God could have but didn't use the power.
Well, just like Jesus in the NT, he limited himself.[
I look at it more of a father and his son wrestling. The Father lets the son win.
I don't know if he let Jacob win. God may have limited himself in order that he be able to interact personally with Jacob. Note that like Moses, Jacob was amazed that he saw God face to face and lived. If God had appeared in his glory to Jacob, Jacob would have fallen dead on the spot.
So, PERHAPS in this limited state, Jacob truly was physically stronger than God and prevailed.
Note also that God asked Jacob's name. If his power was limited at this moment, isn't it also possible that his knowledge was limited and this was a sincere question?
Trust me, I don't understand all this. At the same time, I don't dismiss it as many do. God told us this story for a reason. God does not seem afraid to show himself as limited at times.
And this would answer many controversial scriptures, as when God told Abraham that "for now I know that thou fearest God"
Gen 22:12 And he said, Lay not thine hand upon the lad, neither do thou any thing unto him:
for now I know that thou fearest God, seeing thou hast not withheld thy son, thine only son from me.
Or...
Gen 18:20 And the LORD said, Because the cry of Sodom and Gomorrah is great, and because their sin is very grievous;
21
I will go down now, and see whether they have done altogether according to the cry of it, which is come unto me;
and if not, I will know.
Note the word NOW in both those verses.
Folks want to dismiss these verses as not being literal. But perhaps at these particular times God limited his knowledge and these statements are completely sincere and literal.
You can't explain away that Jacob prevailed over God in this wrestling match. It shows without doubt that God limited himself at this time.