How Does Geopolitics Influence Trade and Investment in RCEP Member Countries?

This study examines how geopolitics affect trade and investment among members of an economically cooperative trading bloc. We find that heightened geopolitical tensions dampen trade and cross-border investments within the bloc, with asymmetric effects. Geopolitical frictions reduce goods, but not services trade. Portfolio investment is more sensitive than direct investment. Notably, goods trade is more resilient than portfolio investment. The findings underscore that even within a cooperative economic bloc, geopolitical tensions can disrupt economic activity.