Understanding the Potential Impact of Tariffs, Income Price Hikes, and Economic Slowdowns on Physician Household Finances

As a physician, you’re likely familiar with the many factors that influence your financial wellbeing—from managing student loan debt to maximizing your income potential.

However, the global economic landscape is evolving in ways that may directly impact your personal finances. With the possibility of rising tariffs, increasing income price hikes, less consumer spending, and a doubling of the odds of a recession, it's important to consider how these shifts might affect your investments, housing decisions, and financial strategies.

In this post, we’ll discuss what tariffs mean for the economy, why income price hikes are likely, how consumer spending is shifting, and how these developments could impact your investments in housing, stocks, crypto, and bonds. Finally, we’ll touch on the importance of adapting financial approaches to suit your unique situation as a physician.

The Impact of Tariffs on the Economy

Tariffs, which are taxes on imported goods, have the potential to disrupt global trade and raise prices on everyday products. In recent years, trade tensions between the U.S. and other countries, especially China, have led to the imposition of higher tariffs. While tariffs are often used as a negotiating tactic in trade disputes, their long-term economic consequences can be significant.

For physicians, the rising cost of goods due to tariffs may lead to higher prices for medical equipment and supplies. While you may not directly import these goods, the overall cost of healthcare delivery could increase as suppliers and manufacturers pass these costs onto healthcare providers. This could also have downstream effects on patients, leading to higher out-of-pocket costs or more insurance-related issues.

Economically, tariffs can also slow down consumer spending. If prices rise due to tariffs, consumers are less likely to purchase non-essential goods, which affects demand in various industries. This reduction in consumer demand can ultimately dampen the overall economy, potentially pushing the country into a slowdown or even a recession.

Potential Wage Price Hikes and Their Impact

In addition to tariffs, wage price hikes—often seen as wage inflation—are also becoming a focal point. Wage inflation occurs when employers are forced to increase salaries to keep up with rising living costs, which can happen in tandem with higher tariffs. This inflationary pressure can result in higher costs for healthcare services and can exacerbate already existing labor shortages in certain sectors.

For physicians, this could translate to higher salaries in some cases, particularly in specialties that are in high demand. However, the reality is that these increases in income may be offset by rising costs in the healthcare system as a whole. Higher wages for staff, increased costs for medical supplies, and other operational challenges may erode any real gains you may experience from income hikes.

A Drop in Consumer Spending

As inflation rises due to tariffs and income hikes, consumers may become more cautious with their spending. Historically, periods of economic uncertainty lead to reduced discretionary spending. People tend to focus on their essential needs, such as food, healthcare, and essential housing, and scale back on non-essentials like dining out, international travel, and entertainment. Most physicians will likely not be personally required to cut their spending - the impact can show up with patients who may defer discretionary or cosmetic procedures and decreased spending can lower tax receipts which can put pressure on the healthcare system - especially in areas like rural health or medicaid payments where many hospitals are already struggling post-Covid.

For physicians, the drop in consumer spending could create challenges, especially if you rely on elective procedures or treatments that are not covered by insurance. Reduced consumer spending can also lower demand for certain types of medical services, especially in areas with more discretionary care.

Potential Recession Odds Rising to 53% in 2025 according to PolyMarket

According to Polymarkets, a decentralized prediction platform, the odds of a U.S. recession in 2025 have doubled to 53%, at the time of this writing on 4/3/25. For perspective, according to PolyMarkets website the odds of recession were just 26% on January 20, 2025, when the current administration took office, so the odds of recession have roughly doubled over the last 73 days.

Here is a link to Poly Market's website laying out these odds as of 4/3/25: https://polymarket.com/event/us-recession-in-2025?tid=1743664742231 as well as a real time widget below showing the current odds of recession in 2025 as of the current time period when you are reading it.

Just to be clear, we are referring to PolyMarkets prediction data because it is interesting, informative and provided in real time. People actually make bets about the future using PolyMarket so these prognostications involve people putting their money where their mouth is so it is more credible of an actual prediction in our view.

In many instances, prediction markets simialr to PolyMarket have predicted supriing outcomes and in other instances they've been wrong. This is in no way a recommendation to use or not use polymarket, nor is D.R. Harris & Co. making any prognostications about recessions to non-clients (and for clients we won't provide our actual view on this blog). This data is just included because it is interesting, infromative and provided in real time.

In summary, as of 4/3/25, the 52% recession odds on PolyMarket in oour view means that market participants are increasingly concerned about the potential for a downturn in the near future.

What does this mean for physicians?

Recessions can lead to job uncertainty for patients, somewhat reduced or deferred demand for healthcare services, and declines in investment portfolios. As healthcare spending may contract at the margin, there could be increased pressure on practices to cut costs on cosmetic or discretionary procedures where the patients typically cash pay. Moreover, in addition, a downturn in the economy could make it harder for patients to afford treatments or procedures and for governments to pay for them, as tax receipts often fall in recessions, which may affect your income. Essentially this could exacerbate the problems that we've already been seeing in rural medicine with many rural hospitals under immense financial pressure today. However, efficient operators may be able to provide these services profitably even in rural environments if the organization is well run.

Tariffs as a Negotiating Tactic?

Governments frequently use tariffs as a strategic tool in international trade negotiations. By imposing tariffs, they aim to protect domestic industries, push for favorable trade agreements, or force other nations to make concessions. While tariffs can boost domestic businesses in the short term, the long-term impact on the global supply chain can be negative.

For you as a physician, tariffs could mean that the cost of supplies and medical equipment rises, as mentioned earlier. This could push healthcare providers to negotiate better rates with suppliers or adjust their pricing strategies on cosmetic or discretionary procedures. Furthermore, if tariffs affect the broader economy and tax receipts, there may be negotiations with insurers or even policymakers to ensure that healthcare services remain affordable.

How These Changes Could Impact Your Investments

So, how do these economic shifts—tariffs, inflation, rising consumer costs, and the looming risk of a recession—affect your investments including housing, crypto, stocks, and bonds?

Here’s what to consider:

1. Housing: In an economic downturn, housing prices can fluctuate. While the housing market has shown resilience in recent years, a recession could lead to a decline in property values if unemployment goes up in your local area. Unemployment is one of the most consistently lagging effects of economic slowdowns or recessions and local unemployment rates can have a big relationship on home prices at the median to lower level, and rents for physicians who have rental properties. Additionally, rising interest rates, which are often a response to inflation, could make mortgages even more expensive than their current 6.75% rate as of 4/3/25 on a 30 year fixed rate mortage. You can click on the link below for current mortgage rates fror the mortgage industry: https://www.mortgagenewsdaily.com/mortgage-rates

If you're a physician looking to buy a home or refinance, be prepared for potential shifts in the market.

2. Stocks: Stock values often react negatively during recessions, and industries that rely on consumer spending (such as retail or travel) can suffer. Most recessions have historically been pretty mild but certain conditions can increase the risks and we have some of those conditions today in my opinion.

   
   

   Additionally, business spending can be heavily impacted in recessions as plans for expansion or big ticket capital spending (like building a new campus or building or investing in expensive equipment) can sometimes be put on hold during tough times and large purchases are sometimes deferred. This spending tends to quickly catch up after a recession ends but for industries that sell big ticket items whose purchases can be deferred - a recession is always a concerning thing in the short term.

   
   

   Some industries may might be somewhat better insulated in a recession, but the broader market could still experience volatility. Diversification is key for many investors, and having a balanced portfolio can help mitigate some risks to the degree to which mitigating risk is one of your goals.

   
   

3. Crypto: Cryptocurrencies are still a relatively young and volatile investment class. In times of economic uncertainty, many investors may turn to more traditional assets, causing the value of cryptocurrencies to fluctuate. However, some may see crypto as a hedge against disaster or a safe haven in times of financial and political instability (somewhat similar to how gold has been viewed over thousands of years of human history). Cryptocurrencies have been getting better infrastructure than in the best and it is less of a wild west experience investing in them today compared to 5 or 10 years ago, since reputable well known companies now make it posssible to buy cryptocurrency in a way where you don't personally have to custody the asset. However, in my view, it’s still very essential to understand the unique risks and potential benefits of bitcoin and other cryptocurrencies before considering allocating significant portions of your portfolio to bitcoin or other cryptocurrencies.

   
   

4. Bonds: In a recession, bonds may provide more predictable cash flows and principal values than stocks. This is because bond interest payments are generally contractually required to be made whereas stock divdiends tend to be discretionary and they can be cut in tough times. Additionally, bonds set up higher in the collateral waterfall and generally if a company goes bankrupt the bondholders will get some or all of their money back and the stockholders can often get wiped out and lose most or all of their stock investment in a bankrupt company. With that said, rising interest rates can hurt bond prices. If you’re considering bond investments, it’s critical to assess the interest rate environment, know what options are out there that might be best for your needs and know what your specific reasons are for owning bonds.

   
   
   
   

Adapting Your Financial Strategy to the currently (as of 4/3/25) turbulent geopolitical and economic environment.

Given all these economic developments, it’s clear that physicians, like everyone else, need to adapt their financial strategies to changing circumstances. There is no one-size-fits-all approach, so your strategy should be tailored to your personal situation, including your income, debt load, investment goals, and risk tolerance.

Consider the following evergreen ideas that can always help

1). Diversify your investments: Consider including in your portfolio a mix of asset classes that can do well in a mix of different economic and political environments and make sure your investments are aligned with your vision for your current and future needs.

2). Be organized and pruposeful with your finances and spending (or consider getting help with this if you are too busy): Be mindful of rising costs and match your spending with your goals and what really matters to you. Turbulent times don't necessarily require major changes if you have a good systemt in place - but if you don't creating one or reaching out to someone to help you create one and be more purposeful with your money can be really beneficial in our view.

3). Maintain some liquidity for uncertainty: Have a 3-12 month "emergency" fund or liquid assets somewhere in your portfolio can provide you time to make your next move if the healthcare economy and environment undergoes a major shift which affects your family personally.

Ultimately, staying informed about these economic shifts and staying somewhat liquid where appropriate can help you rise the the challenges of our current environment. Not all changes are bad, and some change is just part of life, but I believe that you want to set up your finances so that you can be resilieint in the face of even changes you didn't want to happen and physicians can survivie and thrive in tough environment if their finances are in sync with their goals in my view.

If you feel your finances are out of sync, I'd encourage you to chat with a trusted advisor or reach out to one to help you get back on track if you feel that you aren't well set up for the current environment.

With that said since this blog post will live on for a while - it is possible that things get better and this is just a blip of trouble that we'll get through. What I think is important is that your finances are set up in a way that no matter what happens you and your family will always be compleyely okay.