A World on Edge: The Rising Tide of Geoeconomic Confrontations in 2025

As the world grapples with economic volatility, global power shifts, and fractured alliances, a new form of conflict has emerged to shape the 21st-century geopolitical landscape: geoeconomic confrontation. Unlike the open warfare of the past, today’s great powers wield economic instruments as tools of coercion and influence, redrawing the contours of global relations without a single shot fired.

This economic warfare is not merely a clash of trade policies but a deeply entrenched strategic contest. From tit-for-tat tariffs and sanctions to restrictions on critical technologies and raw materials, the economic battlefield is expanding across borders and industries with alarming speed.

The Shift in Global Risk Perceptions

According to the World Economic Forum's Global Risks Report 2025, geoeconomic confrontation now ranks among the top 10 global risks over the next two years, a marked rise from 14th place previously. The scale of concern is reflected in the dramatic increase in harmful trade interventions, which surged from 600 in 2017 to over 3,000 annually from 2022 to 2024.

The report warns of an "unprecedented degree of fragmentation in the global order," driven by eroding trust in institutions, fractured alliances, and the increasing use of economic tools as political weapons.

United States: Tariffs, Nationalism, and Economic Pressure

In 2025, the United States, under President Donald Trump’s second administration, has reasserted its protectionist economic vision. In a sweeping move, the administration imposed 25% tariffs on all imports from Mexico and most from Canada (excluding energy, which faced a 10% tariff). The U.S. framed the policy as a defence of domestic industry, but it swiftly sparked retaliatory tariffs and lawsuits at the World Trade Organization.

More dramatically, a new 34% "reciprocal tariff" on most Chinese imports marked a major escalation in U.S.-China economic tensions. China’s countermeasures included retaliatory tariffs, blacklisting American companies, and restricting the export of rare-earth elements critical to the tech and defence industries.

The fallout has rattled global markets, with business investment in the U.S. recording its sharpest six-month decline since the pandemic recovery period. Investors remain jittery amid rising costs, broken supply chains, and unpredictable policy shifts.

China: Economic Retaliation and Realignment

China has responded to U.S. aggression with a mix of assertiveness and strategy. It cut American oil imports by 90% and bolstered energy ties with Canada. Export controls on rare-earth metals—resources vital to semiconductors, batteries, and defence systems—sent shockwaves through tech industries worldwide.

At the same time, Beijing is seeking to shore up regional alliances. New trade frameworks with South Korea and Japan signal China’s intent to reduce reliance on Western markets and reroute supply chains through Asia. While the moves offer Beijing a measure of resilience, they also raise the spectre of competing economic blocs.

The European Union: Fragmented Unity, Strategic Dilemmas

The European Union finds itself increasingly caught in the middle of global economic rivalries. The bloc’s response to Russia’s war in Ukraine continues to strain internal consensus, with countries like Hungary threatening to veto further sanctions.

Amid this, the EU is seeking to bolster its economic sovereignty. Policy proposals to reduce reliance on the U.S. dollar in cross-border payments and develop independent financial mechanisms reflect growing discomfort with Washington’s dominance.

Yet the EU remains vulnerable. Efforts to sanction Russian energy, support Ukraine, and maintain a unified front against U.S. trade pressures are stretching the bloc’s political and economic cohesion.

Global Impacts: Fragmentation and Uncertainty

The global economy is feeling the ripple effects of these confrontations:

• Supply Chains Under Strain: Industries dependent on cross-border logistics—from electronics to automotive manufacturing—face higher costs and delays.

• Investment Paralysis: Heightened unpredictability deters foreign direct investment, with firms hesitant to commit capital in unstable regulatory environments.

• Technological Decoupling: Competing standards, export restrictions, and bans on dual-use technologies threaten to fragment the global innovation ecosystem.

The International Monetary Fund has warned that if decoupling accelerates, long-term global GDP could shrink by up to 7%, with disproportionate impacts on developing economies.

Navigating a Turbulent Future

Governments, businesses, and multilateral institutions must act with foresight and adaptability. Strategies for resilience include:

• Diversifying Trade Partners and Supply Chains: To reduce dependency on single-source nations.

• Reinvigorating Global Institutions: WTO and IMF reforms could provide more equitable platforms for dispute resolution.

• Investing in Strategic Autonomy: National industries critical to energy, health, and digital security must be prioritised.

As economic confrontation replaces conventional diplomacy, the world teeters on a knife-edge between strategic competition and systemic fragmentation. The next chapter of global order may not be written in treaties, but in tariffs.