The U.S. Headed Could Be Headed for a Recession — How To Prepare
Written by
Caitlyn Moorhead
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
There’s no way around turning on the news and seeing some new ingredient added to the stew that is economic volatility, inflation and impending recession. Many chief financial analysts, officers and experts share the belief that the United States will enter a recession during the second half of 2025.
While Trump is seemingly delivering on promises he made during his campaign, the chaos of the White House administration doesn’t act as a comfort in moving the country’s finances forward. Policy can have a significant effect on the performance of the economy, and perhaps no policy has inspired more discussion than trade.
For example, Trump’s imposed tariffs on Mexico, Canada and China will increase the price of imported goods, often harming both consumers and businesses. To the U.S. consumer, the tariff results in a tax on imported goods which, when added to other volatility, can lead to an economic downturn, sometimes to recessionary levels.
Here’s a look at what a pending recession in the U.S. could look like and how you can prepare for it.
The Promises of President Trump’s Administration
Lower interest rates from the Fed, less taxation and fewer regulations are factors that can increase economic activity. However, the rule of law itself seems to be in danger based on the administration’s tactics alone.
America and its residents depend on law and policy for businesses and financial institutions to succeed. So, for example, when high tariffs kick in, the President’s press secretary may call them tax cuts, but they don’t act as such.
Here are a few other economic takeaways:
- Tariffs can actually result in tax increases which in turn limits the purchasing power of consumers.
- A consumer-driven recession could be at hand as tariffs also drive up prices. The economy depends heavily on consumer spending. If that slows, it might be reasonable to assume that the next recession will likely follow.
- Many economic experts project the U.S.’s limited ability to withstand a trade war as one of the main reasons for a looming recession.
- In harder times, employers tend to shed jobs to save money. The current unemployment rate ranges between about 4% and 4.2%, so time will still tell whether or not this will increase toward the second half of 2025.
How a US Recession Could Affect the Rest of the World
The next recession has not hit the U.S. — at least not yet. Although many analysts once believed that when the U.S. sneezes, the rest of the world catches a cold, emerging economies have arguably reduced U.S. influence.
That said, the U.S. remains the world’s largest economy. China might someday eclipse the U.S., but for now, it and other countries depend heavily on the U.S. consumer. Hence, a U.S. downturn likely holds serious repercussions for the world.
8 Ways To Prepare for and Survive the Next Recession
Optimism aside, most would consider it prudent to prepare for a recession — or, in the event you find yourself out of work, an outright personal economic depression, as has been the case for many once-prosperous individuals..
People react to recessions in a variety of ways, and some actions certainly help more than others. Use these recession survival tips to lessen the impact of the next recession should you lose either your primary or secondary sources of income.
Build and Stick to a Budget
Perhaps the most potent tool to fight a recession is knowing what you spend in the first place. For this process, budgeting becomes critical.
First and foremost, budgeting brings control of what you spend. This gives you the knowledge needed to track spending. It will also help prevent overspending on unnecessary things such as vacations or lattes at a critical time.
Minimize Debt When Possible
Surviving during a recession can be difficult enough with your current bills. Having debt left over from past spending makes coping with a downturn all the more challenging. Next to getting on a budget, eliminating debt as much as possible is arguably the most crucial step.
Not only does this increase your ability to save but also keeps you from spiraling into a further debt cycle with high interest rates. Now, with fewer bills, you’ll increase the chances of getting through a recession without worsening your family’s financial setbacks.
Maximize the Value to Your Employer
Even at the height of the Great Depression, with 25% unemployment, 75% still held a job. However, a recessionary environment forces companies to consider the value added by employees. This makes it all the more critical that you create more value in work than you cost in terms of salary and become the worker they can’t afford to lose.
It’s also good to know that laid-off workers can receive limited benefits for a time while they seek their next position. This could provide critical help at a time of income loss. Workers should keep in mind that benefits are taxed, and a secondary job could reduce or even wipe out those unemployment benefits.
Build an Emergency Fund
Even if you hold onto your job, unexpected expenses or loss of income sources can still affect you. Here, building an emergency fund becomes critical should you end up with an unexpected trip to the hospital, have a repair bill or sustain damage to your home.
Financial planners advise that you keep at least three to six months’ worth of expenses in this account to assure you’re covered in case the unexpected happens.
Build and Maintain Your Credit Score
Good economic times can often make borrowers sloppy. With ample money available for payments, they can borrow recklessly, not caring about the interest rate or even missing payments. But this could destroy your credit score, leaving you unable to borrow at reasonable rates — or at all — during harder times.
Rebalance Your Portfolios
A coming recession makes for a good time to exit high-risk investments. The most overvalued stocks often take the hardest hit during such times. By exiting before the downturn hits, you can have the cash to buy back those stocks or purchase something else, likely at a much lower price.
This should not include your retirement fund, as most of those are designed to ride out downturns. Moreover, you should remain on the hunt for buying opportunities. As stock prices fall, your money will buy more shares.
Review Insurance Coverage
In this case, the “risk mitigation” aspect of insurance becomes essential. Most of us hold policies with health, life, auto, homeowners and other types of insurance. We often buy these policies without considering the chances we will use the insurance.
This leaves ample opportunity to seek out lower premiums. For example, if you’re young and unlikely to end up in the hospital, consider a policy with a lower premium and a higher deductible. Of course, consider other strategies to save money if the long-term risk of changing your policies outweighs the short-term benefits.
Consider Passive Income Sources or Side Gigs
Assuming you have time available, a side hustle could go a long way in mitigating the adverse effects of a recession. While times are good, it can provide the funds needed to build savings or provide extra income. When times are bad — say if you lose your primary job — it ensures you still have some income.
Will Healy contributed to the reporting for this article.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
More From GOBankingRates
