The International Monetary Fund has raised alarms over the escalating risks to global financial stability, pointing directly to the erratic implementation of tariffs by the United States President, Donald Trump.
This warning came through in the IMF’s latest Global Financial Stability Report, released on Tuesday, just as international financial authorities gathered in Washington amid growing concerns over unpredictable policy moves.
The IMF pointed out that the U.S. administration’s inconsistent tariff policy “triggered a bout of policy uncertainty,” a situation made worse by China’s retaliatory steps. The GFSR noted that “global financial stability risks have increased significantly, driven by tighter global financial conditions and heightened economic uncertainty.”
The report outlined three main threats to the stability of global financial markets: inflated prices in critical equity and corporate debt markets, risky leverage levels among some financial institutions including hedge funds, and a looming threat of “further turbulence” in sovereign bond markets—especially in nations burdened with heavy debt loads.
The U.S. bond market, in particular, experienced unexpected volatility earlier this month, with yields surging after the tariffs were enforced, the report highlighted.
This turbulence, however, isn’t confined to the U.S. Decisions made in Washington have rippled globally, with rising yields in traditionally safe economies translating into increased borrowing expenses for other countries.
“Emerging market economies already facing the highest real financing costs in a decade may now need to refinance their debt and fund fiscal spending at higher costs,” the IMF warned.
Adding to the concern, the report pointed out that geopolitical instability, including armed conflicts, could further amplify risks to financial stability.
“Given high levels of leverage in the financial system and growing interconnectedness between nonbank financial intermediaries and banks, sufficient levels of capital and liquidity in the banking sector remain the anchor of global financial stability,” the IMF emphasized.
