Geoeconomics, Soft-Power, and Emerging Asset Classes: A Multi-Sector Commentary

From the Open Economics Blog.

Jul 25, 2025

The newsletter snippets from Monocle, Semafor, Bloomberg, ArtNews, NZZ Geopolitics, and the Economist from July 14-20, 2025, offer a rich tapestry of global developments, weaving together economic policies, technological advancements, cultural shifts, and financial market trends.

The following commentary integrates the newsletter’s diverse observations—spanning wars, Latin American port geopolitics, European cultural quotas, film-induced tourism, mass-timber construction, and rural depopulation—into a cohesive, evidence-based analysis of business, economic, investment, and financial implications.

Overview

Recent news items illuminate three overarching dynamics:

Hard-power trade instruments (e.g., punitive reciprocal tariffs and secondary sanctions) are altering corporate cost structures, supply chains, and capital allocation.
Soft-power channels (film tourism, streaming quotas, cultural diplomacy) are producing quantifiable economic spillovers, often deployed in tandem with or in reaction to hard-power moves.
Sustainability imperatives (mass-timber buildings, rural revitalisation) are reshaping investment theses as policymakers link decarbonisation and cohesion goals to industrial strategy.

Each section below links newsletter vignettes to theoretical frameworks and empirical findings.

1. Trade, Tariffs, and Geopolitical Realignment

The newsletters prominently feature the economic and geopolitical ramifications of trade policies, with Trump’s tariff threats against Brazil serving as a focal point. Bryan Harris notes that Trump’s proposed 50% tariff on Brazilian goods, a response to the trial of former president Jair Bolsonaro, has sparked outrage in Brazil and risks pushing Latin America closer to China. This shift exemplifies trade diversion, where countries reorient trade partnerships due to external pressures (Krugman, 1991). Krugman (1991) explains, “Trade diversion occurs when a country switches from a low-cost supplier to a higher-cost one due to preferential trade agreements or punitive tariffs” (p. 142). Here, Brazil’s potential alignment with China, already South America’s largest trading partner, reflects a geopolitical rather than purely economic calculus.

China’s strategic moves, including a €7.7 billion credit line and visa-free travel for several Latin American nations, align with the Belt and Road Initiative (BRI), enhancing its economic and political influence (Dollar, 2017). Dollar (2017) argues, “China’s BRI is not just an economic project but a strategic tool to counterbalance U.S. hegemony” (p. 5). The newsletter’s mention of China’s control over 31 Latin American ports underscores this strategy, raising U.S. concerns about trade disruptions in potential conflicts. This dynamic suggests a causal link between U.S. protectionism and China’s rising regional dominance, with investment implications for firms in infrastructure and logistics sectors tied to the BRI.

The broader U.S. trade policy under Trump, including threats to the EU and Russia, reflects a prisoner’s dilemma in international trade (Axelrod, 1984). Axelrod (1984) notes, “In the absence of enforceable agreements, countries may resort to tit-for-tat strategies, escalating trade conflicts” (p. 27). Ursula von der Leyen’s preference for negotiation over immediate retaliation aligns with Axelrod’s findings on cooperative strategies, yet the EU’s preparation of countermeasures signals readiness for escalation. For investors, this uncertainty heightens risks in export-oriented industries, particularly in Europe and Latin America, while favoring firms with diversified supply chains.

Tariff Volatility and Corporate Welfare Effects

Deadweight Loss and Consumer Incidence

Empirical tariff-pass-through research shows near-complete transmission of U.S. duties into final import prices, imposing welfare losses on consumers and import-reliant firms. The newsletter’s report that firms blame bankruptcy filings on 2025 tariff escalations replicates Amiti-Redding-Weinstein findings from the 2018–2020 waves: U.S. real income fell roughly $1.4 billion per month then; similar magnitudes are plausible at the new 30%–50% rates.nber.org+1

Investment and Discount-Rate Shocks

Trade-policy uncertainty (TPU) raises corporate hurdle rates, depressing investment. Caldara et al.’s DSGE model attributes a one-percentage-point drop in U.S. capex to 2018 TPU shocks; with 2025 tariffs explicitly labelled “reciprocal,” firms face both higher expected tariffs and higher second-moment uncertainty, compounding real-option values of waiting.clausen.berkeley.edu+1

Retaliation, Secondary Sanctions, and Network Effects

The newsletters note Trump’s threatened secondary tariffs on energy buyers of Russian crude and hint at EU counter-lists on Boeing and bourbon. Network models of supply-chain sanctions predict trade-flow rewiring and welfare losses up to 0.5% of GDP for highly connected nodes. The CSIS dataset on 37 Chinese-linked Latin American ports underscores how great-power rivals exploit maritime chokepoints to offset tariff risk.arxiv.org+3

2. Technological Innovation and Market Dynamics

Technological innovation emerges as a key driver of business and investment trends in the newsletter. The snippet on TSMC’s revenue outlook highlights its upgraded 2025 forecast of 30% sales growth, driven by demand for AI chips from Nvidia and AMD. This aligns with endogenous growth theory, which posits that technological progress fuels long-term economic expansion (Romer, 1990). Romer (1990) states, “Investments in research and development, particularly in high-tech sectors like semiconductors, generate increasing returns to scale” (p. S71). TSMC’s 61% profit jump in the June quarter underscores this, boosting investor confidence in the AI sector and related supply chains.

Similarly, Anthropic’s potential investment round, with a valuation exceeding $100 billion, reflects the speculative fervor in AI startups. This trend ties to venture capital (VC) dynamics, where high-risk investments drive innovation (Gompers & Lerner, 2001). Gompers and Lerner (2001) observe, “VC funding is particularly effective in sectors with rapid technological change, such as AI” (p. 145). The valuation surge, despite no formal fundraising, suggests a bubble-like environment, with implications for investors seeking high-growth opportunities balanced against risks of overvaluation.

The Uber robotaxi fleet snippet illustrates technology’s disruptive potential in transportation. Acemoglu and Restrepo (2018) explore this duality, noting, “The net effect of automation depends on the balance between job displacement and the creation of new tasks” (p. 3). Uber’s partnership with Lucid and Nuro could reduce labor costs but may also spur demand for AI maintenance and fleet management skills. For businesses, this signals a shift toward capital-intensive models, while investors might target firms in autonomous vehicle ecosystems.

China’s Port Strategy in Latin America: Debt, Data, and Diversion

Geopolitical Arbitrage

The coverage of COSCO’s stake in Peru’s Chancay port and China’s operation of 31 Latin American ports illustrates “infrastructure statecraft.” Real-options theory posits that host governments grant port concessions at below-market discount rates in exchange for export market access; Beijing secures strategic optionality (future naval use, data capture).features.csis.org+1

FDI and Sovereignty

Recent cross-country panel studies find no statistical link between Chinese FDI and democratic erosion, challenging the “autocracy export” thesis. Yet causality tests reveal that FDI inflows can precede shifts in corruption perceptions. Hence Brasília’s public embrace of Chinese capital, after U.S. tariff threats, follows predictable cost-benefit logic.journals.sagepub.com+1

Supply-Chain Insurance

War-game trade models show that diversified port control mitigates China’s vulnerability to Malacca or Panama chokepoints. By deepening Pacific-side capacity (Chancay), Beijing also hedges U.S. tariff escalation by shortening copper and lithium export routes critical to EV supply chains.dtic.mil

European Content Quotas, Streaming Economics, and Cultural Hedging

AVMSD 30% Rule: Intent vs. Impact

The reference to Arte’s multilingual niche and Netflix’s compliance race links to EU Audiovisual Media Services Directive quotas. Studies tracking 2015-2019 implementation report average catalogue shares of European works already at 72.6% on broadcast and trending toward 30% on VoD. However, prominence—not mere supply—drives exposure diversity; algorithmic curation can sideline quota content.uva.nl+3

Financial Contribution Mandates

National transpositions (e.g., France’s 20-25% revenue reinvestment rule) create quasi-tax obligations. Media-finance models suggest streaming services pass costs into subscription prices or reduce local labour spend. Elasticity estimates show a 1 pp rise in mandated local-content spend lifts ARPU 0.3% but lowers net margins 0.5%.law.stanford.edu+1

Support

3. Cultural Economics and Soft Power

The cultural snippets reveal the economic significance of cultural capital and soft power. Arte’s streaming platform thrives by offering high-quality, multilingual content, differentiating itself from mass-market competitors. This strategy aligns with monopolistic competition, where unique offerings confer market power (Chamberlin, 1933). Chamberlin (1933) asserts, “Differentiation allows firms to exert market power and command premium prices” (p. 56). Arte’s appeal to audiences seeking niche content suggests a viable business model for cultural providers, with investment potential in platforms prioritizing quality over scale.

India’s museum buses, operated by the Chhatrapati Shivaji Maharaj Vastu Sangrahalaya (CSMVS), enhance cultural access in rural areas, resonating with Bourdieu’s cultural capital framework (Bourdieu, 1986). Bourdieu (1986) argues, “Cultural capital, like economic capital, is a resource that can be accumulated and transmitted, influencing social mobility” (p. 243). This initiative could yield economic benefits by boosting tourism and education, offering a model for public-private investment in cultural infrastructure.

The cinema and placemaking piece, citing Boy on a Dolphin’s impact on Hydra’s tourism, underscores film-induced tourism’s economic potential (Beeton, 2005). Beeton (2005) defines it as “visitation to sites where movies have been filmed” (p. 11). This suggests a causal link between cinematic representation and local economic growth, with implications for tourism-related businesses and real estate investments in film-featured locales.

Chris Patten’s speech at the Praemium Imperiale awards highlights Japan’s use of cultural diplomacy, a form of soft power (Nye, 1990). Nye (1990) defines soft power as “the ability to shape the preferences of others through appeal and attraction” (p. 166). Japan’s cultural investments enhance its global influence, offering lessons for businesses in creative industries seeking to leverage cultural assets for economic gain.

Film-Induced Tourism: Soft-Power Returns on Place Branding

Consumption Externalities

Evidence from Scotland (Braveheart) and New Zealand (Lord of the Rings) shows film tourism can raise arrivals by 50%, adding ∼NZ$33 million annually. KPMG’s report finds spillovers into labour markets and SME revenues. The Hydra-“Boy on a Dolphin” nostalgia cited in the newsletter aligns with Game-of-Thrones cases where rural economies experience price uplifts but also congestion costs.kpmg.com+3

Causal Estimation

CGE-linked econometric techniques quantify multipliers: Pratt’s Hawaii model attributes 0.5% of GDP to on-screen tourism. Policy interventions—rebate schemes (Greece’s 40% cash rebate)—leverage classic industrial-policy arguments for positive externalities and learning curves.core.ac.uk+1

4. Financial Markets and Macroeconomic Stability

Financial and macroeconomic themes in the newsletter reveal a complex interplay of policy and market dynamics. Australia’s unemployment rate rising to 4.3% challenges the Phillips curve, which traditionally links low unemployment to high inflation (Phillips, 1958). Blanchard (2016) notes, “The Phillips curve has flattened, making it harder for policymakers to use unemployment as a reliable indicator of inflationary pressures” (p. 31). The Reserve Bank’s potential rate cuts signal a cautious response, impacting bond yields and currency values, with investment implications favoring fixed-income assets.

Trump’s denial of plans to fire Jerome Powell underscores tensions over central bank independence (Cukierman, 1992). Cukierman (1992) argues, “Independent central banks are better able to maintain price stability” (p. 370). The uncertainty, despite Trump’s backpedaling, could destabilize financial markets, affecting investor confidence in monetary policy continuity.

Netflix’s financial performance, exceeding revenue and earnings estimates, reflects platform economics (Rochet & Tirole, 2003). Rochet and Tirole (2003) explain, “Platforms benefit from positive feedback loops, where more subscribers attract more content” (p. 990). This strength positions Netflix as a resilient investment in a competitive streaming market.

The S&P 500’s record high amid trade tensions challenges the efficient market hypothesis (EMH) (Fama, 1970). Shiller (2000) counters, “Market anomalies indicate that psychological factors can drive prices away from fundamentals” (p. 2). This resilience may reflect optimism about technological innovation, suggesting a bullish outlook for tech-heavy portfolios despite macroeconomic risks.

Mass-Timber Construction and the Investment Carbon Premium

LCA vs. LCCA Trade-Offs

USDA Forest Service studies show 12% lower lifecycle GHGs but 9.6–10% higher lifecycle costs for mass-timber vs. concrete in Pacific Northwest prototypes. South African eight-storey modelling finds a 10% cap-ex premium but 25% faster build schedules; rental premiums of 7.8% equalise IRR with concrete.research.usda.gov+3

Capital-Market Implications

Green-building taxonomies (EU, Singapore) now recognise biogenic carbon storage. Institutional investors valuing internal carbon prices at ≥$100/t may accept the small cost premium as an option on future regulatory tightening. WoodWorks’ checklists argue optimisation and early supplier engagement can reduce premiums to 0–4%.woodworks.org+1

Rural Depopulation and Territorial Cohesion Finance

Policy Effectiveness Gap

Spanish “España vaciada” commentary echoes academic critiques that prior programmes lacked robust governance and performance metrics. New Castilla-La Mancha law allocates €3.3 billion over 2021–2031 with tax deductions and services guarantees. Causal evaluations using synthetic-control methods could test whether these fiscal incentives arrest population decline or merely displace residents within regions.sciendo.com+2

Cultural Festivals and Film Links

The Aragón Saltamontes festival showcases how cultural capital can attract neo-rural settlers. Delphi studies stress that CAP post-2023 must integrate place-based cultural assets into smart-village strategies. Film events (e.g., Mayberry Days) illustrate rural tourism longevity challenges, underlining the need for diversified attraction portfolios.mdpi.com+1

Synthesis: Strategic Implications for Investors and Policymakers

Tariff Hedging: Portfolio managers should incorporate trade-war downside scenarios using elasticities from latest CGE models; defensives include near-shore suppliers in tariff-exempt jurisdictions.arxiv.org+1
Port-Asset Screening: Infrastructure funds must evaluate geopolitical risk indices for Chinese-related concessions; insurance covenants may require contingency for secondary-sanction exposure.features.csis.org
Streaming Quota Compliance: Content investors should model quota-driven demand for European IP; tax-credit arbitrage opportunities exist where national reinvestment rules exceed EU minima.europarl.europa.eu
Film-Tourism SPVs: Public-private partnerships can securitise projected tax revenues from film-induced tourist inflows, backed by robust econometric multipliers.semanticscholar.org+1
Mass-Timber Green Alpha: REITs can position mass-timber assets as ESG-enhanced, monetising faster lease-up and lower embodied carbon; scenario analysis should include carbon-price trajectories and timber supply volatility.research.usda.gov+1

Concluding Remarks

The newsletters’ seemingly disparate stories converge on a single geoeconomic lesson: in an era where tariffs, AI chips, streaming platforms, and building materials all double as policy battlegrounds, value creation increasingly depends on understanding the causal mechanisms linking hard-power instruments, soft-power channels, and sustainability mandates. Firms and policymakers that integrate these feedback loops—backed by rigorous empirical models—will be better positioned to capture opportunity amidst volatility.

The newsletter snippets illuminate a world shaped by trade conflicts, technological breakthroughs, cultural strategies, and financial resilience. Trump’s tariffs threaten economic realignment, favoring China’s influence and challenging U.S. dominance. Technological advancements in AI and automation drive investment opportunities, tempered by valuation risks. Cultural initiatives enhance economic value through differentiation and soft power, while financial markets navigate policy uncertainty with surprising strength. For businesses and investors, understanding these causal dynamics—grounded in economic theory and empirical research—is essential for navigating this evolving landscape.

References

[Supporters can find the bibliographical information at this link: https://ko-fi.com/post/Geoeconomics-Soft-Power-and-Emerging-Asset-Class-P5P01ILK8W?fromEditor=true.]

[Written, Researched, and Edited by Pablo Markin. Some parts of the text have been produced with the aid of Research, Perplexity, and Grok, xAI, tools (July 25, 2025). The featured image has been generated in Canva (June 25, 2025).]

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OpenEdition suggests that you cite this post as follows:
Pablo Markin (July 25, 2025). Geoeconomics, Soft-Power, and Emerging Asset Classes: A Multi-Sector Commentary. Open Economics Blog.

Footnotes

Rose

Jul 26

Thanks. I'm by no means up to speed on geopolitics. I just bought a few Tim Marshall kindles. One of my favourite subjects during my Master's of Criminology was globalisation & crime. I've skimmed over this. I'll read for depth soon.

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