Global trade imbalances widened to 3.7% of world GDP in 2025, the highest since before the global financial crisis, as the U.S. current-account deficit swelled to $1.1 trillion and China's surplus remained the world's largest, setting the stage for tense G7 negotiations in France this week.
Global trade imbalances widened to 3.7% of world gross domestic product in 2025, the highest level since before the 2008 financial crisis, as the U.S. current-account deficit swelled to $1.1 trillion and China's surplus remained the world's largest, according to International Monetary Fund data cited by the Wall Street Journal.
"The international imbalances discussion is fundamentally about the irresponsible policies of China and the U.S.," Adam Posen, president of the Peterson Institute for International Economics, said at an IMF panel in April. "There's only so much traction that surveillance has on the world's two largest economies."
The combined value of all current-account deficits and surpluses rose steadily from post-crisis lows, the IMF data show. The U.S. deficit alone accounted for the largest single imbalance, while China, Germany and Japan ran the biggest surpluses. The IMF's Kristalina Georgieva said in April that "excessive imbalances" are the concern, not normal trade deficits.
The widening gap forms the backdrop for the Group of Seven summit in Evian-les-Bains, France, where French President Emmanuel Macron placed global macroeconomic imbalances on the agenda. France has framed the issue as a shared structural problem: China overproduces, the United States overconsumes and Europe underinvests. Macron said Thursday that without coordinated action, "these imbalances risk unwinding in a disorderly manner."
The U.S. current-account deficit is sustained in part by the federal budget deficit. The IMF estimates that a budget deficit of 2 percent of GDP increases the current-account deficit by 0.5 percent of GDP. President Donald Trump has blamed unfair trading practices for the shortfall and threatened 100 percent tariffs on French wine unless Paris eliminates its digital tax on American tech giants, according to an interview with the New York Post before the summit.
China's surplus, the world's largest, is reinforced by industrial policy that keeps the yuan undervalued. Joseph Gagnon of the Peterson Institute estimates the yuan is at least 15 percent undervalued. China uses foreign exchange intervention and capital controls to maintain the advantage while subsidizing investment through taxes on households and a limited social safety net, the IMF's analysis shows.
One potential remedy echoes the 1985 Plaza Accord, under which the G-5 agreed to let the dollar depreciate sharply against the yen and the mark. Brad Setser, former U.S. economic adviser, and Shahin Vallée, former French economic adviser, recently wrote that ending "deep currency undervaluations is the one policy change that would directly bring balance to global trade."
The U.S. financed much of its deficit last year by selling stocks to foreigners — a record $736 billion, according to Kristin Forbes, an economist at the Massachusetts Institute of Technology. She said a plunge in stocks driven by disappointment in artificial intelligence could effectively write down those IOUs and lower the dollar, further correcting the deficit. The risk, she added, is that losses inflicted on foreign investors could spill over to bond and currency markets.
The last comparable period of coordinated currency adjustment, the Plaza Accord, helped narrow imbalances sharply but also contributed to inflationary forces that preceded the 1987 stock market crash. With China absent from the G-7 and the IMF lacking enforcement power over its two largest shareholders, the path to a negotiated solution remains unclear.
This article is for informational purposes only and does not constitute investment advice.
