Skip to navigationSkip to main contentSkip to right columnADVERTISEMENTBy Promit MukherjeeTue, June 23, 2026 at 7:32 PM GMT+2 2 min read(Corrects dateline to 'June 23' from 'June 7')By Promit MukherjeeOTTAWA, June 23 (Reuters) - The Bank of Canada Governor Tiff Macklem said on Tuesday that global imbalances of financial flows, led by China's export surplus and the reliance of the United States on foreign capital, and may be fuelling financial stability risks. Speaking to a business audience in Paris, Macklem said global imbalances are widening again after easing in the aftermath of the global financial crisis, as some countries continue to run large surpluses while others rely on borrowing and spending. Macklem's speech comes at a time when the President Donald Trump's tariffs, imposed with an intention to onshore manufacturing and reduce trade deficit that the U.S. runs with most of the world, has upended global trade and led to rise in protectionism. China's massive trade surplus has led to huge outflow of capital to more productive assets and the attractiveness of the U.S. dollar has ensured that capital flows to the country. "Cross-border finance is a good thing," Macklem said, but cautioned that continued and excessive flows could fuel imbalance. "But when flows become excessive, they can widen trade gaps, fuel protectionism and distort asset prices. Capital gets misallocated. Pressures cumulate and financial stability risks increase," he said. He said that with this one-way flow of capital, which is seen again with massive investments in Artificial Intelligence and related infrastructure, could lead to asset bubbles, like it was observed in the run-up to the global financial crisis. Usually, he said, imbalances adjust slowly as exchange rates change and capital and trade flows shift, but when adjustment is delayed, imbalances persist, growth is held back and risks build across the global system. Another issue he pointed out is that as bank regulations have increased, the capital funding needs are increasingly met by new non-bank financial intermediaries such as hedge funds, private finance companies, pension funds and other asset managers. Non-bank players generally do not face the same reporting requirements or level of monitoring as banks, Macklem said, increasing risks further. To reduce these imbalances, globally countries should deepen trade, even as the U.S. pulls back from global trade, and countries should also invest beyond just the U.S., Macklem said.(Reporting by Promit Mukherjee; Editing by Dale Smith)Terms and Privacy PolicyEU DSA contactPrivacy & Cookie SettingsMore Info