Hawaii’s economy is in store for reduced growth due to indirect impacts on tourism from President Donald Trump’s global tariffs, according to two local
economists.
Eugene Tian, chief economist at the state Department of Business, Economic Development and Tourism, said that recently lowered economic growth projections for places where most Hawaii visitors come from portend a weakening of the local tourism industry rebound that has yet to reach pre-pandemic levels.
Also, projections for more unfavorable changes to exchange rates along with higher U.S. inflation and lower U.S. household spending are expected to have dampening effects on Hawaii tourism, said Tian, who cited projections from an April 10 Blue Chip Economic Indicators survey of the top 50 economic
forecasting organizations.
This survey was done
after Trump initially announced trade tariffs against the rest of the world on
April 2 and then paused upper-level increases for 90 days on April 9 while boosting tariffs against China.
Paul Brewbaker of TZ Economics said the amount of uncertainty with tariffs, and their impacts, is so high that he refers to April 2 as “Obliviation Day” instead of “Liberation Day” as declared by Trump.
“Basically, everything changes every day,” he said. “The uncertainty is just killing us.”
Tian and Brewbaker spoke during a Tuesday
webinar presented by the Hawaii Economic Association.
DBEDT’s last forecast for Hawaii’s economy was published in March, and it projected 1.7% growth this year. But Tian cited pessimism for economic growth this year around the world based on the Blue Chip Economic Indicators survey done April 10 compared with a previous survey in March.
For U.S. growth the
projection fell to 1.4% in
the recent survey from 2% earlier. Projections also slipped for other countries, including Canada (1.3% from 1.7%), Japan (1% from 1.2%) and South Korea (1.3% from 1.6%).
“A lot of countries will
experience a decrease in economic growth, but the U.S. is the most,” Tian said, noting that most visitors to Hawaii come from the
mainland.
One sliver of potential upside to Trump tariffs could be more demand from mainland markets for tropical crops grown in Hawaii if imports from foreign countries cost more. Brewbaker, however, said agriculture amounts to only about 0.5% of Hawaii’s economy. He also noted some crops have shipping restrictions.
“You can’t even take mangoes to the mainland on an airplane,” he said.
Hawaii also isn’t well positioned for much in the way of manufacturing, so if Trump’s tariffs do lead to more U.S. manufacturing, then no material local benefit is expected.
Other uncertainties loom from Trump policies focused on cutting federal jobs and spending, and what those impacts will end up being in Hawaii.
Tian said he believes the state is in a good position to hire displaced federal workers because of an
ongoing recruitment effort to fill many vacant state
positions.
“That will mitigate the impact,” he said.
How much federal funding is cut off to Hawaii is highly uncertain.
DBEDT’s next forecast update for Hawaii’s economy is slated for publication May 29.
“We are watching the developments and will see what will happen,” Tian said. “Maybe a month from now it will be reflected in our forecast.”
