Without mentioning either the US or China by name, IMF head (and convicted criminal) Christine Lagarde warned about the dangers of the world being "sucked into a protectionist spiral" that would undermine global growth - the latest sign that the IMF's upcoming global growth projection might be somewhat less enthusiastic than the nearly 4% rate for this year and next forecast by the IMF in January.
While her organization remains optimistic, Lagarde said Wednesday during a speech in Hong Kong ahead of the annual spring meeting of the IMF next week in Washington that the global economy is benefiting from surging investment, recovering trade and "favorable" financial conditions (low or negative interest rates) all of which are encouraging companies and households to spend more money.
The only problem is that as we have shown in recent weeks, this "coordinated recovery" is now over.
Worse, growing protectionism could quickly reverse out all of this she said. "Yes, the current global picture is bright. But we can see darker clouds looming," she said.
Parroting an argument that has been made countless times since Trump unveiled his aluminum and steel tariffs, Lagarde said the rise in global trade reduced extreme poverty, reduced the cost of living and created millions of high-paying jobs.
"But that system of rules and shared responsibility is now in danger of being torn apart," she said. "This would be an inexcusable, collective policy failure."
Import restrictions, Lagarde said, hurt everybody - especially the poorest consumers.
"Increasing trade, removing barriers, encouraging this level playing field to which everybody should contribute has to be done collectively," she said. "It can’t be by exceptional measures. It can’t be by unilateral threat."
But instead of the biggest risk being to the overall growth picture, Lagarde said trade barriers risk "undermining confidence", which would in turn hurt investment.
Of course, the latest round of "conciliatory" rhetoric from both Trump and Chinese leader Xi Jinping would suggest China is considering a concession on auto imports that could placate the US and help stave off an all-out trade war - though it's unclear if this is another bluff.
Lagarde also appeared to take Xi at his word when he "renewed" his promise earlier this week to finally lower barriers for foreign firms to compete in China's banking and insurance sectors (a dangerous prospect for the Communist Party because they wouldn't be able to directly control the foreign firms).
Lagarde hailed his promises as "significant advances that we need to see delivered in the coming months" and "clearly an improvement to a situation that has evolved over time," she said.
"We need to be a little bit sensible about this talk about a trade war," she said. "There are threats and there are counter threats, there is an attempt to open a dialogue and I think we should support that dialogue attempt as much as we can, that is the way to progress the situation, not to let it snowball into something that would then lead to significant consequences."
Well, if the IMF is hanging its hopes for global growth on the promises of the newly crowned Chinese emperor, then good luck.
Meanwhile, in an implicit critique of President Trump's grumbling about the US trade deficit, Lagarde insisted that trade deficits are an "imbalance" driven by "the fact a country spends above its income" - not a sign of some injustice, or the predatory practices of a trading partner. And with global risks intensifying, Lagarde urged her audience to do more to widen the window of economic opportunity in the developed and developing worlds.
"The window of opportunity is open," she said. "Yet there is new urgency because uncertainties have significantly increased - from trade tensions, to rising financial and fiscal risks, to more uncertain geopolitics."
The IMF will release its next quarterly growth forecast on April 17; expect it to be far less optimistic than recent prior editions.