Prospects for global imbalances in 2026 and beyond: Another China shock?

Tamim Bayoumi and Joseph Gagnon
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Tamim Bayoumi: (King’s College

No WP26-2, Working Paper Series from Peterson Institute for International Economics

Abstract: Global current account imbalances widened in the past two years, led by growing surpluses in China and deficits in the United States. Most forecasters expect imbalances to stabilize or even narrow in 2026 and 2027. Bayoumi and Gagnon disagree with these projections, concluding that China's surplus will grow considerably, putting downward pressure on surpluses in Europe and the rest of Asia. The global economy may be on the cusp of a second, more intense China shock, with profound geopolitical and economic consequences.

Keywords: Current account; protectionism; tariff; trade tensions. (search for similar items in EconPapers)
JEL-codes: F21 F32 F34 F51 (search for similar items in EconPapers)
Date: 2026-02
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