As stocks plunge, how can Minnesotans protect themselves financially?

[THEME MUSIC] NINA MOINI: The global economy is our top story today. Stocks plunged around the world this morning in response to a trade war and potential economic downturn. In the US, stocks zigzagged up and then back down again after a false report that President Donald Trump was considering hitting pause on his tariff plans. Joining me now to break down what all this turmoil could mean for Minnesotans is Chris Farrell, our senior economics contributor.

Thanks for taking the time, Chris. I know you've already been busy this morning.

CHRIS FARRELL: It's great to be here.

NINA MOINI: I said to you, it's Monday at noon. Chris, welcome. It's only Monday. What is the very latest? Because things were concerning. I have things taken a turn. What are you seeing?

CHRIS FARRELL: So right now, if you're looking at the action in the market, it's bouncing around, as you mentioned. Zigzag is actually a really good phrase to use. But overall, the Standard and Poor's 500, which is your measure of multinational corporations, large dynamic companies, it's in what we call a bear market territory, is nearing bear market territory, which is a decline of about 20%.

So obviously, investors are trying to evaluate what are the implications for these companies when it comes to this broad-based, unexpectedly large tariff regime that has been announced by the President.

NINA MOINI: And we do know that Minnesota has a lot of companies, big, publicly traded, a lot of them renowned across the world. What do you see when you focus in on Minnesota?

CHRIS FARRELL: Well, I divide it into two. So when you look at 3M, Ecolab, Hormel, I mean these have global supply chains. I mean, these are dynamic companies. They're big companies. They really have been a part of the story of globalization over the past 80 years. They've been embedded in this sort of rule-based regime that has been created.

So these companies are really vulnerable to tariffs because a lot of what they make-- some of it's from Europe. Some of it's from Asia. Some of it's from here, may cross the border two or three times, five or six times, seven or eight times. So they're very vulnerable. And their stocks are down.

But there's also other areas of vulnerability to talk about. One is the farmer. I mean, we're an agricultural state.

And export markets have been and are incredibly important, if you just think about corn and soybeans and pork. So the agricultural community is very vulnerable. And then small business.

And the big difference, one difference, obviously, between a big company and a small company is if you're a big company and your costs are going up because of tariffs, you might be able to absorb some of that cost. Maybe you cut back in a little bit of division over here. Maybe you sort of don't do some investments.

But if you're a small business, this is just an increase in your costs. And you think about most small businesses, very thin profit margins. They're just running on cash flow, right. So they'll have to either change the way they do their business, maybe drop some aspects of their business or just pass on the price increases to consumers.

NINA MOINI: Yeah, it could change the way that people experience life and their behaviors and their choices. And before we came on the air, and earlier when you were on with Angela Davis this morning, a lot of people were calling in saying, what should I do with my retirement funds? And people were very on edge. President Trump has said, don't panic.

And I'm just curious, what is the best and the worst case scenario that could come out of these so-called trade wars? Like, where does it end? How do you know who's winning.

CHRIS FARRELL: So it's a whole spectrum. What you really don't want to see is retaliation. And so China has retaliated.

President Trump came on. He's said, if they do, unless they get rid of these retaliatory tariffs, we're going to put even higher tariffs on them. European Union has some retaliatory tariffs, but they've been very muted.

The big fear is a trade war. Nobody wins in a trade war. And you actually raise a very important point. What's victory in a trade war?

So the worst scenario is mutual destruction through raising tariffs, which then brings down the whole global economy because a tariff is a tax. It's a huge tax. We went from when President Trump was sworn into office-- Ian Bremner, a political scientist, has a great newsletter.

Tariffs averaged in the US 3.7%. Now, after the announcement after liberation day, 22%. This is an enormous increase.

NINA MOINI: Huge.

CHRIS FARRELL: So the worst-case scenario is we get lots of retaliation, economy goes down. The best-case scenario is OK, this isn't working. Let's try something else.

But hopefully what happens is things calm down, things slow down. And people can more wrap their mind, what is the strategy? What's the plan? What's the end goal here? And then you can start making adjustments with your investments and your planning.

Right now, I would say it feels like chaos. And we haven't had tariffs like this in more than a century. This is a new world. And uncertainty is a cliche, but this is an uncertain time.

NINA MOINI: Absolutely. Chris, we always appreciate you coming by and breaking things down for us. Thank you.

CHRIS FARRELL: Thanks a lot.

NINA MOINI: Please come back

CHRIS FARRELL: I will. I'd love to.

NINA MOINI: That's Chris Farrell, MPR's senior economics contributor. So now, joining me with some advice on how individuals can respond to this economic moment is Shannon Doyle. She's a financial education program manager with LSS Financial Counseling at Lutheran Social Services of Minnesota.

Shannon, thanks for your time as well today.

SHANNON DOYLE: Yeah, good morning. I'm happy to be here today.

NINA MOINI: I know that--

SHANNON DOYLE: Oh, I should say it's noon now.

NINA MOINI: I guess, yeah. Good afternoon. President Trump has been telling folks not to panic. There are a lot of people, though, particularly older people, who don't have a ton of time, perhaps before they retire or they're making these really big life decisions, anybody who's making big life decisions. I'm curious to know what you are hearing and experiencing right now.

SHANNON DOYLE: Well, a lot of what you just talked about. Our financial counselors at LSS Financial Counseling, we're seeing a lot of people who are afraid. We're hearing from people who are worried about falling behind on their credit cards, worrying about losing their jobs.

My own parents are retired, and they're calling me and asking, what should I do? And it's hard because it is, as Chris was saying, it's really unprecedented times. And I think you want to calm people down and say, yeah, don't panic.

And I think the important thing, though, is to really focus on what you can control. Because we can't control the stocks, or the tariffs, or things like that. But there are certain things we can do in our own lives to focus on what we actually can control when we're feeling so uncertain and out of control.

NINA MOINI: So what are you recommending to folks right now? Because it's one thing to not panic, but you do want to try to prepare, correct? So how could people start preparing for even greater uncertainty?

SHANNON DOYLE: Yeah, I love that. Yeah, don't panic, but prepare. That should be a slogan.

NINA MOINI: You're welcome.

SHANNON DOYLE: I might have to reuse that.

NINA MOINI: You can, yeah.

SHANNON DOYLE: One of our top recommendations would be to take a look at what you're spending, how often you're spending, and just doing a quick budget review. I know nobody likes the B word, but do a quick budget review.

Are there things that maybe you could reduce or cut out? If you're feeling really uncertain, one of the best ways to increase your certainty is to understand where your money is going and decide what you have. Where are those choices that you can make?

We can't change what our mortgage or rent payments are, but we can change how much we're spending, maybe on streaming services, or going out to eat, or how often we're ordering in, things like that. I'm not saying cut out all fun because who's going to do that.

Once I heard this term, and I love it. It's called instead of being mindful, be spendful. It's being mindful about your spending. I think that's really good advice. But also focus on building that savings, because that is one of the ways to really increase the feeling of security.

NINA MOINI: Absolutely. And I'm just curious to know at what point, though-- everyone's saying, don't panic. Don't make any moves. At what point would you advise people to start thinking about what could happen next for them or making actual moves?

SHANNON DOYLE: Well, I think it's going to depend on your own personal situation. There are people-- I think of all the federal workers who have been laid off. And if your job is connected to that, we don't think about all the other jobs that are connected to the federal workforce, such as refugee services, or other state positions, or pollution control, things like that.

So if you're concerned about a layoff, that's going to make your need to really take a look at your spending and look at asking yourself how long could I get by on unemployment? Thinking that unemployment is really just replaces about 50% to 60% of what you're used to earning.

How long could you rely on that? I like to call it kind of a stress test, stress testing your own finances, where you do look at your spending. And what could you control? What could you reduce? What can you cut out?

But also looking at that savings, if you have savings, because not all of us do. But if you have that savings, how long could you live off of that, if you needed to? I think that kind of stress test can give you a good sense of where you need to focus your energy at this time.

NINA MOINI: Yeah, a lot of people who maybe haven't budgeted. Now is maybe the time, just amid all of this uncertainty, to go ahead and maybe do one thing different or try something. And, Shannon, we sure appreciate you stopping by and just breaking that down for us and giving us some great advice. Hope you'll come back as well.

SHANNON DOYLE: Oh, I'd love to. I'd love to.

NINA MOINI: Thank you. That's Shannon Doyle, financial education program manager for LSS Financial Counseling. That's at Lutheran Social Service of Minnesota.