S9 Ep23: Global imbalances redux
From VoxTalks Economics by VoxTalks
April 13, 2026 · 34 min · Season 9 · Episode 23
About this episode
The episode discusses the history and current state of global imbalances, focusing on the US trade deficit and potential policy responses.
Three times since the 1970s, global imbalances have grown large. In the 1980s, the US trade deficit ballooned under Volcker's tight money and Reagan's tax cuts and military spending. In the 2000s, a global savings glut and then a US housing credit boom pushed the deficit to 6% of GDP. Today, the imbalances are back. The US current account deficit stood at 3.9% of GDP in 2025. The policy medicine this time: tariffs. Maurice Obstfeld of the Peterson Institute for International Economics and CEPR has written a chapter in the fourth Paris Report, published jointly by CEPR and Bruegel, examining that history, how policymakers responded, and what it can tell us about the effectiveness of policy remedies in 2026. He tell Tim Phillips that blaming foreigners misdiagnoses the problem if the US saves too little and invests heavily. The gap has to be financed from abroad. Good policy for the new global imbalances would requires three actors to move together: fiscal consolidation in the US, stronger consumption in China, and more investment in Europe. All three would benefit, none are close to doing it. The longer the can is kicked, Obstfeld warns, the greater the risk that the resolution…
People in this episode
Host: Tim Phillips
Guest: Maurice Obstfeld
Topics covered
- global imbalances
- US trade deficit
- economic policy
- international economics
- fiscal consolidation
- investment
Keywords
- global imbalances
- US trade deficit
- economic policy
- fiscal consolidation
- China consumption
- European investment
- tariffs
Mentioned in this episode
Organizations: Peterson Institute for International Economics, CEPR, Bruegel
Books & works: The New Global Imbalances
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