The International Monetary Fund (IMF) has warned that global imbalances are widening again. It says tariffs and narrow industrial policies will not fix the problem.
The warning comes at a time of rising trade tensions and persistent current account gaps. The IMF Executive Board backed a staff paper highlighting these risks. It stressed that deeper structural factors are driving the imbalances.
According to the Fund, the balance between national saving and investment remains the key driver. Countries cannot correct imbalances simply by taxing imports or promoting specific industries. Instead, they must adjust domestic policies. These include fiscal decisions, spending patterns, and savings behaviour.
The IMF’s position challenges the growing reliance on trade restrictions. It argues that such measures often target symptoms rather than root causes. As a result, they may have limited long-term impact.
The report also finds that traditional macroeconomic policies remain more effective. Sector-specific policies tend to produce mixed results. Their impact depends on whether they significantly improve productivity.
Even tariffs are unlikely to deliver lasting change. Their effect is limited unless combined with broader policies, such as increasing public saving.
The IMF suggests that coordinated global action offers the best outcome. Both surplus and deficit countries need to adjust. This approach can reduce imbalances while supporting global growth.
Source: IMF says global imbalances are widening again, and tariffs will not fix them
