Impact of a 2025 Recession on Overwhelming Numbers of Households
A Potential Recession in 2025: What You Need to Know
Brace yourself, folks! With the U.S. economy teetering on the edge, there's a whopping 20% chance of a recession hitting in 2025. That's according to Kris J. Mitchener, an economics professor at Santa Clara University, anyways. But don't freak out just yet!
Let's dive into what a recession really means and what factors could send our economy spiraling. We've grabbed some insights from Mitchener and Angelo DeCandia, a business and accounting professor at Touro University, and they've shared their thoughts on what to expect in 2025.
What's a Recession, Anyway?
Simply put, a recession is when a country's GDP, or the total value of its goods and services, goes backward for two consecutive quarters. Fun fact: GDP can be influenced by government spending, business investment, consumer spending, and net exports.
Get Ready to Rumble: Trade Wars and Tariffs
DeCandia thinks Trump's determination to impose tariffs on trading partners could be the ultimate catalyst for a recession. The thing is, new or higher tariffs can do two things: they could help fix trade deficits by discouraging imports, or they could lead to a trade war. Bam!
A trade war is when two countries impose retaliatory tariffs on each other, and it's not pretty. If the results of the trade war are an increasing trade deficit, the GDP will take a hit, potentially leading to a recession. You don't want that.
The Recession Triggers: What to Watch Out For
Economic Starting Point
Luckily for us, the U.S. economy was in good shape at the start of 2025. That means low unemployment, steady job growth, moderate inflation, and growth in GDP and consumer spending. Hey, we'll take it!
Stocking Up and Cutting Corners
Companies could cause a trade deficit by stocking up on imports before tariffs escalate. If that spending doesn't continue, it could create confusion and potentially weaken consumer and business confidence. Ouch!
Slippie Slidey Slide: Declining Confidence
Declining confidence in the economy is like a domino effect: consumers and businesses may start to scale back on spending. Now, a big reduction in spending can lead to a recession, even if a higher trade deficit doesn't materialize from the trade war.
How a Recession Affects U.S. Households
When the economy tanks, it usually hits middle and working-class households the hardest. Outcomes can include fewer job opportunities, restrictive working conditions, reduced discretionary income, changing net worth, and in the worst-case scenario, stagflation.
Prepare Now...just in Case
Since January, things have been looking gloomy for the U.S. economy. Between tariff and trade war headlines, consumer and business confidence has taken a hit. And as we all know, when confidence drops, recession risk rises.
But don't worry! You still have time to take action. Cut your budget, pay off debt, and stash away some cash. If a recession doesn't happen, you'll be in a stronger position to sail through the next economic wave. It's a win-win!
Enrichment Data:- A recession is when a country's GDP goes backward for two consecutive quarters.- The economy is influenced by government spending, business investment, consumer spending, and net exports.- Tariffs are taxes applied to imported goods.- Trade deficits occur when a country imports more than it exports.- Trade deficits reduce GDP.- Tariffs can discourage imports, but could be counterproductive when other countries retaliate with their own tariffs, starting a trade war.-Overall, the U.S. economy was in good shape at the start of 2025, but new tariffs and retaliatory tariffs might cause a trade deficit, potentially triggering a recession.-If a recession happens, it could lead to fewer job opportunities, more restrictive working conditions, reduced discretionary income, changing net worth, and potentially stagflation.- Households can prepare for a potential recession by trimming their budgets, paying off debt, and building cash reserves.
- Economics professor Kris J. Mitchener predicts a potential recession in 2025, stating a 20% chance of it happening.
- Trade wars and tariffs, as suggested by business and accounting professor Angelo DeCandia, could be the catalyst for this potential recession, potentially leading to an increasing trade deficit and a decrease in the country's GDP, which could trigger a recession.
- To prepare for this potential recession, households should consider trimming their budgets, paying off debt, and building cash reserves to strengthen their position in anticipation of possible job losses, reduced discretionary income, and changing net worth.
