Trump-Led Policies Crashing the US – Hawaii Economy?

Recession odds are rising as Trump’s trade war escalates, Goldman Sachs says.

The US economy faces a growing risk of a recession as surging tariffs threaten to stunt growth, reignite inflation and lift unemployment, according to Goldman Sachs.

The Wall Street bank warned clients in March that it now sees a 35% chance of a recession in the next 12 months, up from 20% previously.  Goldman Sachs also increased its inflation estimate, slashed its 2025 GDP forecast to just 1% and bumped up its year-end unemployment rate outlook by 0.3 percentage points to 4.5%.

Market Close as of April 10th, 2025

This story was originally published in BeyondKona on March 29, 2025 …

Bloomberg reported last week that US consumer confidence fell this month by the most since August 2021 on concerns about the outlook for the broader economy, adding to a growing stack of indicators that uncertainty over President Donald Trump’s policies has Americans increasingly worried about their economic future.

Consumer confidence fell to its lowest level since January 2021. This marks a continuation of a downward trend that began after the December 2024 election. The Conference Board survey highlights increasing concerns about inflation and a potential economic downturn, resembling stagflation. Expectations for income, business, and labor market conditions also dropped to a 12-year low

Rising inflation and tariffs are key factors driving pessimism among Americans. A CBS News poll revealed that 67% of participants expressed concerns about the economy. The sharp decline in consumer confidence since Trump took office and has raised recession fears among economists.  University of Michigan Consumer Sentiment Index reflects a dropped to 57.0 in March, down from 64.7 in February and 80.4 a year ago. This marks a monthly decline of 11.9% and an annual drop of 28.2%, indicating worsening sentiment regarding personal finances and business conditions

The drop in confidence was broad across age groups and incomes.

Consumers were more pessimistic about current and future labor-market conditions as well as the outlook for incomes and business conditions. Perceptions of present and future financial situations worsened and the share of respondents expecting a recession in the next year rose to a nine-month high.

That pessimism has Americans cutting back their spending: According to a new study from Wells Fargo, more than half of consumers are delaying major life plans due to uncertainty over the economy and the consequences of Trump’s tariff threats. layoffs and chaos in cutting federal agencies impacting most Americans.

American consumers confidence in Trump policies continue to retreat: Consumers surveyed this week stated;

• a third said they were putting off buying a home
• one in six have postponed education plans, and
• one in eight have pushed back retirement plans

President Donald Trump signaled tariffs on American’s former NAFTA trading partners Mexican and Canadian imports will go ahead and he’s also stepping up pressure on other traditional trading partners and allies, adding to inflation pressures and threat of a global trade war.

Several factors contributed to this downturn in consumer sentiment:

1. Inflation fears: Consumers expressed increased worry about persistent inflation, with expectations for higher prices in the coming years.

2. Disruptions and widespread layoffs in Federal agencies by Trump administration: actions ranging from the threat of agency shut downs to benefit cutbacks in healthcare, amplifying financial concerns of most American pocketbooks, directly and indirectly.

3. Trade policy uncertainty: There is growing apprehension regarding President Donald Trump’s stringent tariff policies and their potential impact on the economy and consumers pocketbooks

4. Labor market concerns: Consumers became more pessimistic about future employment prospects, with this pessimism reaching a ten-month high

5. Income outlook: Americans reported feeling less optimistic about their future income prospects

Trump signed a proclamation earlier this week to implement a 25% tariff on auto imports and pledged harsher punishment on the EU and Canada if they join forces against the US, expanding a trade war and triggering threats of retaliation.   “What we’re going to be doing is a 25% tariff on all cars that are not 100% made in the United States,” Trump said at the White House on Wednesday as he pushed ahead with a program seeking to bring more manufacturing jobs to the US.

Hours later, Trump suggested further tariffs would be imposed on the European Union and Canada if they worked together “to do economic harm” to the US. The reaction in currency markets including the euro and Canadian dollar was muted. Taken together, Trump’s escalating trade actions appear likely to deepen tensions with key trading partners even before his promised so-called reciprocal tariffs on April 2.

Key Impacts on Hawaii’s Economy

Federal Funding Cuts and Layoffs

• Trump’s administration has implemented sweeping federal funding cuts and layoffs, which could result in the loss of approximately 2,200 federal jobs in Hawaii. These layoffs are expected to offset growth in construction and other sectors, contributing to stagnant job growth in 2025, and minimal growth in 2026.

• Federal grant rescissions have already affected projects like wildfire mitigation efforts in Waikōloa Village, further straining local initiatives.

Tariffs and Rising Costs

• New tariffs include a 10% levy on Chinese imports and a pending 25% tariff on steel and aluminum. These measures are increasing uncertainty and driving up costs for materials like aluminum and steel, which are critical for construction projects.

• Tariff-related price hikes could deter new development projects as contractors face unpredictable cost pressures.

Tourism Decline

• Trade wars linked to Trump’s tariffs have weakened international economies, leading to reduced visitor arrivals from key markets like Canada. Canadian visitors to Hawaii dropped significantly in 2024, impacting spending and overall tourism revenue.

• Additional travel restrictions for federal employees have also hurt Hawaii’s hospitality sector, leaving hotel rooms empty unexpectedly.

Inflation and Consumer Behavior

• Tariffs are expected to raise prices on goods and services, potentially causing mainland U.S. consumers to cut back on luxury spending like long-haul travel to Hawaii. This could further dampen tourism, a cornerstone of Hawaii’s economy

• Inflationary pressures from tariffs are compounded by external factors like the bird flu, which has driven up poultry and egg prices nationwide.

Construction Sector Challenges

• While construction remains a bright spot due to ongoing federal contracts, tariffs and potential labor shortages caused by deportations may push costs higher. Uncertainty surrounding future projects could slow long-term growth in this sector.

Vehicle Sales

• Hawaii’s auto industry is experiencing declining sales, with optimism for recovery in 2025 dampened by tariff-related uncertainties affecting consumer confidence.

Overall, Trump’s tariff policies, combined with federal funding cuts and immigration measures, are creating headwinds for Hawaii’s economy. These factors threaten job stability, increase costs across industries, and weaken key sectors like tourism and construction. Economists warn that these challenges could lead to a recession or significantly slower growth over the next few years