Hawaii Braces for Economic Downturn Amid Declining Tourism

In a new report that has alarmed stakeholders across the state, the Economic Research Organization at the University of Hawaii (UHERO) has forecasted a challenging year ahead for Hawaii’s economy. Visitor numbers are dwindling, and fresh federal tariffs are applying added strain on the global economy. It seems Hawaii’s golden sands are now overshadowed by economic clouds.

A Tense Economic Atmosphere

The UHERO’s latest analysis predicts that the Hawaiian islands are on the cusp of a mild recession. Despite previous resilience in the broader U.S. economy, this momentum hasn’t carried through to 2025. According to assistant professor Steven Bond-Smith, the data indicates that the national economy is weaker than earlier estimations had shown. This domestic downturn could exacerbate an already frail global economy.

Tariffs and Tourism: Twin Challenges

The report-squarely blames new tariffs as a central factor of the global economic uncertainty. While long-term trade agreements typically foster stability, these new tariffs are volatile and unpredictable, slowing the economy and putting the Federal Reserve in a challenging spot to make interest rate decisions.

Adding to the pressure is the noted decline in foreign tourism. The state faces significant decreases in visitors from both Canada and Japan. Once-booming markets, arrivals from Japan haven’t rebounded to pre-pandemic levels, stuck below half of the 2019 figures. Canada isn’t faring much better, with a 9% drop in visitors due to its recession. According to mauinews.com, these factors are contributing to a “soft summer” of tourism in Hawaii.

Housing Market Woes

UHERO’s report highlights a slump in Hawaii’s condo market—the weakest since 2010. This downturn stems from high mortgage rates, soaring insurance costs, and uncertainties over legislative changes like Bill 9 on Maui, which could eliminate transient vacation rentals in apartment districts.

Construction: A Bright Spot in the Gloom

Amid this tumult, the construction sector remains a beacon of hope, bolstered by federal and large-scale public projects. However, the report cautions that despite this support, a “mild Hawaii recession is imminent,” with contractions anticipated in payroll jobs, real GDP, and personal income, accompanied by rising inflation. Yet, there’s a silver lining—experts predict a slow recovery by the end of next year, providing a glimmer of hope amidst a challenging forecast.