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

Author

Listed:
  • Tamim Bayoumi

    ((King’s College)

  • Joseph E. Gagnon

    (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.

Suggested Citation

  • Tamim Bayoumi & Joseph E. Gagnon, 2026. "Prospects for global imbalances in 2026 and beyond: Another China shock?," Working Paper Series WP26-2, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp26-2
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    File URL: https://www.piie.com/publications/working-papers/2026/prospects-global-imbalances-2026-and-beyond-another-china-shock
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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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