What is a recession and what could it mean for you? Here's what to know

Fears of a recession have heightened in the U.S. as early signs appeared to signal the possibility, but what does that actually mean and how could it impact you?

The concerns come amid uncertainty caused by President Donald Trump's planned tariffs on a range of American trading partners and the prospect of higher prices. The president himself isn't ruling out the possibility of a recession this year.

Here's what to know:

What is a recession?

A recession can be defined as a “significant downturn in economic activity reflected in a decline in the growth of gross domestic product,” according to Mercer University. Dr. Antonio Saravia says the “conventional definition” of a recession is when there is negative growth in the GDP in two consecutive quarters.

Unemployment rates and payroll data can also be used to determine the start and end dates of a recession, according to economists.

The National Bureau of Economic Research also holds that significant declines in economic activity must be evaluated on their depth, diffusion and duration.

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough," according to the Business Cycle Dating Committee with NBER, which officially determines if a recession has occurred.

Is the U.S. at risk of a recession?

The Conference Board’s report last month said that the measure of Americans’ short-term expectations for income, business and the job market fell 9.3 points to 72.9. The Conference Board says a reading under 80 can signal a potential recession in the near future.

Asked over the weekend whether he was expecting a recession in 2025, Trump told Fox News Channel: “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.” He then added, “It takes a little time. It takes a little time.”

On Wall Street, it was a tough week with wild swings dominated by worries about the economy and uncertainty about what Trump's tariffs may bring.

Tariffs from China on U.S. agricultural products went into effect Monday. Canada also instituted 25% increases on electricity exports to the U.S. in response to Trump tariffs.

More tariffs are coming this week, with Commerce Secretary Howard Lutnick telling NBC's “Meet the Press” that 25% tariffs on steel and aluminum imports will take effect Wednesday. Lutnick said Trump's threatened tariffs on Canadian dairy and lumber though would wait until April.

The Federal Reserve Bank of Atlanta's GDPNow tool is currently projecting that the GDP in the first quarter may decline by 2.4%, the first quarterly contraction seen in the U.S. since 2022.

According to CNN, a combination of increasing layoffs, an uptick in inflation and rising consumer prices could be indicators of an economic downturn, but economists have been quoted as saying the current situation could simply be a “cooling” of private sector activity.

Sam Stovall, chief investment strategies at CFRA Research, told CNBC the current situation is a reaction to the Trump administration’s tariff policies.

“We are in the throes of a manufactured correction," he said. "I say manufactured because it’s really based in response to the new administration’s tariff programs, or at least threats of tariffs, and what kind of an impact that will have on the economy."

Stovall did say that there is a possibility the recent market downturns are part of a “typical pullback,” and that there could be a “resetting of the dials” after recent records set on the stock exchanges.

For his part, Trump seems comfortable with the uncertainty that he's generating, saying that any financial pain from import taxes is a mere “disruption” that will eventually lead to more factories relocating to the United States and stronger growth.

When was the last time the U.S. was in a recession?

The last recession the U.S. experienced, according to the NBER, occurred during the early days of the COVID pandemic in 2020, when millions of Americans were forced out of work and large-scale shutdowns took place.

That recession was short-lived, only lasting a matter of months. The federal government responded to the pandemic with a massive infusion of money into the economy, which helped contribute to post-pandemic inflation, according to economists.

Prior to the pandemic, the last recession the U.S. experienced occurred between 2007 and 2009, and is now known as the “Great Recession,” the most significant economic downturn since the Great Depression.

A massive collapse of the U.S. housing market helped fuel the recession, with a slew of major banks forced to seek out huge government bailouts to help stay afloat during the crisis, according to Britannica.

What could a recession mean for you?

According to Fidelity, recessions can have "negative chain reactions" that impact businesses, jobs, real estate and the stock market.

"For example, when a recession looms, people may become more conservative with their spending. While this helps them feel more financially secure, it can negatively impact the businesses they usually support. This in turn causes layoffs, which decreases the amount of income others have to spend to grow the economy and may harm a company's performance in the stock market," the investment company stated. "This could cause even more people to rein in spending, continuing the negative cycle. In some extreme cases, this decrease in demand can also lead to deflation, or price decreases."

How long could a recession last?

There's no clear answer to this.

Kiplinger reported the average length of recessions dating back to 1857 is less than 17.5 months. For recessions in years post-World War II, that number drops to 11.1 months.

The Great Recession that began at the end of 2007 and continued into 2009 lasted 18 months. Meanwhile, the COVID recession was two months.