Mild recession in the forecast for Hawaii
Christine Hitt
The University of Hawaii Economic Research Organization (UHERO) has released its latest forecast, and the economic outlook is grim.
'The Hawaii outlook has deteriorated since the time of our last report,' the report states. 'This is primarily due to actual and threatened U.S. tariff hikes that are much larger than anticipated, as well as adverse effects on increased federal policy uncertainty around trade, immigration, spending and tax cuts, and other areas.'
UHERO believes the local economy will fall into a mild recession by the end of the year.
In a video discussing the report's findings, UHERO assistant professor Steven Bond-Smith said, 'GDP growth will slow in both the U.S. and Hawaii, but with Hawaii's already slow growth rate, the slowdown tips us into a recession.'
Bond-Smith goes on to say tourism is among the sectors under stress as 'uncertainty remains elevated.'
According to the report, 'the most damaging effect on Hawaii of President Trump's aggressive tariff policies may well be to the visitor industry. This will be felt through several channels: the adverse impact of high tariffs on major source country economies, the discouraging effects of uncertain international visitor regulations and enforcement and avoidance by travelers who are upset by these and other administration policies.'
So far this year, the Japan market is still sluggish. Canadian visitors to the U.S. have dropped significantly. With that said, Hawaii started the year positively, with the statewide visitor census up 2% in the first two months of the year compared to last year.
However, UHERO calls this the 'calm before the storm,' and it has reduced its tourism outlook for 2025-2026 significantly.
'We now expect arrivals to fall 4% over the next two years, a drop of 400,000 visitors,' the report said.
'Over 2025-2027 the pace of decline will be the biggest on the international front, with Japanese arrivals falling by more than 6% this year, before stabilizing in 2026. … U.S. arrivals will decline 3% by 2026, with downside risk should a recession develop. Total visitor arrivals will not reclaim their 2024 level until 2028.'
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