The International Monetary Fund has issued a stark warning about escalating risks to global financial stability, triggered by former US President Donald Trump’s renewed tariff policies. In its latest Global Financial Stability Report, the IMF highlights how heightened trade tensions and policy uncertainty are unsettling markets worldwide.
According to the report, Trump’s April tariff declarations have already contributed to a “sharp repricing of risk assets,” with financial markets reacting nervously to the evolving geopolitical landscape. The IMF now sees a “significant increase” in global financial vulnerabilities, urging regulators to stay vigilant in the face of possible systemic shocks.
Among the key risks identified are inflated stock and bond valuations, heavy institutional leverage — particularly among hedge funds — and growing fragility in government bond markets. Of notable concern is the expanding influence of “nonbank” financial entities such as pension and investment funds, which are lightly regulated but deeply interconnected with traditional banks. Their rising borrowing levels could distort market dynamics and worsen sell-offs, as recently seen in the US government bond market.
The IMF flagged the possibility that some large global banks may be underestimating actual risk exposure, based on inconsistencies in their internal risk-weighted asset measures. The report also underscored the need for swift and consistent implementation of post-2008 banking reforms, such as the Basel 3 framework, which some countries — including the UK — have delayed.
Another growing concern is the private credit sector. As more companies shift to private lending markets, the IMF cautions that financial shocks could rapidly spread across countries and institutions, intensifying the risk of global contagion.
The warning comes as world finance leaders gather in Washington for the IMF’s spring meetings, with fears mounting that economic policy missteps and market volatility could trigger a major global setback.