Global economic and financial stability is under pressure due to persistent imbalances between countries' current account balances. The United States faces large deficits, while China and Europe hold significant surpluses. These differences are primarily the result of disparities between national savings and investment rates.
Before the 2008 financial crisis, an abundance of global savings led to lower interest rates worldwide. This situation encouraged increased risk-taking and higher debt levels, driven by financial innovation that pushed the boundaries of borrowing. The result was the formation of real estate and credit bubbles, which played a key role in triggering the subprime crisis. Within the eurozone, similar imbalances led to large external deficits in southern European countries, funded by surplus savings from northern countries. When these capital flows stopped abruptly, as in Greece's case, trust in heavily indebted nations collapsed and a crisis ensued.
The article emphasizes the importance of identifying the root causes of each country's external imbalances to address them effectively.
Donald Trump identified the US trade deficit as a problem but was mistaken about how to fix it. "Protectionism and tariff barriers will do nothing to resolve the US savings deficit that is behind the country’s trade imbalance. There is simply no denying it: Americans are living beyond their means. Consumers are overspending while the government deficit deepens. This combination of low private savings and high public dissaving leads to a structural savings deficit whereby the country is unable to fund its investments, thus chronically fuelling its external deficit. Rebalancing the external accounts means reducing the public deficit – a direction diametrically opposed to the one taken by Trump with his One Big Beautiful Bill Act and its huge tax cuts. Any deepening of the public deficit will worsen external imbalances and thus entail greater reliance on foreign savings."
China maintains a large current account surplus due to an export-driven economy supported by high private savings. The article notes that "in the short term, with consumer spending weakened by the real estate crisis, Chinese growth continues to depend on external demand." In order for China’s growth model to become more sustainable, domestic consumption needs to be boosted through expanded social safety nets and improved public services.
The eurozone's persistent surpluses are largely driven by Germany’s strong trade performance. Although private savings are abundant and most budget deficits remain controlled (with France as an exception), investment levels lag behind other global powers like China and the US. To remain competitive and maintain strategic autonomy, Europe must increase investment in sectors such as defense, energy, digital infrastructure, advanced technologies, and future industries.
The analysis concludes that these patterns between surplus- and deficit-holding countries help explain why global imbalances persist. It warns that if US creditors lose confidence due to confrontational policies or threats from American leaders like Donald Trump, they may prioritize internal stability over financing US debt—potentially triggering abrupt adjustments with risks for global financial stability.