President Donald Trump’s turbulent tariff agenda, combined with mass deportations and increased national debt, has created heightened volatility in financial markets. Though many economists say there’s low risk of a job-loss recession, others say we’re at a critical crossroads, as consumer sentiment sours and the labor market sputters. 

Some analysts have even posited that the economy could be circling the drain toward stagflation, a rare and toxic scenario of slowing growth and high inflation. In the 1970s, stagflation — a combination of inflation and stagnation — was a major economic crisis characterized by double-digit inflation, steep interest rates and soaring unemployment.

In a June study by Apollo Global Management, chief economist Torsten Sløk warned of ongoing stagflationary risks. «Tariff hikes are typically stagflationary shocks — they simultaneously increase the probability of an economic slowdown while putting upward pressure on prices,» Sløk wrote. «The current tariff regime increases the chance of a US recession to 25% over the next 12 months.» 

Stagflation is considered to be an even worse economic prognosis than a typical downturn, as the government lacks effective policy prescriptions to control it. «There may not be an easy path to monetary or fiscal stabilization,» said James Galbraith, economics professor at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.

US households, already struggling to afford the high cost of living, are preparing for what’s next. Whether we’re headed for a recession or a period of stagflation, taking steps to proactively safeguard your finances becomes all the more critical.

Are we still at risk of a recession?

Rampant economic uncertainty often triggers recessionary conditions as companies and households start to reduce spending and investment. During a recession, unemployment goes up, and the prices of goods begin to decline. It’s generally harder to obtain financing, as banks tighten their requirements to minimize their risk of lending to borrowers who may default on loans. 

The economy regularly experiences periods of booms and busts, with downturns occurring roughly every five to seven years. «We are due for a reset and a slowdown in the economy,» said Greg Sher, managing director at NFM Lending. 

Certain macroeconomic hallmarks, like shrinking GDP and rising joblessness, are consistent across all recessions. But every US recession is also unique, with a different historical trigger. The Great Recession of 2007-09, which kicked off with the subprime mortgage crisis and the collapse of financial institutions, was the longest. The COVID-19 pandemic recession, resulting from lockdowns and the loss of 24 million jobs, was the shortest recession on record.

Working-class and middle-class households experience the day-to-day hardship of a recession well before the National Bureau of Economic Research makes the official call. Folks on the margins also experience a much slower recovery after a recession is declared to be over. 

Relying on hard data like GDP and employment to determine recessions is faulty. Because those figures are backward-looking, they tell us where the economy was before, not necessarily where it’s heading. Many economists note that unemployment is worse than what the headline figures report. 

Here are some of the key warning signs of a recession:

Could we be facing stagflation?

Stagflation would mean having less purchasing power as prices go up and saving becomes more difficult. Jobs become harder to find, investments might take hits and interest rates could rise. Stagflation is typically measured by the «misery index,» the sum of the unemployment rate and the inflation rate, reflecting the level of economic distress felt by the average person.

For decades, experts didn’t believe stagflation was possible because it goes against basic principles of supply and demand. Usually, when more people are out of work, prices go down because demand for goods and services is lower. 

But stagflation began to rear its head in the 1970s. Growing government debt, fueled by military spending on the Vietnam War, sent prices soaring. Soon after, the energy crisis hit. In 1973, OPEC’s oil embargo resulted in a massive supply shock, worsening inflation and depressing output. 

Official unemployment peaked at 9% while inflation kept ratcheting higher and eventually surpassed 14% year over year. A second oil supply shock in 1979 prompted the Federal Reserve to raise interest rates to record highs, above 20%. While that approach worked to bring inflation down, it prompted a severe recession. 

Most economists say the likelihood of entering a period of stagflation is still quite low, but others like Sløk warn that Trump’s trade policies could fuel the fire. At the same time, the dollar and the balance sheets of major financial institutions are in a much stronger position than in the 1970s.

What role do tariffs play?

Since February, new import taxes have been announced, delayed, raised and reduced in quick succession. If tariffs are eventually implemented as announced, the average rate on US imports will be the highest in a century, back to the levels last witnessed during the Great Depression. 

Tariffs, which are import taxes on goods from another country paid by the importer, can have a similar effect to oil supply shocks, causing widespread disruptions and cost increases along supply chains. Companies either pass on those increases to domestic customers, triggering more inflation, or they cut back on investments and output, leading to layoffs and weakened growth. 

«Big tariffs right now wouldn’t just make inflation worse — they could set off a chain reaction of economic trouble that central banks and governments aren’t ready to handle,» said Sher. According to Sher, there’s a misguided assumption that consumers will be willing to pay the higher cost of goods brought on by tariffs. «Consumers will be more likely to sit on their hands and stop spending, which will further stoke the recession flames,» said Sher. 

There are signs that tariff-related uncertainty is causing cracks in the labor market. Even as unemployment remains relatively low, currently at 4.1% according to the Bureau of Labor Statistics, hiring has slowed and those currently out of work are finding it nearly impossible to find gainful employment.

Is there a solution to stagflation?

There’s an established, if imperfect, playbook for diminishing the impact of a recession. The Fed, which is in charge of maintaining price stability and maximizing employment, usually lowers interest rates to stimulate the economy and buoy employment during a downturn.

When inflation is high, however, the Fed typically raises interest rates to combat price growth and slow down the economy by making credit and borrowing more expensive for consumers and businesses. The two approaches can’t be taken simultaneously. 

«While prices are on the firm side and growth has cooled from a too-warm pace, unemployment remains closer to historic lows than not,» said Keith Gumbinger, vice president at housing market news site HSH.com. «We don’t have stagflation per se, at least as yet.» 

Gumbinger said stagflation is more intractable than a recession. It has a trickier path because the go-to policies used to address one problem often worsen the other. 

Right now the Fed is in a bind. Lower interest rates can boost a weaker economy, but they can also stoke inflation. If inflation remains sticky, the central bank is more likely to continue pausing rate cuts. The president’s habit of making knee-jerk policy announcements, only to delay or reverse them weeks later, makes it even harder for policymakers to course correct. 

That kind of government paralysis could drag out economic hardship, especially for the most financially and socially vulnerable populations. While the average recession lasts about 11 months, the last bout of stagflation in the US lasted more than 10 years.

If a recession or stagflation materializes, it would be a «self-inflicted» injury resulting directly from US government policy, said Kathryn Anne Edwards, labor economist and independent policy consultant.

How can you prepare for an economic downturn? 

Stagflation could feel like a recession with the added pain of high prices, making it difficult to prepare for and even harder to navigate. Still, experts say you’ll want to take some of the same steps you would ahead of an economic downturn. 

Establish your emergency fund. Having an emergency fund is a good idea in any economy. During an economic downturn, high unemployment can make it harder to get back on solid financial footing if you have a sudden expense. If your savings cover at least three to six months of living expenses, you can more easily weather a financial storm without relying on credit cards or retirement savings.  

Make a financial plan. Focus on paying down debt, particularly high interest credit card debt, so you don’t have to carry a balance when times are tougher. Postpone making any major purchases that overstretch your budget and that you’ll regret having to pay off in a year or two. Avoid panic buying things like laptops, phones or cars just to get ahead of expected price increases. 

Review your investments. Given the level of economic uncertainty, expect the stock market to have more volatility. If you mostly have high-risk investments, consider diversifying with a variety of low-risk accounts, or combining stocks and bonds. Consult with an adviser about inflation-resistant assets and having a more balanced portfolio based on your individual risk tolerance, age and financial goals. 

More on today’s economy

• How to Prepare for a Recession: 6 Money Rules Experts Recommend
• Tariff Pricing Tracker: We’re Watching 11 Products You Might Need to Buy
• I Bought Only Essentials for a Month. What I Learned Surprised Me
• Mortgage Rates at a Tipping Point. Why Trump’s Tariffs Have the Housing Market on Edge
• 3 Ways to Get Your Student Loans in Good Standing Before Paycheck Garnishment Starts
• DoorDash Wants Me to Finance My Fries. That’s a Hard No

President Donald Trump’s second-term economic plan can be summed up in one word: tariffs. As he unleashed a barrage of those import taxes, markets trembled and business leaders sounded alarms about the economic damage they would cause. In response to the initial chaos after «Liberation Day» in April, the heaviest of Trump’s tariffs were paused for 90 days — that is, until this week — but they’ve been extended again through Aug. 1. More recently, the administration hiked tariffs against Canada to 35% and threatened Brazil with a 50% rate.

Amid the uncertainties and upheavals, Trump has barreled forward with his plans, including doubling the tariffs on steel and aluminum imports and announcing a new plan to increase the rate for China to 55%. He also hyped up a trade deal on July 2 that leaves Vietnam’s import tax rate at a historically high 20%. The sweeping tariff initiative will likely impact your cost of living, which we know from our surveys is something you’re worried about.

That all came after Trump’s push hit its biggest roadblock yet, when the US Court of International Trade ruled late last month that Trump had overstepped his authority when he imposed tariffs. That ruling was stayed but the fight is likely to head to the Supreme Court. All the while, major US companies like Apple and Walmart have butted heads with the administration over the tariffs and their bluntness about how tariffs will make affording things harder for consumers.

Amid all this noise, you might still be wondering: What exactly are tariffs and what will they mean for me?

The short answer: Expect to pay more for at least some goods and services. For the long answer, keep reading, and for more, check out CNET’s price tracker for 11 popular and tariff-vulnerable products.

What are tariffs?

Put simply, a tariff is a tax on the cost of importing or exporting goods by a particular country. So, for example, a 60% tariff on Chinese imports would be a 60% tax on the price of importing, say, computer components from China.

Trump has been fixated on imports as the centerpiece of his economic plans, often claiming that the money collected from taxes on imported goods would help finance other parts of his agenda. The US imports $3 trillion worth of goods from other countries annually. 

The president has also shown a fixation on trade deficits, claiming that the US having a trade deficit with any country means that country is ripping the US off. This is a flawed understanding of the matter, many economists have said, since deficits are often a simple case of resource realities: Wealthy nations like the US buy specific things from nations that have them, while those nations in turn may not be wealthy enough to buy much of anything from the US.

While Trump deployed tariffs in his first term, notably against China, he ramped up his plans more significantly for the 2024 campaign, promising 60% tariffs against China and a universal 20% tariff on all imports into the US. 

«Tariffs are the greatest thing ever invented,» Trump said at a campaign stop in Michigan last year. At one point, he called himself «Tariff Man» in a post on Truth Social. 

Who pays the cost of tariffs?

Trump repeatedly claimed, before and immediately after returning to the White House, that the country of origin for an imported good pays the cost of the tariffs and that Americans would not see any price increases from them. However, as economists and fact-checkers stressed, this is not the case.

The companies importing the tariffed goods — American companies or organizations in this case — pay the higher costs. To compensate, companies can raise their prices or absorb the additional costs themselves.

So, who ends up paying the price for tariffs? In the end, usually you, the consumer. For instance, a universal tariff on goods from Canada would increase Canadian lumber prices, which would have the knock-on effect of making construction and home renovations more expensive for US consumers. While it is possible for a company to absorb the costs of tariffs without increasing prices, this is not at all likely, at least for now.

Speaking with CNET, Ryan Reith, vice president of International Data Corporation’s worldwide mobile device tracking programs, explained that price hikes from tariffs, especially on technology and hardware, are inevitable in the short term. He estimated that the full amount imposed on imports by Trump’s tariffs would be passed on to consumers, which he called the «cost pass-through.» Any potential efforts for companies to absorb the new costs themselves would come in the future, once they have a better understanding of the tariffs, if at all.

Which Trump tariffs have gone into effect?

Following Trump’s «Liberation Day» announcements on April 2 and subsequent shifting by the president, the following tariffs are in effect:

• A 50% tariff on all steel and aluminum imports, doubled from 25% as of June 4.
• A 30% tariff on all Chinese imports until the new deal touted by Trump takes effect, after which it will purportedly go up to 55%. China being a major focus of Trump’s trade agenda, it has faced a rate notably higher than other countries, peaking at 145% before trade talks commenced.
• 25% tariffs on imports from Mexico and 35% on those from Canada. This applies only to goods from each country that are not covered under the 2018 USMCA trade agreement brokered during Trump’s first term. The deal covers roughly half of all imports from Canada and about a third of those from Mexico, so the rest are subject to the new tariffs. Energy imports not covered by USMCA will be taxed at only 10%.
• A 25% tariff on all foreign-made cars and auto parts.
• A sweeping overall 10% tariff on all imported goods.

For certain countries that Trump said were more responsible for the US trade deficit, Trump imposed what he called «reciprocal» tariffs that exceed the 10% level: 20% for the 27 nations that make up the European Union, 26% for India, 24% for Japan and so on. These were meant to take effect on April 9 but were delayed by 90 days due to historic stock market volatility, and then delayed again to Aug. 1. These rates are subject to change until that new effective date, and some have already been altered: the rate against Japan was upped to 25%, the same as the rate against South Korea; Trump has also threatened a 50% rate against Brazil.

Trump’s claim that these reciprocal tariffs are based on high tariffs imposed against the US by the targeted countries has drawn intense pushback from experts and economists, who have argued that some of these numbers are false or potentially inflated. For example, the above chart says a 39% tariff from the EU, despite its average tariff for US goods being around 3%. Some of the tariffs are against places that are not countries but tiny territories of other nations. The Heard and McDonald Islands, for example, are uninhabited. We’ll dig into the confusion around these calculations below.

Notably, that minimum 10% tariff will not be on top of those steel, aluminum and auto tariffs. Canada and Mexico were also spared from the 10% minimum additional tariff imposed on all countries the US trades with.

On April 11, the administration said smartphones, laptops and other consumer electronics, along with flat panel displays, memory chips and semiconductors, were exempt from reciprocal tariffs. But it wasn’t clear whether that would remain the case or whether such products might face different fees later.

How were the Trump reciprocal tariffs calculated?

The numbers released by the Trump administration for its barrage of «reciprocal» tariffs led to widespread confusion among experts. Trump’s own claim that these new rates were derived by halving the tariffs already imposed against the US by certain countries was widely disputed, with critics noting that some of the numbers listed for certain countries were much higher than the actual rates and some countries had tariff rates listed despite not specifically having tariffs against the US at all.

In a post to X that spread fast across social media, finance journalist James Surowiecki said that the new reciprocal rates appeared to have been reached by taking the trade deficit the US has with each country and dividing it by the amount the country exports to the US. This, he explained, consistently produced the reciprocal tariff percentages revealed by the White House across the board.

«What extraordinary nonsense this is,» Surowiecki wrote about the finding.

The White House later attempted to debunk this idea, releasing what it claimed was the real formula, though it was quickly determined that this formula was arguably just a more complex version of the one Surowiecki deduced.

What will the Trump tariffs do to prices?

In short: Prices are almost certainly going up, if not now, then eventually. That is, if the products even make it to US shelves at all, as some tariffs will simply be too high for companies to bother dealing with.

While the effects of a lot of tariffs might not be felt straight away, some potential real-world examples have already emerged. Microsoft has increased prices across the board for its Xbox gaming brand, with its flagship Xbox Series X console jumping 20% from $500 to $600. Kent International, one of the main suppliers of bicycles to Walmart, announced that it would be stopping imports from China, which account for 90% of its stock.

Speaking about Trump’s tariff plans just before they were announced, White House trade adviser Peter Navarro said that they would generate $6 trillion in revenue over the next decade. Given that tariffs are most often paid by consumers, CNN characterized this as potentially «the largest tax hike in US history.» Estimates from the Yale Budget Lab, cited by Axios, predict that Trump’s new tariffs will cause a 2.3% increase in inflation throughout 2025. This translates to about a $3,800 increase in expenses for the average American household.

Reith, the IDC analyst, told CNET that Chinese-based tech companies, like PC makers Acer, Asus and Lenovo, have «100% exposure» to these import taxes, with products like phones and computers the most likely to take a hit. He also said that the companies best positioned to weather the tariff impacts are those that have moved some of their operations out of China to places like India, Thailand and Vietnam, singling out the likes of Apple, Dell and HP. Samsung, based in South Korea, is also likely to avoid the full force of Trump’s tariffs. 

In an effort to minimize its tariff vulnerability, Apple has begun to move the production of goods for the US market from China to India.

Will tariffs impact prices immediately?

In the short term — the first days or weeks after a tariff takes effect — maybe not. There are still a lot of products in the US imported pre-tariffs and on store shelves, meaning the businesses don’t need a price hike to recoup import taxes. Once new products need to be brought in from overseas, that’s when you’ll see prices start to climb because of tariffs or you’ll see them become unavailable. 

That uncertainty has made consumers anxious. CNET’s survey revealed that about 38% of shoppers feel pressured to make certain purchases before tariffs make them more expensive. About 10% say they have already made certain purchases in hopes of getting them in before the price hikes, while 27% said they have delayed purchases for products that cost more than $500. Generally, this worry is the most acute concerning smartphones, laptops and home appliances.

Mark Cuban, the billionaire businessman and Trump critic, voiced concerns about when to buy certain things in a post on Bluesky just after Trump’s «Liberation Day» announcements. In it, he suggested that consumers might want to stock up on certain items before tariff inflation hits.

«It’s not a bad idea to go to the local Walmart or big box retailer and buy lots of consumables now,» Cuban wrote. «From toothpaste to soap, anything you can find storage space for, buy before they have to replenish inventory. Even if it’s made in the USA, they will jack up the price and blame it on tariffs.»

CNET’s Money team recommends that before you make any purchase, especially a high-ticket item, be sure that the expenditure fits within your budget and your spending plans. Buying something you can’t afford now because it might be less affordable later can be burdensome, to say the least.

What is the goal of the White House tariff plan?

The typical goal behind tariffs is to discourage consumers and businesses from buying the tariffed, foreign-sourced goods and encourage them to buy domestically produced goods instead. When implemented in the right way, tariffs are generally seen as a useful way to protect domestic industries. 

One of the stated intentions for Trump’s tariffs is along those lines: to restore American manufacturing and production. However, the White House also says it’s negotiating with numerous countries looking for tariff exemptions, and some officials have also floated the idea that the tariffs will help finance Trump’s tax cuts.

Those things are often contradictory: If manufacturing moves to the US or if a bunch of countries are exempt from tariffs, then tariffs aren’t actually being collected and can’t be used to finance anything. This and many other points have led a lot of economists to allege that Trump’s plans are misguided. 

As for returning — or «reshoring» — manufacturing in the US, tariffs are a better tool for protecting industries that already exist because importers can fall back on them right away. Building up the factories and plants needed for this in the US could take years, leaving Americans to suffer under higher prices in the interim. 

That problem is worsened by the fact that the materials needed to build those factories will also be tariffed, making the costs of «reshoring» production in the US too heavy for companies to stomach. These issues, and the general instability of American economic policies under Trump, are part of why experts warn that Trump’s tariffs could have the opposite effect: keeping manufacturing out of the US and leaving consumers stuck with inflated prices. Any factories that do get built in the US because of tariffs also have a high chance of being automated, canceling out a lot of job creation potential. To give you one real-world example of this: When warning customers of future price hikes, toy maker Mattel also noted that it had no plans to move manufacturing to the US.

Trump has reportedly been fixated on the notion that Apple’s iPhone — the most popular smartphone in the US market — can be manufactured entirely in the US. This has been broadly dismissed by experts, for a lot of the same reasons mentioned above, but also because an American-made iPhone could cost upward of $3,500. One report from 404 Media dubbed the idea «a pure fantasy.» The overall sophistication and breadth of China’s manufacturing sector have also been cited, with CEO Tim Cook stating in 2017 that the US lacks the number of tooling engineers to make its products.

For more, see how tariffs might raise the prices of Apple products and find some expert tips for saving money.