US-China Trade Tensions: Our tariff tracker earlier this week had highlighted that two economic health indicators of the US and the world would be out soon. These reports are out now, one by the International Monetary Fund and the other by the US Federal Reserve (equivalent of India’s RBI). In both, the common sentiment is of warnings against uncertainty, unpredictability, etc.

The IMF in its World Economic Outlook says, “…the landscape has changed as governments around the world reorder policy priorities and uncertainties have climbed to new highs…Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both short-term and long-term growth prospects.”

The US Fed’s Beige Book says, “Economic activity was little changed since the previous report, but uncertainty around international trade policy was pervasive across reports…The outlook in several Districts worsened considerably as economic uncertainty, particularly surrounding tariffs, rose.”

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Uncertainty is indeed pervasive across the global financial system, as the world waits for the 90-day pause on US President Donald Trump’s tariffs to end in July. There’s no way to know whether the unprecedentedly high tariffs — slapped on both friends and foes — will stay, and in what form.

Trump’s officials had earlier said they would strike “90 deals in 90 days” with countries bilaterally for a trade system “fairer” to the US. However, no one knows what level of negotiations any of these deals have reached, especially as the US President continues to make contradictory and completely unsubstantiated claims about negotiations.

Here’s a more detailed look at the IMF’s World Economic Outlook

The IMF said the global economy seemed to have stabilised, but growth rates, though steady, were “underwhelming”.

“Forecasts for global growth have been revised markedly down compared with the January 2025 World Economic Outlook (WEO) Update, reflecting effective tariff rates at levels not seen in a century and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected in January. Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions,” the report said.

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And at the US Fed’s Beige Book

The Beige Book reported that “most Districts saw moderate to robust sales of vehicles and of some nondurables”, as customers rushed to buy these goods before tariffs kicked in.

Districts here are the 12 Federal Reserve Districts across the US, with one Federal Reserve Bank in a major city in each district, such as in Boston, Atlanta, Cleveland, Richmond, New York, San Francisco, etc.

“Just five Districts saw slight growth, three Districts noted activity was relatively unchanged, and the remaining four Districts reported slight to modest declines. Non-auto consumer spending was lower overall,” the report said.

Meanwhile in China

In China, which faces the steepest tariffs, business owners are making efforts to adjust to the new realities. According to a report in the South China Morning Post, many Chinese businesses are now planning to open factories in the US so their goods can escape the import tariffs. However, these plants are likely to be small-scale, only producing goods that need more automation and little manpower, as labour is more expensive in the US and labour laws stricter.

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The Chinese government, meanwhile, is looking to identify materials its businesses absolutely have to import from the US, and possibly exempt them from the retaliatory tariffs it has slapped, Reuters reported. However, no such exemption has been announced yet.

If the exemptions do come through, the US-China trade deal, which for now looks rather mythical, would be easier to strike.