IMF and CFR warn global trade imbalances are distorting asset prices

An analysis by the Council on Foreign Relations and the International Monetary Fund warns that global trade imbalances are expanding and distorting asset prices. The US trade deficit widened in August to $105.6 billion, a 17-month high, driven by a 4.3 percent surge in imports for AI buildout. Asian surpluses have risen to historic heights, with China, South Korea, and Taiwan being key contributors.

These expanding global imbalances pose growing risks to economies and markets worldwide. The surge in US imports of computer chips and equipment is tied to the global AI buildout. Economists estimate that semiconductors and automatic data-processing equipment account for almost two-thirds of China's recent export growth.