This single word can send shivers down the spine of economists, investors, and everyday workers alike: recession. And lately, it’s been on everyone’s mind. Google searches for the term have skyrocketed. Other than the economic signals, this anxiety-fueld search intent is in itself a bad sign, as studies have shown that interest in recession can predict an actual recession by months.
Granted, this spike in interest comes in the wake of the US imposing tariffs on key trading partners—Canada, Mexico, and China. But could this actually lead to long-term economic problems?
The Butterfly Effect of Trade Wars
Economies don’t crash overnight. They wobble first. Strong modern economies are robust and layered, but not unbeatable. They thrive or perish based on trade and trade policies like tariffs, setting off a domino effect.
Tariffs are taxes imposed by governments on imported goods, designed to make foreign products more expensive and encourage consumers to buy domestically produced alternatives. That’s the theory. In practice, when major economies engage in tariff battles—raising taxes on each other’s exports—it slows global trade, unsettles markets, and contributes to inflation. They also put more pressure on consumers, particularly less affluent consumers.
Tariffs are paid by importers—usually businesses that bring foreign goods into a country—not by the exporting country itself. These costs are often passed down the supply chain, leading to higher prices for manufacturers, retailers, and ultimately, consumers. That’s why tariffs are seen as an outdated and counterproductive tool that ends up hurting consumers and not really helping anyone.
The current wave of tariffs, particularly those imposed by the US, has sparked concerns about their long-term economic impact, including the possibility of a recession. When tariffs come in, prices rise. When tariffs emerge, especially on a background of uncertainty, supply chains get tangled. Companies delay hiring. Consumers, sensing trouble, pull back on spending. And that restraint, in turn, slows growth even further. With consumers showing so much interest in a recession, we’re probably already into this process.
The stock market also reflects those jitters. The S&P 500 has seen trending down, a sign that investors are bracing for impact. Regular consumers are also freaking out, and this kind of fear isn’t just personal—it’s systemic. It shows that people are concerned, and when people are concerned, they tighten their wallets. This can cause entire industries to feel the squeeze.
Today’s Policy Resembles The Great Depression
A recession is a significant decline in economic activity across multiple sectors, lasting for months or years. Technically, a recession is defined as two consecutive quarters of negative GDP growth, though economists also consider factors like rising unemployment, declining industrial production, and reduced consumer spending to determine its onset.
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Modern recessions can be caused by a number of events. The 2008 financial crisis came on the back of reckless lending and a housing market implosion. The dot-com bubble of the early 2000s was fueled by tech hype gone wrong. The 1970s stagflation era combined slow growth with high inflation, a particularly nasty mix.
The current recession fears have a familiar recipe: trade tensions, inflationary pressures, and market volatility. These are the exact same ingredients that have triggered downturns in the past. There’s another concerning similarity: US tariffs on major trade partners echo the protectionist policies of the 1930s, which deepened the Great Depression, one of the worst economic crises in history.
The Smoot-Hawley Tariff Act of 1930, designed to shield American industries from foreign competition, set a number of tariffs much like the ones today. It backfired spectacularly, becoming one of the most catastrophic economic decisions in US history. Numerous imported goods faced steep tariffs, prompting U.S. trading partners to retaliate with their own trade barriers. This tit-for-tat escalation strangled global commerce, exacerbating unemployment and worsening the economic collapse.
That’s almost exactly what Trump is doing today. They’re about to make everything more expensive and have Americans (particularly the poorer Americans) pay it off while the economy suffers. Meanwhile, inflation remains a persistent worry, much like in the 1970s, when oil shocks and policy missteps led to economic stagnation. Investors and businesses, wary of these historical parallels, are reacting with caution, pulling back on spending and investment.
Trump himself refuses to rule out the possibility of a recession, further sowing panic and distrust both in the market and in consumers. The question now is whether we are heading toward a crisis like 2008, the 1930s, or something milder.
How Bad Could It Get?
Recessions vary in intensity. Some are brutal, leading to widespread job losses and financial ruin. Others are more shallow, causing turbulence but not disaster. A key parameter is how governments respond. Interest rate cuts, stimulus checks, and strategic investments can soften the blow. The Federal Reserve has tools at its disposal—though whether it will use them in time is always the trillion-dollar question.
In this case, the tariff damage is largely self-inflicted. This means we could undo the damage, at least in theory. If tariffs are lifted, market confidence could recover quickly, easing and stabilizing economic growth. Additionally, governments and central banks have more tools at their disposal than in past crises, including interest rate adjustments and stimulus measures, which could help cushion the blow. Of course, this hinges on whether the tariffs will actually be lifted (currently seems unlikely) and whether this is done fast enough to avoid triggering an economic domino effect.
However, if trade tensions escalate further or consumer and business confidence collapses, the downturn could deepen, leading to widespread job losses, reduced investment, and a prolonged period of economic stagnation. Considering that Trump has said he has no intention of backing down, there are strong reasons for concern.
Meanwhile, the global economy can’t be ignored A slowdown in the U.S. doesn’t happen in isolation. If European and Asian markets remain strong, they could act as a buffer. But if trade conflicts escalate, this could cascade across continents.
Today’s global economy is more robust than that of 1930. It can take a bit of beating. But put too much pressure on it, and it will break, with catastrophic effects.
What Should We Do?
For the average person, economic uncertainty warrants smarter financial choices. Experts advise avoiding panic-driven decisions. Staying invested, reducing unnecessary debt, and having an emergency fund are always good ideas, especially in a crisis.
What about investing your saved-up money?
When facing economic uncertainty, deciding where to keep your money—stocks, cash, or alternative investments—depends on risk tolerance and financial goals. Investing in stocks during a downturn can be risky, as markets tend to be volatile, but it also presents opportunities to buy strong companies at lower prices and benefit from long-term growth. A balanced approach—holding a mix of stocks, cash, and defensive assets—can help weather economic storms while positioning for recovery when conditions improve.
There’s one point we should come back to: always have a backup fund. Regardless of whether you’re looking at maximizing your investments or simply not getting into big trouble, you should try to have an emergency fund. It provides a financial cushion in case of job loss, rising costs, or unexpected expenses.
Ultimately, the economy is always shifting, shaped by policies, global events, and public sentiment. While the threat of recession looms, its impact—and duration—will depend on how governments, businesses, and individuals respond. Whether this moment turns into a full-blown crisis or a temporary slowdown, one thing is certain—resilience and rational decisions, both at the policy level and in personal finances, will determine who weathers the storm and who struggles to stay afloat.