President Donald Trump’s trade war is threatening the global financial stability that’s kept banks and insurers safe since the 2008 crisis, the International Monetary Fund warned, as it urged policymakers to bolster their industries’ defenses.

The world has seen a sharp repricing of some assets and heightened volatility across stock, currency and bond markets in response to the latest tariff announcements, the Washington-based lender wrote in a report published Tuesday. More adjustments might be in the pipeline if the economic outlook were to deteriorate.

“Global financial stability risks have increased significantly,” the IMF said, warning that some financial institutions — especially highly leveraged ones — could come under strain. “One main trigger of further selloffs could be geopolitical risk.”

There’s no shortage of that. The implications of Trump’s tit-for-tat trade war with China extend far beyond those two economies, also affecting countries suffering from uncertainty about their own trade relations with the U.S.

The Bank of England warned earlier this month that the trade conflict “could harm financial stability by depressing growth.”

At the same time, the Russian invasion of Ukraine continues with a peace accord still elusive, and fighting continues in Gaza as well.

Despite the IMF’s stark warnings, there’s no reason for alarm, according to Tobias Adrian, who heads the lender’s monetary and capital-markets department.

It’s true that the magnitude and speed of the market adjustment following the April 2 tariff announcements was “fairly abrupt,” he said in an interview in Washington, “but it wasn’t disorderly.”

China embargo

U.S. Treasury Secretary Scott Bessent told a closed-door investor summit Tuesday that the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate.

That de-escalation will come in the very near future, Bessent said during event hosted by JPMorgan Chase & Co. in Washington, which wasn’t open to the public or media. He characterized the current situation as essentially a trade embargo, according to people who attended the session.

Bessent said that it was not the U.S.’s goal to decouple from China and that the current status quo of 145% tariffs on Chinese goods by the U.S. and 125% tariffs on U.S. products by China was not sustainable. He expressed optimism that tensions could cool in the coming months, which would bring relief to markets, but cautioned that a larger deal could take longer.

The Treasury chief told attendees that a comprehensive deal between the two countries could happen in two to three years.

Negotiations with China over such a deal have not started yet, he said.

Daniel Flatley, Jorgelina do Rosario and Kerim Karakaya at Bloomberg contributed to this report.