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The International Monetary Fund (IMF) has warned that growing differences in the way major economies save, spend, export and import could pose a bigger risk to the global economy if governments fail to address the problems at home.
The IMF said countries should focus on fixing domestic economic problems instead of relying mainly on tariffs and other trade restrictions to correct the gap between countries that export much more than they import and those that import more than they export.
The warning was contained in a new analysis by IMF economists Jiaqian Chen and Josef Platzer, published on Thursday.
According to the report, the gap between major economies widened further in 2025, largely because China’s trade and savings surplus increased sharply.
The IMF said China’s current account surplus, broadly the amount by which the country’s earnings from the rest of the world exceed its spending abroad, increased by about $300 billion last year.
It said this was the biggest increase in China’s surplus in dollar terms since at least 2000, pushing it to about 0.6 per cent of the world’s total economic output.
The development contrasts with the position of the United States, which continues to run the world’s largest current account deficit.
Although the US reduced its deficit by $69 billion last year, the IMF said the gap was still equivalent to about 0.9 per cent of global economic output.
The Fund noted that the US deficit was still bigger than the combined surpluses of China and the euro area.
The widening gap has come at a time of rising trade tensions and major changes in US trade policy. However, the IMF said past experience showed that tariffs and other trade barriers had not necessarily reduced overall trade imbalances.
Instead, the measures have changed where the US gets its goods. American imports from China have fallen sharply, but imports from other countries have increased.
The IMF stressed that having a trade surplus or deficit is not automatically bad. Countries routinely borrow, lend, import and export as part of normal economic activity.
The problem arises when these gaps become too large and continue for too long, potentially creating economic and financial problems.
China and the US are currently the biggest contributors to the global imbalance, the Fund said. In China, weaker investment has helped push up the surplus since 2023. Investment in the property sector fell first, followed more recently by weaker spending on factories, manufacturing and infrastructure.
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The IMF also said Chinese households and businesses tend to save a lot of money, partly because people save more when they have limited access to strong social safety nets.
High savings mean less money is being spent at home, contributing to the country’s large surplus.
The situation is different in the US. The country saves relatively little compared with its spending, while the government continues to run a large budget deficit. This contributes to its large external deficit.
The IMF warned that if these gaps remain very large for a long time, they could cause money and investment to flow into less productive areas, increase financial risks and make any eventual adjustment more painful.
Large imbalances could also lead to uneven economic growth, spread financial problems from one country to another, worsen trade disputes and deepen divisions in the global economy.
“History shows that large imbalances can unwind abruptly through capital flow reversals, asset price corrections, and weaker growth, imposing significant costs both domestically and globally,” the Fund said.
The IMF, therefore, called for coordinated action by major economies, particularly the US, China and countries in the euro area.
It said countries with large surpluses, such as China, could help by encouraging stronger domestic spending and investment. This would increase demand for goods and services at home and reduce the pressure to depend heavily on exports.
At the same time, countries running large deficits need to address the factors that cause them to spend more than they save.
The IMF said countries should still take action even if reaching a global agreement proves difficult. However, it warned that countries acting alone could create new risks for financial markets and affect economic growth and inflation.
The Fund said the situation could become more difficult if current trends continue unchecked. While the global economy may remain relatively strong in the short term, it warned that hidden weaknesses could build up, increasing the risk of a sharper economic correction in the future.
The IMF stressed that tariffs and trade restrictions alone cannot solve the problem. Instead, governments need to address the underlying issues involving government spending, household savings, investment and consumer demand that are driving the widening gaps between major economies.
The warning comes amid continuing global trade tensions and growing pressure on major economies to adopt policies that can deliver more balanced and sustainable economic growth.
