Americans brace for tariff-driven price hikes as savings become a priority

[UNITED STATES] Though a pause on reciprocal tariffs is currently in place, many American consumers are already preparing for the financial toll of rising prices.

According to a new NerdWallet survey conducted this month with over 2,000 participants, 85% of Americans express concern over the impact of tariffs. Chief among their worries is the potential for these policies to make basic necessities less affordable and to push the U.S. economy toward a recession.

The data also points to notable generational divides in perception. Younger adults—particularly Gen Z and millennials—report heightened anxiety about long-term economic disruption, while older respondents are more preoccupied with short-term inflation and price increases on everyday goods. These differences underscore how varying age groups are grappling with distinct financial pressures amid a turbulent economic climate.

Meanwhile, signs of eroding consumer confidence are surfacing in other indicators. The University of Michigan’s consumer sentiment index has dropped more than 30% since December, with fears of an escalating trade war dampening outlooks. April’s reading marked an 11% decline from March, coming in below expectations.

Experts say these concerns are well-founded. Researchers at the Budget Lab at Yale University estimate that tariffs could add up to $3,800 in additional annual expenses for the average household.

Compounding the issue, recent data from the Bureau of Labor Statistics shows core inflation—excluding food and energy—remains persistently high. As household budgets feel the squeeze, economists warn that consumer spending, especially on non-essentials, may decline sharply in the months ahead, particularly in sectors such as retail and hospitality.

“Most Americans are worried about tariffs, and it’s actually impacting their spending plans,” said Kimberly Palmer, a personal finance expert at NerdWallet. Looking ahead, many Americans say they plan to shift their financial habits. The NerdWallet survey found that 45% expect to reduce discretionary spending, 33% intend to cut back on essentials, and 30% plan to increase their emergency savings. Meanwhile, only 14% said they plan to scale back debt payments.

The trend toward financial restraint is most evident among middle-income households—those earning between $50,000 and $100,000 a year—who are disproportionately affected by cost increases. While wealthier households may be better positioned to absorb rising prices, those in the middle are more likely to reduce spending on essential items, exacerbating economic vulnerability for a critical demographic.

“These tariffs are adding to that financial stress and basically forcing people to make some difficult decisions,” Palmer said, noting that many households are now reconsidering major purchases such as travel and vehicles.

Emergency Savings Take Priority Amid Economic Uncertainty

As prices continue to climb, experts are urging households to prioritize emergency savings above all. “Rising prices and competing financial demands can quickly erode income,” said Stephen Kates, a certified financial planner and analyst at Bankrate. “If you don’t have anything set aside, the first step is building an emergency fund.”

Kates advises that individuals aim to save at least one month’s worth of essential expenses initially, eventually building up to a reserve covering three to six months. Financial planners note that even modest savings can provide a psychological cushion, reducing stress and increasing confidence in the face of economic shocks.

In the event of job loss or a sudden drop in income, such savings can help prevent households from going deeper into debt, Kates explained.

For those already carrying debt, building an emergency fund should remain the top priority, he added. Even when compared to retirement savings, Kates recommends focusing on emergency reserves first.

That doesn’t mean other financial goals should be neglected entirely. Kates suggests implementing the “debt avalanche” strategy—paying off high-interest debt first while maintaining minimum payments on other balances. This approach not only reduces interest costs but also helps free up cash in tight household budgets.

Regarding retirement savings, Kates emphasizes that workers should still contribute enough to secure any available employer match, ensuring long-term financial planning isn’t completely sidelined.