World Rethinks Geoeconomic Calculus in a More Contested Era
IMF Blog, June 2, 2026
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- Authors: Gita Bhatt
- Published: June 2, 2026
Overview
- Publication: Finance & Development blog entry by Gita Bhatt, dated June 2, 2026.
- Central thesis: Economic thinking must evolve to account for a shift in how nations pursue security, growth, and influence as geoeconomics—use of tariffs, sanctions, and export controls for national security—becomes more prevalent.
- Key observation: The line between economic and national security policy is blurring, ushering in a new era of geoeconomics.
Historical context and perspective
- Geoeconomics is not new: For many countries—from Brazil to India to Türkiye—it has long been the norm (noted by Josh Lipsky).
- Recent change: The world’s largest economy is increasingly employing geoeconomic tools, amplifying global consequences.
Analytical framework and mechanisms of geoeconomic power
- Authors and contributions cited:
- Christopher Clayton, Matteo Maggiori, and Jesse Schreger: provide a new analytical framework.
- Core findings:
- Control of choke points—such as financial infrastructure, technology, or critical commodities—can confer immense power.
- Overuse of geoeconomic power is self-defeating: it drives other nations to seek alternatives and erodes the leverage being wielded.
- Policy implication from framework:
- Need for policy tools that allow limited intervention to enhance economic security while preserving benefits of globalization.
Costs, benefits, and trade-offs
- Jeffry Frieden: economic coercion imposes costs on efficiency, innovation, credibility, and domestic cohesion.
- Kim Ruhl: enhancing geoeconomic resilience is essential even if it reduces efficiency; the US must adopt tariffs, sanctions, and industrial strategies to respond to nonmarket actions by adversaries.
- Common theme: Resilience matters—but so does restraint.
- Excessive dependence = vulnerability.
- Excessive fragmentation = jeopardizes economic benefits from cooperation.
- Challenge articulated: Strike a balance—diversify and cooperate where possible, preserve institutions that make power predictable rather than arbitrary.
Implications for middle powers and regions
- Gedion Timothewos (Ethiopia’s foreign minister): Sub-Saharan African countries face declining aid and a crumbling multilateral peace architecture, but can find leverage in the global race for Africa’s critical minerals.
- N. K. Singh: Middle powers such as India can shape the emerging order by building issue-based coalitions.
- Beatrice Weder di Mauro: Europe should stop thinking of itself as a middle power and start acting like a great power in proportion to its economic heft.
- Multilateral system challenge:
- Aaditya Mattoo, Michele Ruta, and Robert Staiger: Geopolitical competition need not end trade cooperation, but requires rethinking the rules to avoid disruptive trade wars and protect neutral countries.
Policy recommendations and strategic guidance
- Adopt limited, targeted interventions to enhance economic security while preserving globalization’s benefits.
- Build resilience through diversification and cooperation, avoiding both excessive dependence and fragmentation.
- Middle powers should form issue-based coalitions to increase influence.
- Major economies should exercise restraint to prevent overuse of leverage that prompts countermeasures and fragmentation.
- Multilateral institutions must adapt rules to accommodate geopolitical rivalry while protecting trade cooperation and neutral states.
Conclusion and outlook
- Geoeconomics likely represents a durable shift in how nations pursue security, growth, and influence.
- Economic thinking and policy must evolve with real-world experience to navigate an increasingly volatile world.
- Editorial note: The author was saddened by the passing of Robert Skidelsky, who submitted an article to F&D shortly before his death in April, aged 86.
Source: Gita Bhatt, "World Rethinks Geoeconomic Calculus in a More Contested Era", June 2, 2026 — https://www.imf.org/en/blogs/articles/2026/06/03/the-geoeconomic-calculus
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- fd-june26-geoeconomics