Martin Wolf Sees Imbalances. The Real Story Is the Bill for the Dollar Order

Wolf sees the return of global imbalances. The sharper conclusion is that the bill for the dollar order has arrived.

That is the point Martin Wolf’s analysis does not place at the centre of the story. He sees China saving too much, Germany exporting too much, America borrowing too much, and the world drifting once again toward crisis. But the deeper problem is not merely that some countries run surpluses and others run deficits. The deeper problem is that the dollar-centred globalisation settlement produced those imbalances, rewarded them, and then blamed the consequences on everyone except the system itself.

We were sitting in a coffee shop when Wolf’s latest argument came up. It was a fitting place to read it. Around us was the ordinary machinery of globalisation: imported coffee, phones assembled through Asian supply chains, laptops designed in America and manufactured elsewhere, payments routed through financial systems built around dollar-era capitalism.

The scene contained the argument.

Wolf, one of the most influential economic commentators of his generation, recently argued that global imbalances are back on the agenda. His warning is familiar: surplus countries cannot grow rich forever by selling more than they buy; deficit countries cannot borrow forever; and unless China, Europe and America adjust, crisis will eventually follow.

There is truth in that. But it is not enough.

The imbalance was built into the dollar order

The global imbalance was not an accident. It was not simply imposed on an innocent America by foreign mercantilists. It grew out of the dollar order itself.

America became the issuer of the world’s reserve currency, the supplier of the world’s safest assets, and the centre of a system that required foreign capital to recycle continuously into dollar markets. The world needed dollar assets. America supplied them. Foreign central banks, sovereign funds, pension funds, banks and exporters recycled savings into US securities.

America consumed goods and exported financial claims.

That system gave America enormous advantages. It helped finance federal deficits. It lowered borrowing costs. It supported Wall Street. It made US financial markets the balance sheet of the world. It gave Washington sanctions power, military reach and geopolitical leverage.

But it also carried an industrial price.

America imported production and exported Treasury securities. It enjoyed the privileges of monetary empire while parts of its industrial base weakened. It traded factories for financial depth. It gained capital inflows and cheap goods, but lost strategic manufacturing capacity and industrial communities.

That is the missing centre of Wolf’s argument.

America wants the privileges of reserve currency dominance without the industrial consequences of reserve currency dominance. It wants the world to buy Treasuries without the trade deficits that help supply the dollars. It wants cheap imports without lost factories. It wants Wall Street primacy without Main Street decay. It wants the dollar empire without the domestic wreckage produced by the dollar empire.

That contradiction is now breaking into politics as tariff rage.

Tariffs are not enough when trade has become security

Wolf is right that tariffs alone cannot eliminate America’s external deficit. But that is no longer the only strategic question.

In a world of sanctions regimes, semiconductor chokepoints, energy insecurity, maritime disruption and supply-chain warfare, trade policy is no longer simply about cheaper goods. It is about national resilience. It is about whether a state can still produce the things it needs when the system fragments.

The question is not merely whether tariffs balance trade flows.

The question is whether a financialised state can remain a serious industrial power.

That is where Wolf’s framework becomes too narrow. He treats China’s surpluses, Germany’s export model and America’s fiscal deficits as distortions inside a broadly workable system. But the system itself is now the problem.

The old globalisation settlement worked for those who controlled finance, logistics, technology standards and reserve assets. It worked for Wall Street, multinational corporations, asset holders and consumers of cheap imports. It worked less well for industrial workers, hollowed-out regions and states that discovered too late that manufacturing capacity is not just an economic category.

It is strategic power.

China is not innocent, but the charge of mercantilism is too easy

China is not innocent. Its household consumption share remains unusually low. Its state-directed industrial strategy places real pressure on foreign manufacturers. Its export surpluses are not imaginary.

But calling China’s strategy simply “mercantilism” is too easy.

China is not only accumulating surpluses for accounting pride. It is converting industrial capacity into national power. In the twenty-first century, production is security. Batteries, ships, electric vehicles, drones, chips, robotics, machine tools and energy equipment are not just commercial goods. They are strategic depth.

The West understood this perfectly when it controlled the commanding heights. When China produced cheap goods for Western retailers, it was called globalisation. When China began producing advanced goods that threatened Western incumbents, it became “overcapacity”.

The language changed when the hierarchy changed.

The real imbalance is political, not merely financial

Wolf’s solution is the familiar technocratic one: America should reduce its fiscal deficit; China and Europe should generate more domestic demand; surplus countries should stop relying on exports.

At the level of macroeconomic accounting, that is coherent.

At the level of political economy, it assumes away the problem.

America’s economy became dependent on financialisation, asset inflation, deficit consumption and dollar privilege. China’s became dependent on industrial scale, state-directed production and export capacity. Germany’s model depended on export surpluses inside a eurozone structure that weakened normal adjustment.

Each bloc defends the part of the system from which it benefits while demanding adjustment from others.

That is the real imbalance.

The crisis cannot be solved by moral lectures against mercantilism. Nor can it be solved by pretending America is merely the injured party.

The United States commanded the dollar order, benefited from it, financed itself through it, projected power through it, and then blamed others when the system it dominated produced domestic industrial damage.

This is the correct framing.

America did not simply suffer from globalisation. It became the chief beneficiary and manager of the monetary architecture that made this form of globalisation possible.

Now that architecture is breaking.

Not because China alone saved too much. Not because Germany alone exported too much. Not because America alone borrowed too much. Those are symptoms.

The deeper cause is that the globalisation settlement itself has fractured under the weight of its own contradictions.

The dollar order allowed America to consume beyond production, borrow beyond discipline, sanction beyond ordinary law and finance power beyond taxation. But it also transferred industrial capacity abroad, deepened domestic inequality and made American politics vulnerable to the backlash now expressed through tariffs, protectionism and nationalist anger.

Wolf sees the return of global imbalances.

The sharper conclusion is that the bill for the dollar order has arrived.

And America, having spent decades enjoying the privileges, now refuses to accept the consequences.