Staff Report
If a recession is on the horizon, it might just be one of the most heavily telegraphed economic downturns in recent history.
With President Trump’s sweeping new tariffs now rattling consumer sentiment and shaking global markets, economists are raising red flags once again. But with so much warning, Americans still have a chance to prepare.
The Signs Were Always There
Ever since the economy bounced back from the short-lived COVID-19 recession, experts have been warning of potential trouble ahead. Geopolitical tensions, rising inflation, and sharp interest rate hikes all added fuel to the fire. Yet, recession didn’t materialize—at least not yet.
Now, with Trump’s administration dramatically expanding import tariffs, fears of an economic contraction are resurging.
A recent CNBC Fed Survey revealed that the perceived chance of a U.S. recession has jumped to 36% from just 23% in January. J.P. Morgan’s chief economist went even further, placing the odds at 40%. Analysts say the sharp escalation in tariffs is a major contributor.
“Forecasting recessions is tricky, but the consensus is growing: the risk of a painful downturn has increased notably over the past quarter—especially in light of recent policy decisions,” said Mark Hamrick, senior economic analyst at Bankrate.
So what can Americans do to brace themselves financially?
1. Eliminate High-Interest Debt While You Can
Credit card interest rates are averaging over 24%, and that’s money draining away with every passing month. Experts urge anyone with high-interest debt to take aggressive action now, while they still can.
If possible, pay more than the minimum. Better yet, transfer your balance to a 0% APR card, a personal loan, or a home equity line of credit with lower rates.
“High-interest debt is like an anchor on your finances,” says Sean Higgins, finance professor at Northwestern University. “Paying it down should take priority—even over building savings in some cases.”
2. Build an Emergency Cushion
If you’re debt-free, now’s the time to shore up your emergency fund. Ideally, you want three to six months of living expenses saved—though few Americans hit that target.
Bankrate reports that 27% of Americans have no emergency savings at all.
“Don’t get discouraged by the big numbers,” advises Santa Clara University finance professor Meir Statman. “Start small. Save consistently. Put the money somewhere safe and accessible.”
A high-yield savings account is a great place to store your rainy-day fund, ensuring your money grows while staying liquid.
3. Plan Ahead for Big Purchases
While slashing all your spending isn’t necessary, thoughtful planning is wise. If a major purchase—like a car or home renovation—is on the horizon, start preparing financially now.
“Don’t let an unexpected expense derail your finances during a recession,” says Chicago financial planner Timothy McGrath. “Map it out in advance.”
4. Avoid Panic Selling in the Markets
Watching your investments decline is stressful—but pulling out of the market at a low point can lock in losses. For those years away from retirement, staying invested through downturns is often the best strategy.
“If anything, it may be a great time to buy,” says Veronica Willis, global investment strategist at Wells Fargo. “Stocks are cheaper, and over time, markets bounce back.”
Retirees, on the other hand, should be more cautious. Experts recommend having a portion of your portfolio in cash or lower-risk assets to avoid selling stocks during a slump.
5. Rebalance and Diversify
Now is also the moment to reevaluate your portfolio. After strong market performances in 2023 and early 2024, your investments might be heavily weighted toward stocks.
“If you’re overexposed to equities, look for days when the market rebounds to rebalance into bonds or more stable assets,” Willis says.
Even in volatile markets, diversification remains a powerful risk management tool.
A Recession Isn’t a Life Sentence
While a recession would hurt, it won’t last forever.
“Yes, it could get bumpy,” said Higgins, “but the economy has always recovered. The key is being smart, proactive, and calm.”
And that’s the bottom line: whether a downturn is inevitable or just a heightened possibility, the steps you take now can make all the difference later.
