lowest point in 30 years. China responded by shifting its trade more toward Southeast Asian countries (ASEAN). This whole situation shows how trade can be used like a weapon—causing real economic pain, but also creating strategic opportunities and risks.
Sanctions on Russia
After Russia invaded Ukraine in 2022, Western countries responded by hitting Russia with tough sanctions. These measures froze about 70% of Russia’s banking assets and have cost the country over $500 billion, according to the Centre for Strategic and International Studies (CSIS). Even so, Russia’s economy hasn’t collapsed—it’s actually expected to grow by 1.4% in 2025, despite early predictions that it would shrink by 10-12%. The European Union alone has blocked €48 billion worth of exports to Russia and banned €91.2 billion in imports since 2022. This shows that while sanctions are a key tool in economic warfare, their success is limited when countries find ways to work around them—like using secret shipping routes known as “shadow fleets.”
China’s Belt and Road Initiative (BRI)
Started in 2013, the Belt and Road Initiative (BRI) is China’s massive global investment project, worth over $575 billion. Most of the money—91%—has gone to poorer countries that qualify for World Bank support, according to a World Bank report. By 2016, China had already finished $66 billion worth of infrastructure projects under the BRI. But between 2019 and 2023, nearly a third (28%) of the countries that received BRI funding ended up struggling with high debt. Looking ahead, it’s estimated that 37% of these countries will have increased debt compared to the size of their economies. One of the most well-known examples is Sri Lanka’s Hambantota Port. Because Sri Lanka couldn’t pay back its loans, it had to lease the port to China for 99 years. This situation has raised concerns about so-called “debt trap diplomacy,” where China is accused of using loans to gain control over key assets.
Debt Data from Belt and Road Countries
The World Bank has shared detailed numbers on how much debt countries involved in China’s Belt and Road Initiative (BRI) are taking on. These figures help show just how big an impact the BRI is having on the global economy.
How Currency Shapes Geoeconomic Power
Control over currency is a major part of economic power. As of late 2024, the US dollar still dominates, making up 59% of global currency reserves—but that’s a drop from 70% in 2000 (IMF data via BestBrokers). This shift is giving more room for other currencies, like China’s yuan (RMB), which now holds 2.18% of reserves. China is pushing hard to get countries to use the yuan more, aiming to rely less on the dollar.
By 2022, over 40% of China’s international payments were made in RMB, according to a Boston University study. This is part of China’s broader plan to protect itself from financial risks tied to the US-dominated system.
What’s Coming Next?
Looking ahead, economic competition using geoeconomic tools is likely to become more intense. The IMF predicts the global economy will grow by 3.3% in 2025—a stable number but still below the usual pace, partly due to ongoing trade tensions.
The OECD agrees that trade uncertainty will slow things down. J.P. Morgan even expects the US economy to shrink slightly—by 0.3% in 2025—mainly because of tariffs, and they warn a recession could be coming.
The World Bank shows in its graphs that global trade is still weaker than it was before COVID-19. This is a sign that the world economy is becoming more divided and less cooperative.
At the same time, the growing use of China’s currency hints at a possible power shift in the financial world. The Atlantic Council says this trend could change how countries align economically and politically.
Wrapping It All Up
In simple terms, geoeconomics—using trade and money as tools for global influence—is changing how countries deal with each other. Whether it’s the US-China trade war, the sanctions on Russia, or China’s investments through the BRI, all of these examples show the different ways countries are using economic strategies to get ahead.
As the power balance shifts, especially in the world of currency, the future looks more complicated and divided. For leaders, analysts, and anyone studying global affairs, keeping up with geoeconomics is now more important than ever.
—————–
Rajeev Ahmed
The Editor of Geopolits.com and the Author of the book titled Bengal Nexus
———————–