A Great Rebalancing Is Coming

The trade imbalances that have come to characterize the global economy are fundamentally untenable. China, Germany, and a handful of other economies run large, persistent trade surpluses, while the United States absorbs much of these surpluses by running the world’s largest trade deficit. Sooner or later, something must give. For an advanced, capital-rich economy such as that of the United States, an enduring trade deficit will bring with it either rising unemployment or rising debt, neither of which is sustainable.