Is a financial crisis in the offing? Watch US rules, not shadow banks

Financial crises cause greater loss of economic output than macroeconomic crises. They are also more difficult to get out of

America’s President Donald Trump has unleashed a tariff war that will most certainly slow down global economic growth in 2025.  The world can live with slower growth. The worrying prospect is that slow growth combines with turbulence in the financial markets to cause a financial crisis.  

Is such a crisis in the offing? In recent weeks, three entities have raised the possibility of a financial crisis-— though none is forecasting one. The International Monetary Fund (IMF) flags it in its Global Financial Stability Report (GSFR), April 2025. The Economist, in a special report dated May 31, speculates about where the