The International Monetary Fund warned Tuesday there are few indications international trade imbalances are narrowing, a trend that could raise trade tensions and lower economic growth.

In its annual External Sector Report, the IMF also said almost half of the world’s current-account balances are excessive and that current-account surpluses and deficits are increasingly concentrated in developed countries.

Excessive current-account balances mean they cannot be defended by a country’s fundamentals, such as unemployment and supply and demand, and its ideal economic policies.

The current account documents a country’s transactions with the rest of the world over a defined period of time.

The annual IMF report gauges the trade position and exchange rates of the world’s largest economies. Tuesday’s report was based on data and IMF staff projections as of June 22.

The report said China’s current account surplus grew slightly last year to 1.7-percent of its gross domestic product. The IMF also included China on the list of countries with excessive balances. Germany, South Korea, the Netherlands, Sweden and Singapore are also listed.

Countries with excessive current account deficits, those that borrow too much money, included the U.S., Britain, Argentina and Turkey, the report said.

The IMF said big trade surpluses in Germany and China, coupled with the large U.S. trade deficit, could worsen trade conflicts that are engulfing much of the world.

“Large and sustained excess external imbalances in the world’s key economies — amid policy actions detrimental to external balances — pose risk to global stability,” the report said.

U.S. President Donald Trump’s tax cuts and increased U.S. government spending are contributing to an increase in borrowing rates, a stronger U.S. dollar and a ballooning U.S. current-account deficit, according to the report.

In addition to potentially exacerbating trade tensions, the report said the trends could weaken emerging markets by causing interest rates to increase faster than expected.
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