Stocks surged this morning after officials from the U.S. and China announced a 90-day pause on tariffs while trade negotiations continued. But here in Hawaiʻi, economists say the damage has already been done.
A new report released Friday from the UH Economic Research Organization, UHERO, forecasts a “mild recession” for this year and next. It is an abrupt shift from the organization’s last forecast, and the revision is due to President Donald Trump’s tariff policy.
Steven Bond-Smith is an assistant professor at UHERO and one of the authors of the new forecast. He spoke with The Conversation about local impacts of ongoing tariff uncertainty, and what a mild recession will mean for Hawaiʻi.
He said the deal announced with China today doesn't change the outlook. Tariffs are still much higher than just a few months ago, and there is significant uncertainty about what tariff rates will be in the future.
“It's simply that Hawaiʻi's economy has returned to sort of its long-run growth rate, which is relatively low anyway, but we expect that a slowdown in the U.S. and a slowdown in visitor numbers will then tip us just into negative territory,” Bond-Smith said. “So technically, it becomes a recession, but it's much more mild than any recent recession."
As people go about their day-to-day lives, he said that the most affected will be those with less secure jobs, or if their income is dependent on sales.
“In the near term, there's a softening of international tourists because of the tariffs and because of the geopolitical environment”, Bond-Smith said. “As the U.S. economy starts to slow then there might be a reduction in a further reduction in U.S. visitors. And that is the main driver of our slowdown in Hawaiʻi.”
“I think the point I really want to point forward, though, is about Hawaiʻi's long-run growth rate… That means there's this widening gap between Hawaiʻi and the rest of the U.S., and that's the case anyway, regardless of these tariffs. The tariffs push us into negative territory, but that long-run low productivity growth — that's a general problem for the Hawaiʻi economy that we need to really think about.”
This interview aired on The Conversation on May 12, 2025. The Conversation airs weekdays at 11 a.m.
